I welcome the Minister of State to the House.
There is no doubt that international events have impacted on Ireland's economy, not least the high price of food, the fact that the prices of commodities have risen by up to 40%, and the rise in the price of oil, which is now $137 per barrel, despite a 12-month low of $58 per barrel. We have seen significant changes. The American economy is heading towards a recession and the British economy is in recession. There have been difficulties here in the building sector. Recognising the difficulties, ours is a remarkable economy that has grown and will grow this year in what our finance spokesperson called a perfect storm. The economy will grow at a rate of 0.5% in the most difficult of times.
This economy is well managed, though the Opposition has often asked what we did with the good times. In the good times, we manage very well. Our Government debt is now 25% of our gross domestic product. In 1990, it was 95% and in 1993 it was also at this level. We have made remarkable strides in reducing the Government debt ratio. Similarly, we have remarkably improved our financial prospects in that the National Pensions Reserve Fund has grown to €19.379 billion this year. Not only have we reduced debt significantly, we have also put money away for the rainy day.
There are others who believe we are managing the economy well. One group, Moody's Global Sovereign, which gives no hostages to fortune whatsoever, rates the banks and does not give any pluses unless they are deserved. Its credit analysis of February 2008 states:
Ireland's Aaa government bond rating is supported by successful macroeconomic management and a competitive economy. Economic development has been characterised by strong growth which, supported by a favourable demographic profile and outward-oriented policies, contributed to a substantial rise in wealth levels over the past two decades. Deregulation and structural reforms played a key role in Ireland's efforts to make growth sustainable and the economy much more resilient to shocks. Strong investment spending and foreign direct investment (FDI) remain catalysts for the Irish economy's capacity to grow amidst the dynamics of population ageing, helped by immigration and the baby boom of the late 1970s. The success of the Irish government and the National Treasury Management Agency (NTMA) in consolidating public finances resulted in a marked drop in spending ratios and large fiscal surpluses between 1995 and 2000. Continued fiscal discipline in subsequent years helped to substantially reduce gross debt to about 25% of GDP at present.
We have been talking about continued fiscal discipline this week in respect of cuts of €440 million. These cuts could be made easily because they are in the context of a total spend of €543 billion. Therefore, they amount to less than 1%. If Ministers must forego their pay rises, they will do in the service of the public, as they do in respect of so much else.
The Moody's Global Sovereign report also states:
Strong economic growth, supported by the booming property market, has led to consistently higher tax revenues in recent years. However, higher interest and recent tensions in credit markets have started to slow growth in what had been the most dynamic sectors of the economy.
Moody's Global Sovereign states consistently that Ireland has been well managed, continues to be governed well and has made the correct decisions. The recent ESRI report indicates there will be a slowdown for 18 months, after which we are to return to growth rates of 3.5%. The documentation states we have a well-managed economy and implies we should not be concentrating on the few difficulties we must and will deal with but on how circumstances will change and how the Government will manage through the difficulties.
If oil prices are to remain at their current level, many economies will continue to experience difficulties. The reality is that there is no shortage of oil but a shortage in production capacity. If there is no world shortage of oil, one can increase production capacity, as is occurring. New refineries are opening in India, Canada and elsewhere. One problem associated with the high price of oil was the fact that hurricane Katrina ripped through two of the United States' major refineries in the Gulf of Mexico, thus cutting off 6% of US production. I would like to see a return to more sustainable oil prices. With a 2% shortage, prices can reach any height, and with a 2% surplus, they can fall to any level. I would much prefer to see a sustainable rate of $60 per barrel rather than $138 in the shorter term.
The reality is that the shortage of oil is a misnomer. Large areas have yet to be explored and the reality is that, for years, it did not pay people to take the oil out of the ground. Marginal fields were passed over and before the period to which I refer, the Brent oilfield was marginally profitable, at $5 per barrel. We witnessed this within the past two decades.
We are facing a short-term fillip, as we saw in the wake of the events of 11 September 2001 and the dotcom boom. The Government will get over it and will continue to manage finances in a prudent and positive manner, as it has done heretofore and as it demonstrated yesterday.