Wednesday, 1 Feb 2012

Priority Questions

Public Finance Strategy

Questions (1)

Michael McGrath

Question:

1Deputy Michael McGrath asked the Minister for Finance his views on the impact of the new proposed European Fiscal Compact Treaty on Ireland’s public finance strategy beyond the end of the Programme for Assistance with the EU and IMF in 2013; the period of time over which he expects Ireland will have to reduce its structural deficit to 0.5% of GDP and its debt to GDP ratio to 60%; The impact this is likely to have on national budgets post 2013; and if he will make a statement on the matter. [5990/12]

Oral answers (10 contributions)

Minister for Finance (Deputy Michael Noonan)

The Government's overriding fiscal objectives are twofold: first, we must return to a situation in which we are living within our means; and, second, we must put the debt-GDP ratio on a firm downward path. The strategy to achieve these objectives is set out in the Government's medium-term fiscal statement as well as in the documentation accompanying budget 2012. These documents spell out the necessary consolidation to correct our excessive deficit by 2015 - in other words to reduce the general Government deficit to below 3% of GDP by that stage. On the basis of these measures, it is envisaged that the debt-GDP ratio will peak in 2013, and will decline thereafter.

This multiannual approach balances the need to support the emerging economic recovery with the need to pursue further consolidation. Crucially, this strategy has been agreed with the troika. The intergovernmental treaty on stability, co-ordination and governance in the economic and monetary union agreed on Monday does not change the strategy as implementing the programme commitments remains the priority.

Nevertheless, over the medium term, member countries are required to achieve a balanced budget in structural terms, in other words after adjustment for the impact of the economic cycle on the budgetary position. The timeframe for convergence towards the structural deficit target set in the intergovernmental treaty and our associated country-specific medium-term objective, MTO, is yet to be determined. At this point in time, it would be speculative to put forward a possible timeline for reaching the structural deficit of 0.5% of GDP and in any event it is currently the priority for Government to bring our actual deficit below 3% of GDP by the end of 2015. My officials will continue to work with the Commission on all aspects, including measurement of the structural fiscal position.

The debt correction requirement in the new treaty, which will apply to Ireland as our general Government debt-GDP ratio is above 60% of GDP, is the same as is already required under the reforms of the Stability and Growth Pact as part of the so-called "six pack" of legislative reforms.

Additional information not given on the floor of the House.

Specifically, we will be required to reduce our debt-GDP ratio annually by at least one 20th of the difference between the actual rate and the threshold rate. I would point out that a transition period will apply for all countries that are currently subject to the excessive deficit procedure on the basis of the deficit criterion, including Ireland.

In terms of the fiscal implications of this debt correction rule, it is important to remember that it is the ratio of debt-GDP that is important. In other words, on the basis of reasonable assumptions over the medium term, we can expect economic growth to do much of the heavy lifting. Furthermore, I think its also worth pointing out that, irrespective of our international commitments, we need to get the debt-GDP ratio down to more manageable levels because otherwise we will just spend more of our tax revenue on servicing the debt burden, which reduces the amount we can spend on education, health, social welfare and other areas.

It is also appropriate for me to highlight developments in recent times in our bond spreads and the NTMA's recent success in switching approximately €3.5 billion worth of bonds due to mature in 2014 with bonds maturing in 2015 at a broadly similar annual interest rate. This will smooth the maturity profile of Irish debt, and is a reflection of the improved market sentiment for Irish Government paper.

Deputy Michael McGrath

I thank the Minister for his response. In assessing the provisions of the fiscal compact, this is a key question that needs to be answered. The economic and fiscal outlook document the Minister published along with the budget in December clearly sets out that nominal GDP for Ireland is forecast to be €179 billion in 2015. The Department of Finance estimates that the structural deficit for Ireland at that time will be 3.7% of GDP or €6.6 billion in nominal cash terms. This is based on everything going according to plan between now and 2015 in terms of the growth rates and the fiscal consolidation between now and then.

An Leas-Cheann Comhairle

A question please.

Deputy Michael McGrath

As the Minister knows, under the treaty we are obliged to reduce the deficit on the structural side to 0.5% of GDP, so under static conditions it must be reduced to approximately €900 million, a reduction of €5.7 billion. Of course, conditions will not be static and it will be a combination of growth and the fiscal adjustment. The key question is as follows. Over what timeframe will Ireland be expected to deliver on that reduction of the structural deficit from 3.7% in 2015 to 0.5%?

Deputy Michael Noonan

Allowance is being made for countries with excessive deficits, especially countries in programmes, such as Ireland. The timeline will be a matter for negotiation with the Commission. Certainly countries with larger deficits will have a longer period of adjustment than countries with balanced budgets at present.

