asked the Minister for Economic Planning and Development if he is aware of the forecast by the National Prices Commission predicting a return to double-digit inflation this year; and the proposals, if any, to alleviate this problem.
Ceisteanna—Questions. Oral Answers. - Inflation Forecast.
16.
I am aware of the forecast prepared by the National Prices Commission predicting a return to double-digit inflation which was based on the estimated year-on-year increase at mid-February. The consumer price index for mid-February has now been published and represents a rise of 4¼ per cent in the November-February quarter. As pointed out by the commission this sharp rise is due in part to a number of non-recurring factors and the quarterly increase for February-May should be lower.
If the preconditions set out in the White Paper "Programme for National Development 1978-1981" are met, the Government are confident that further reductions in the quarterly rate of increase will be achieved in the subsequent quarters of this year.
Could the Minister at least indicate to the House if we will have a double digit-rate of inflation for 1978?
That is a matter of history. The answer is no.
Sorry, I meant 1979.
I am not a prophet and neither is the Deputy. All of these forecasts are based on certain assumptions about likely trends and behaviour. There were a number of uncertain factors in the outside world as well as a number of indeterminate trends within our own economy. Therefore, I can only repeat what I said in my reply, that if the pre-conditions set out in the White Paper are met, then the Government are confident that further reductions in the quarterly rate of increase will be achieved in the subsequent quarters of this year and that we can, therefore, approach our target of a 5 per cent rate of inflation by the end of the year.
Would the Minister agree that the annual rate of inflation has increased by three-quarters in the nine months up to February?
I agree that the rate of inflation for the November-February quarter was very much higher than that in the preceding quarters.
That is not the question I asked. I asked if the annual rate of inflation increased by over three-quarters in the nine months ending February.
Which quarters is the Deputy referring to?
Between the 12 months ending May 1978 and 12 months ending February 1979.
Yes, I would.
Would the Minister say whether all the budgetary increases have been taken into account in the February index or whether more of them are still to come and will affect the February-May index, as has been suggested?
It depends on what are defined as budgetary increases, but there is still some proportion of the indirect tax increase which does not appear to be reflected fully in the February figure and will, therefore, appear in the May figure. However, as I have said already, we would expect the February-May figure to be lower than the figure for November-February. Tax increases were not the only non-recurring factor that accounted for the sharp rise up to mid-February. There were other seasonal or exceptional factors, such as the various sharp increase in the price of potatoes for example, which added something over .5 per cent, accounting for .5 per cent of the 4.25 per cent total. That is a sequence unlikely to be repeated in later quarters. Therefore, I do not see the point of trying to read too much into the results of any one quarter.
I am talking about the annual rate. It is only the Minister who has talked about quarters. Is the annual rate of inflation to mid-May likely to rise further than the 10.8 per cent rate already reached?
It could well be higher.
I see, we will move towards 11-12 per cent inflation.
For one quarter only. We can also move very sharply downwards in later quarters. We have been at pains to emphasise all along that we expected an upturn in the rate of inflation for a short period only and that there should not be too great an emphasis placed on that purely temporary phenomenon. The important thing to emphasise is that the rate of inflation on average over the last 18 months or so has been significantly lower than in earlier years and that if we behave sensibly over the coming months and produce the sort of arrangements on cost increases, pay matters and so forth which are appropriate to our circumstances now as members of the EMS, then it will be possible to have a very good return to these lower rates of inflation and to drive down the rate of inflation even lower than that which we enjoyed in the latter part of 1977 and first half of 1978.
(Interruptions.)
One at a time. I am calling Question No. 17.
The Minister has referred to matters outside our control and those within our control. Would he agree that an alarming feature of the present increase in the rate of inflation and the alarming position of the CPI is the gradual rise in food prices, especially of meat?
"Would the Minister" is not a question.
Would he agree that in these circumstances, in view of the objectives of the White Paper to gain moderate wage increases this year, his administration should revise their policy of phasing out the food subsidies?
Question No. 17. That is not a relevant question.
It is the only supplementary question I have asked.
If the Minister wishes to answer it he may but it does not relate to the basic question on the Order Paper.
Since the Deputy was permitted to make his remarks, I feel I should be entitled to reply to them.
Nothing ever restrained the Minister from opening his mouth in Brussels or Dublin.
We have nothing to fear from opening our mouths. We have nothing to be ashamed of. If we have any problem it is that reports do not always convey accurately what we said.
(Interruptions.)
Deputies opposite are the people who should worry about opening their mouths. If they want to talk about tax reform, they are the people who said that tax reductions were not feasible and could not be afforded or sustained. We were the party who said consistently that it could be done and we have backed up our words with actions.
And we did it.
(Interruptions.)
I thought the Members opposite learned to listen in Brussels. The Minister did not answer my supplementary question.
I do not retract a single word I have said in Brussels.
We will get down now to the question on the Order Paper.
I will reply to the supplementary question asked by the Deputy because he raised the question of food prices. There was an exceptional increase there in the November-February quarter. Again on the basis of the information available to us there is no reason why there should not be a very marked slowing down in the rate of increase in food prices in the remaining quarters of the year. It is feasible that the total increase for the remaining three-quarters of this year would be less than the increases that occurred in the November-February quarter. Therefore the scope is there for a very significant improvement in that area also.
Mr. O'Leary
Is the Minister seriously saying he can see meat prices reducing as we go on through the year?
I repeat what I said.
I cannot allow a discussion on prices, costs and so on.