I move:—
That a sum not exceeding £114,030 be granted to complete the sum necessary to defray the Charge which will come in course of payment during the year ending on the 31st day of March, 1959, for the Salaries and Expenses of the Office of the Minister for Finance, including the Paymaster-General's office.
I should like to refer to what I might call an impromptu debate on inflation and deflation which we had at the end of the Finance Bill. I feel we did not deal very adequately with the question at the time and I should like to elaborate a little on it now. Inflation and deflation are not only of interest to us but are a very vital question in most European countries and, I suppose, in every country outside Europe, too. I gave an "off-the-cuff" reply to Deputy Sweetman last week and I might, perhaps, supplement it briefly now by indicating how I regard the present state of the economy and the prospects for the future.
There was a significant recovery in 1957. Gross national product regained the ground lost in 1956. This improvement was due to increased agricultural production. In the transportable goods industries output over the whole year was slightly less than in 1956 but the last quarter showed a sharp rise of over 8 per cent. above the corresponding quarter of 1956. The fall in 1956 in the volume of output per person employed was partly made good in 1957. Towards the end of the year unemployment began to decrease relative to the corresponding period of 1956.
The increase in the national income in 1957 went into savings and not into consumption. Provided it is maintained, this increase in savings will provide the basis for a higher level of productive home investment.
On the whole, economic trends in 1957 were in the right direction. There still exist, of course, the problems of a high level of unemployment and an insufficiency of productive investment. When introducing the Budget in April last I said that the primary aim of policy must be to secure as much productive employment as possible while at the same time restraining inflationary forces so as to avoid balance of payments difficulties. This remains our policy. Its achievement depends on maintaining the improvement in production and the higher level of savings which were gratifying features of 1957.
The returns available for the present year do not disclose any strong inflationary or deflationary influences at work in the economy. The trade figures provide the best immediate indication. As expected, imports have increased, but this has been offset to some extent by a further expansion of exports and by an improvement in the terms of trade. Provided the gap does not widen, external payments this year should not be far from balance. There seems little prospect, however, of any surplus. Last year's £9,000,000, following an unbroken series of deficits since 1946, was probably an isolated experience. In any case, our policy is to avoid deficits rather than to build up surpluses—we want all our savings to be turned into productive home capital.
The increase of £6.2 million in the import excess in the first six months of the year is not, of itself, alarming. The position needs to be carefully watched but unemployment is too high to warrant our taking any restrictive measures before it is clear beyond doubt that they are essential to stop a drain on our reserves. As far as I can judge, we have at the moment neither inflation nor deflation. What we have to do is to preserve that balance, at the same time increasing our production, and maintaining our savings so as to provide the capital necessary to finance the greater productive investment we require to raise our living standards permanently.
In my Budget speech I stressed the need for a general review of investment policy to ensure that our development resources would be applied to immediately productive purposes to the greatest extent possible. I mentioned that a study was being prepared in my Department, with the co-operation of other Government Departments and State bodies, as to how best our economic deficiencies might be remedied and our development opportunities realised. I have also since then received a report from the Capital Investment Advisory Committee dealing with the principles on which future development should be based. Our development resources and problems were discussed generally with a representative of the World Bank who visited Dublin recently. I am confident that the advice received from these various sources will prove of great assistance in the consideration of future policy.
