I am aware of recent developments in house prices. Statistics compiled by the Department of the Environment show that the average increases in new and second-hand house prices in 1995, by comparison with 1994 were 7.3 per cent and 6.1 per cent respectively, representing a quickening in the pace of house price inflation. In the first quarter of 1996, the latest period for which the official statistics are available, new and second-hand house prices rose by 4.9 per cent and 10.2 per cent year-on-year respectively. These same 1996 data show that the quarter-on-quarter price increases, first quarter of 1996 compared with last quarter of 1995 were 1.6 per cent for new houses and 1.0 per cent for second-hand houses.
The relationship between house price inflation and consumer and producer price inflation is not a clear one. House prices as such do not form part of the Consumer Price Index, although the cost of servicing residential mortgage loans is included in it. There is no doubt, however, that an excessive increase in house prices would be a cause for concern.
I do not consider that the recent acceleration in house prices carries an immediate threat to the maintenance of low inflation in Ireland. Over the first half of 1996 inflation, as measured by the Consumer Price Index, has been lower than was generally expected, it fell to just 1.4 per cent in May, showing no apparent reaction to the significantly faster pace of increase in house prices which can be dated from about the second half of 1994. Inflation in the industrial sector is even more subdued, with the year-on-year rate of change in the manufacturing output price index having fallen to 0.8 per cent in June 1996. The recent rises in house prices are however such as to require close monitoring. The Central Bank has in recent months expressed concern about house prices and credit growth and has stated that it is monitoring the situation carefully.
The "low import prices for consumer goods and goods for further production" cited in the Deputy's question, and more generally the firm exchange rate of the Irish pound, have certainly helped our recent inflation performance. They have not however been the only beneficial influences. Domestic factors such as pay moderation under the Programme for Competitiveness and Work, increased competition in retailing, and restraint on administered price increases have also made significant contributions to fostering price stability.