Deputy Michael McGrath

The Minister mentioned the word "negotiation" and I hope that will form part of the outcome because the wording of the treaty indicates that the timeframe will be proposed by the Commission. To what extent will the input of the individual member state be taken on board? By any measure a further adjustment of almost €6 billion in nominal terms, although we hope that growth will offset that, is very significant. It comes on top of €8.6 billion between 2013 and 2015. My question is very reasonable. In what timeframe will we be expected to deliver? What can stop the European Commission in 2015 requiring Ireland to knock a further €5 billion to €6 billion off our deficit to bring it within the 0.5%?

Deputy Michael Noonan

The practice of the Commission over the years with all governments is to discuss matters before imposing any regime. When it states "propose", it will discuss.

The Deputy is correct that the concept of a structural deficit is difficult to understand in the first place. It is extremely difficult to measure, particularly for a country such as Ireland, which has, in effect, a common labour market with the UK. The Deputy will remember the Warren Buffet quotation that it is only when the tide goes out that one discovers who has been swimming naked. The Deputy should reflect on that experience of his party's Government. The Fianna Fáil and the Green Party Government was supposed to be running surpluses for several years but was actually running structural deficits when all the headline figures suggested surpluses. The tide went out and they were left naked with the waves lapping around their ankles and nowhere to go.

Deputy Michael McGrath

The question is about the future though.

Deputy Michael Noonan

The reason was that all the transactional taxes coming from the property industry were part of the cycle and were not a permanent feature of the tax system. That all disappeared and they left this huge deficit. When considered in those terms, structural deficits and structural surpluses are easier to understand.

Deputy Michael McGrath

We have the figures for Ireland.

Job Creation

Questions (2)

Pearse Doherty

Question:

2Deputy Pearse Doherty asked the Minister for Finance his view on the use of the National Pension Reserve Fund discretionary portfolio for investment in job creation; if he has discussed the use of these funds with the Troika for this purpose; if so, if he will outline the specific schemes under discussion; and if he will detail his understanding of the Troika’s view on this matter. [5892/12]

Oral answers (6 contributions)

Deputy Michael Noonan

In September 2011 the Government announced the establishment of the New Economy and Recovery Authority, NewERA, within the NTMA and the establishment of the strategic investment fund. NewERA will centralise the management of Government holdings in the commercial semi-State sector - initially the companies within NewERA's remit are ESB, EirGrid, Bord Gáis Éireann, Bord na Mona and Coillte - from a shareholder perspective. This role, based on the shareholder executive model already established in a number of developed economies, will involve oversight of activities such as capital expenditure plans, corporate strategy, acquisitions and disposals. NewERA is already working closely with the relevant Departments and companies in this regard. The shareholder executive approach is designed to provide the Government with a portfolio view of investment returns from the sector with a means of assessing the likely impact of commercial developments in the sector on long-term Government investment plans.

NewERA is also charged with assisting the development and implementation of Government plans for investment in energy, water and next-generation telecommunications with the long-term objective of employment creation and has commenced work with the relevant Departments in these areas.

The strategic investment fund will, following appropriate legislative changes to the investment policy of the National Pensions Reserve Fund, channel commercial investment from the NPRF towards productive investment in the economy. As well as money from the NPRF, the fund will seek matching commercial investment from private investors and target investment in areas of strategic significance to the future of the economy. It will comprise a series of sub-funds targeted at commercial investment in critical areas of the economy, including infrastructure, venture capital and provision of long-term capital for SMEs. The NPRF will take a lead role in the development and implementation of each sub-fund.

Additional information not given on the floor of the House.

In November 2011, the NPRF announced a commitment of €250 million to a new infrastructure investment fund which is seeking up to €1 billion from institutional investors in Ireland and overseas and which will invest in infrastructure assets in Ireland, including assets designated for disposal by the Government and commercial State enterprises and also new infrastructure projects.

NewERA and the strategic investment fund are important elements in the Government's strategy to promote economic growth and create jobs.

The fifth quarterly review mission under our EU IMF programme took place from 10 to 19 January. All actions were met for the fourth quarter of 2011 in terms of both policy reforms and quantitative targets. The troika's overall assessment was positive.

During the mission, the Minister for Public Expenditure and Reform and I both engaged with senior officials from the EU, ECB and IMF - the troika - and separately assured them that the Government will take all the necessary measures to ensure a successful implementation of the programme. The Government is continuing its commitment to the fiscal targets set out in the EU-IMF programme.

In its concluding summary of the mission, the troika team noted that our programme implementation continues to be strong. The fiscal deficit target was comfortably reached and was well below the target of 10.6% of GDP. Major progress in strengthening and downsizing the banking system was made in 2011. Steps to support growth and job creation are being put in place. However, Ireland continues to face considerable challenges.

