Dáil Éireann debate -
Wednesday, 10 Jun 1998

Vol. 492 No. 2

Written Answers. - Price Inflation.

Bernard J. Durkan

Question:

38 Mr. Durkan asked the Minister for Finance if he anticipates an increase in inflation by the end of 1998 arising from statistics now available; the actions, if any, he proposes to take; and if he will make a statement on the matter. [13697/98]

Donal Carey

Question:

45 Mr. D. Carey asked the Minister for Finance the plans, if any, he has to introduce measures to combat rising inflation; and if he will make a statement on the matter. [13641/98]

Proinsias De Rossa

Question:

65 Proinsias De Rossa asked the Minister for Finance if he will provide, based on the best information available to his Department, the expected inflation rate for 1998; and if he will make a statement on the matter. [13571/98]

Bernard J. Durkan

Question:

108 Mr. Durkan asked the Minister for Finance the measures, if any, he proposes to take to deter inflation within the next six months; and if he will make a statement on the matter. [13826/98]

Minister for Finance (Mr. McCreevy)

I propose to take Questions Nos. 38, 45, 65 and 108 together.

The original 1997 budget day forecast for consumer price inflation was 2.2 per cent, whereas the outturn for that year was 1.5 per cent. The forecast for 1998, as included in my budget last December, was 2 per cent. This was based on unchanged interest and exchange rates prevailing at that time. This forecast will be updated in the annual Economic Review and Outlook to be published next month. I note that the most recent forecast from the Central Bank in its 1997 annual report on 25 May 1998 is 2.75 per cent, and from the ESRI “Quarterly Economic Commentary” in April 1998 is 2.7 per cent.

As I pointed out in my reply to previous questions on this topic, there are a number of factors working to keep inflation low. These include low international inflation, including commodity and oil prices — as a small open economy, this is of particular importance; Partnership 2000 is helping to moderate wage pressures; the Asian economic crisis is expected to have a downward influence on prices, as the countries involved strive to regenerate their economies through export-led growth, underpinned by the fall in their exchange rates; structural reform in the State utilities sector, which is delivering benefits to the consumer; continuing competition in the retail sector, especially resulting from the increasing numbers of UK retailers setting up in Ireland and higher volumes of sales which are allowing producers and retailers to absorb increases in costs.

Over the last four months, the monthly increases in prices were:

Month	% Change
January	-0.6
February	+0.5
March	+0.5
April	+0.5

The pattern of increases for the rest of the year will influence the CPI for the year as a whole. These will reflect the impact of movements in sterling and other currencies and any movements in interest rates over the period in question.

I reassure Deputies that the Government will continue to pursue prudent policies based on Partnership 2000 and the Government's Programme, An Action Plan for the Millennium. One of the commitments in both these programmes is the maintenance of price stability. Specific action has been taken to reinforce this approach.

In response to the Bacon report, measures have already been taken to stabilise house prices. These included tax initiatives, coupled with measures to increase the availability of serviced land and, together, they are expected to reduce the rate of increase of house prices.

The 1999 budget will have the maintenance of low inflation as the primary focus. The Government will, therefore, be carefully monitoring price developments over the months ahead in the context of the formulation of policy for the forthcoming budget.