Dáil Éireann debate -
Tuesday, 8 Apr 2003

Vol. 564 No. 5

Written Answers - Price Inflation.

Róisín Shortall

Question:

57 Ms Shortall asked the Minister for Finance the projected level of inflation for 2003 based on the latest information available to his Department; the way in which this compares with the projected EU average; the impact he expects the anti-inflationary measures agreed in the recent national talks will have on the consumer price index; and if he will make a statement on the matter. [9741/03]

Bernard J. Durkan

Question:

73 Mr. Durkan asked the Minister for Finance if the inflation rate here is sustainable having regard to inflation levels in Eurozone countries and throughout the European Union; and if he will make a statement on the matter. [9746/03]

Minister for Finance (Mr. McCreevy)

I propose to take Questions Nos. 57 and 73 together.

On budget day, inflation, as measured by annual changes in the consumer price index, CPI, was projected to average 4.8% in 2003. This forecast was, as always, based on the technical assumption of unchanged interest rates. My Department will publish a revised estimate in the Economic Review and Outlook which will be published in the summer. It is expected that inflation will moderate this year from March, reflecting: first, the fact that last year's increase in VAT will fall out of the annual comparison; second, that services sector inflation is moderating; and third, the recent interest rate cuts.

In terms of EU comparisons, the appropriate measure of inflation is the harmonised index of consumer prices, HICP. HICP inflation for Ireland for 2003 as a whole was forecast to be 4.2% on budget day. The Commission's autumn forecast estimated that euro area inflation would average 2.0% this year.

Irish inflation has exceeded the EU and euro area average for some time now. This has occurred for a variety of reasons, both external and domestic. It is on those domestic sources of inflationary pressure that we must focus our attention if we are to bring inflation down and thereby maintain the competitiveness which has been key to our economic development. In this context, the adoption of the pay arrangements set out under the draft new social partnership agreement, Sustaining Progress, is significant as is the implementation over the next 18 months of the anti-inflation initiative agreed by Government, in conjunction with the social partners.

I am also aware that keeping public expenditure on target will be important if our inflation rate is to moderate and new management and control mechanisms have been put in place to this end.