Deputy Pearse Doherty

In four weeks it will be a year since the people went to the polls to elect a new Government. Central to many people's thoughts when they went into the polling stations was the need for change and particularly the opportunities for employment. Figures have been issued this week indicating that more than 439,000 people are out of work. We all know about people who are leaving our shores because they feel there is no hope for them on this island. The Minister spoke about NewERA and the potential for investment from the National Pensions Reserve Fund. When will we see an investment by the State, using the discretionary portfolio that exists within the National Pensions Reserve Fund of €5.4 billion, invested into job creation opportunities? What the Government is giving people in this city and other places is not satisfactory. People want to know whether there is a chance for investment in job creation and why the Government has not used any moneys from the National Pensions Reserve Fund to date to invest in jobs. We know the rest of the money totalling almost €19 billion or €20 billion has been used to bail out and recapitalise banks. People want to know whether the Government will bring forward real proposals to use the remainder, some €5.4 billion, to help to bail out them and to provide employment for the economy and for them.

Deputy Michael Noonan

There has been an extraordinary change since the Government was elected ten months ago. The Government is working every day bringing forward initiatives to restore health to the economy and this has been recognised at home and abroad. The live register figures passed through Government yesterday and they were published today. They are the best set of positive figures since 2010. I do not suggest they are satisfactory because there are significant levels of unemployment in the country but things are moving in the right direction.

Our model is dependent on export-led growth and the projections for exports are up again on the figures published this week. On the figures for January, consumer sentiment, which affects the domestic economy, is up to 56.6 on the index. It was 49.2 in December and last January it was at 48.7. This represents a significant increase in consumer sentiment and the economy is lifting slowly. We would prefer if more significant progress was being made but the depth of the hole explains the tardiness of progress made.

NewERA will invest when it is satisfied it can make profitable investments with taxpayers' money and that there will be a real creation of jobs. It will not dig holes and fill them in again simply for the sake of activity.

Deputy Pearse Doherty

Investment by the National Pensions Reserve Fund must be made in a certain way and EUROSTAT will dictate that. The Minister says we are moving in the right direction but young people are moving to Dublin airport and from there to Australia and it is not a lifestyle choice. The set of figures the Minister claims are the best yet represent 439,000 people unemployed. It is not acceptable.

When I met the troika as part of the Sinn Féin delegation, it informed me that at no point during its discussions did any Minister or Irish Government delegation discuss the use of the National Pensions Reserve Fund to invest in job creation, save for water metering purposes. It was never on the agenda of the troika. The Minister has failed to do this. Nevertheless, the Minister for Finance and the Taoiseach stand up in the House and declare that job creation is their No. 1 priority but never has the issue been raised with the troika except for water metering. In the Minister's view, how much of the National Pensions Reserve Fund, the €5.4 billion remaining in the discretionary portfolio, will be used for the purposes of job creation?

Deputy Michael Noonan

Deputy Doherty has quoted the troika as stating as much to him previously but when we asked the troika at subsequent meetings it denied that it ever stated this to the Deputy. Deputy Doherty should sort out that with the troika.

I suspect the troika is right because on several occasions we raised with it the possibility not only of using the National Pensions Reserve Fund for job creation, but the possibility of using a proportion of the proceeds when State assets are sold for re-investment in projects that would generate growth and job creation. I am unsure where Deputy Doherty's quotation is coming from but that is not what the troika has said to us.

Deputy Pearse Doherty

How much of the money will be used?

Economic Forecasting

Questions (3, 4)

Richard Boyd Barrett

Question:

3Deputy Richard Boyd Barrett asked the Minister for Finance if he will respond to the recent downgrading of growth projections by the IMF and others, for Ireland and the Eurozone economies; and if he will make a statement on the matter. [5893/12]

Oral answers (12 contributions)

Deputy Michael Noonan

There is a good deal of uncertainty at the moment as evidenced by the wide range of GDP projections for this year not only for Ireland, but also for the euro area. The recent downgrading of forecasts by the IMF, including those for Ireland, reflects heightened concern about growth prospects in the euro area and the wider global outlook. As a small, open economy whose recovery is being driven by exports, Ireland will be affected by weaker euro area growth. However, the substantial competitiveness improvements we have seen in recent years will provide some support. It is important to note that a weakening of activity in our main trading partners is already factored into the Department of Finance forecasts for economic growth which underpin the 2012 budget.

The budget forecast is for real GDP growth of 1.3% in 2012. This forecast was prepared on the basis of economic information, domestic and international, available up to the end of November 2011 and it was mid-range at that time. Given the highly uncertain environment, the budget documentation also pointed to several risks to this forecast, some to the downside and some to the upside. These risks remain valid.

