It will see €1bn a year in contributions to offset "an unanticipated adverse shock to the economy"
The Finance Minister Michael Noonan says the Government is planning to introduce a 'Rainy Day' fund to help balance the economy when needed.
Mr Noonan says the fund will be made up of €1bn a year in contributions from 2019 onwards.
The aim of the fund will be to stimulate the economy in times of recession, and will be used in the event of "an unanticipated adverse shock to the economy".
The announcement was made as part of the Government's Summer Economic Statement (SES) this afternoon.
It says that proposals for the operation of the 'Rainy Day' fund - and the circumstances under which the amount would be deployed - will be developed.
The Government will also consider the merits of using any one-off receipts (such as a windfall in corporate tax receipts) or part of the Ireland Strategic Investment Fund (ISIF) to capitalise the fund.
"This approach helps reduce net indebtedness while at the same time ensuring that liquid assets are available to be deployed in a timely and counter-cyclical manner to help smooth the business cycle," the SES says.
The SES analysis is based on "macroeconomic assumptions" that were set out in the Stability Programme Update in April 2016, and were endorsed by the Irish Fiscal Advisory Council.
It comes against a background of economic recovery, which the Government says is now "firmly established" - with growth of 7.8% and a deficit of just 2.3% in 2015.
The SES will be debated in the Dáil on Thursday.
It includes the provision of an extra €1bn in capital spend on top of the additional €4bn contained in the Programme for a Partnership Government.
It brings total State-backed investment over the term of the Capital Plan to €48bn.
Public Expenditure Minister Paschal Donohoe says in recognition of the urgent need to build more houses, the Government has already agreed to proposals to set up a €200m Infrastructure Fund.
Minister Noonan says as the economy recovers, the government should have extra money to put aside for times of need.