The deterioration in the economy's competitiveness relative to that of our main trading partners has been driven by a combination of factors. These include a strong euro, wage increases in excess of productivity, and the relatively high rate of inflation that we have experienced in recent years. While CPI inflation has eased in recent months and may temporarily turn negative during the course of next year, it is important to note the level of prices here stands at more than 20% above the euro area average. Improving our competitive position is essential to facilitate a re-balancing of the economy towards more sustainable, export-led growth and to maintain Ireland's attractiveness as a location for inward investment.
In recognition of this, and notwithstanding the need to underpin the sustainability of the public finances, the Government took a number of steps in Budget 2009 aimed at supporting the economy's competitiveness. These included re-affirming our commitment to the 12.5% rate of corporation tax and maintaining and enhancing pro-employment business tax reliefs. We are also continuing to prioritise productivity enhancing capital investment. These measures will ensure that the Irish economy is well placed to take advantage of the global pick-up when it emerges.
The pursuit of national competitiveness is not, however, solely for Government. Rather it is a shared responsibility of all in society including the social partners — Government, employers and unions. Regaining our competitive position, which as a small open economy is critical to our economic success, will require each of us to play our part and work together to this end.
A key aspect of this will be to ensure sensible wage developments over the coming years. In this regard, the willingness of the various parties to adopt a realistic approach to wage developments will be required to ensure that we address the changed economic circumstances which we now face. In addition, it will be important to ensure that improvements in external factors that favourably impact on domestic costs are passed on in full.