While the weak external outlook is of concern, there have also been some positive developments since budget time, not least of which is the trajectory of ECB interest rates which appears more favourable than was the case in November. In addition, recent exchange rate movements will provide some benefit for the exporting sector. Some of the economic data, domestically and internationally, have not been as poor as some were assuming. For example, high frequency survey data shows that economic activity in the euro area increased in January, the first such increase in five months, while at home consumer sentiment picked up, as did new manufacturing export orders. Moreover, concerted action has been taken at European level to address the weaknesses that have become evident in the design of monetary union. Measures include the so-called six-pack of legislative reforms as well as the agreement on a fiscal compact to ensure fiscal discipline in participating member states. I am confident that this strong policy response will contribute to a restoration of confidence in the euro area as we go through 2012.

During the coming months my Department will continue to monitor the economic situation in terms of positive and negative developments and, as is the norm, it will publish an updated macro-economic assessment in the spring in the context of the stability programme update. It is anticipated that the update will be published in April in line with the requirements under the European semester agreed by member states last year.

Deputy Richard Boyd Barrett

The Minister's response is made up of "on the one hand this and on the other hand that" and the view that we should wait and see. I am calling on the Minister to respond to the alarming but accurate concerns expressed by a major international financial body, the IMF. It is a body that I do not have much time for and whose activities over the years have contributed substantially to the mess we are in now. However, when the head of the IMF states that we may be headed towards a 1930s-style depression, one must take it reasonably seriously. I do not understand why there seems to be no acknowledgment that the rather dramatic downgrading of growth forecasts that has occurred in recent months is precisely as a result of austerity and the cuts in expenditure. It is a consequence of these cuts working their way through in terms of a serious drop in consumer demand and, similarly, a collapse in investment in this country and a drop in investment throughout in Europe. These two things are absolutely connected.

An Leas-Cheann Comhairle

Has the Deputy a question?

Deputy Richard Boyd Barrett

Will the Minister explain it to me, please, because the economics of his outlook appear to defy gravity? If we continue to cut as required by the fiscal compact and the austerity programme will it not inevitably produce the same result that we have seen in recent months, that is, growth will continue to contract and we will enter a downward spiral? How can anything else happen if the Government continues to cut expenditure, if there is no investment and if the banks continue to hoard money in the ECB?

Deputy Michael Noonan

That is an interesting intervention but growth in Ireland has been marked down because of failing growth in our customer countries abroad. It is not because of anything in the domestic economy. In fact, the economy in Ireland is positioned to grow and if we got fair weather abroad certainly it would grow strongly. The economy is growing. It grew last year by at least 1%. It continues to grow in the first quarter of this year and as things settle down in Europe I expect there will be stronger growth patterns at the end of the year.

The critics make the connection that the budget targets will be off course because of the down-marking of growth rates. I do not believe this is the case for several reasons. First, our exports are going rather well. Second, the thing had improved at the end of the year beyond what we factored into the budget. The Deputy will remember the budget was worked on a deficit of 10.1% but it will come in for 2011 somewhere between 9.8% or 9.9%. If one thinks of it as a journey, we are a couple of miles up the road towards our destination. Therefore, the situation has improved and there is no reason at present to think we will not reach our fiscal target of a deficit of 8.6% at year end.

Deputy Richard Boyd Barrett

I am not interested in the fiscal target of 8.6%, I am interested in growth and jobs and that is what my question was about. The Minister should not deliberately misinterpret my question by referring to the Irish economy. I referred in particular to Christine Lagarde's comments about the entire eurozone. Ireland's growth projection is down, as is the case for Europe and Germany. Who will buy our exports if consumer demand is depressed right across the European economy, even in the large supposedly wealthy states where demand is also contracting? If people do not have an income because of the austerity already imposed and the further austerity demanded by the fiscal compact and if investment is collapsing because large businesses do not believe it is safe to invest in a depressed economic environment, from where will the jobs and growth come?

Deputy Michael Noonan

Some 20% of our exports go to the United States, another 20% to the United Kingdom, 40% to Europe in general and the other member state and 20% to other markets. Many of our exports are inelastic to demand, for example medical and pharmaceutical products. If one is sick and needs a stent for one's heart, one will buy and pay for the stent. Food is in the same category, particularly food exports into south east Asia and emerging markets. The new emerging families in China and India want to give their children protein and dairy products and they see Ireland as the premier world brand. Almost any food that is produced in Ireland can be sold. Therefore, it is not true to say there is a direct relationship between the downturn in world demand and the ability of Ireland to export. We proved that all last year, with exports increasing by 4.5% having already increased the previous year by 6%. We know from the order books that exports will have risen again this year. Therefore, the Deputy's analysis is not fully correct.

Michael McGrath

Question:

4Deputy Michael McGrath asked the Minister for Finance if he has reviewed his growth projection for 2012 from the Budget day forecast of 1.3% in view of a significant number of recent downgrades; his views on the implications for this year’s general Government deficit target of a growth rate of 0.5%; and if he will make a statement on the matter. [5821/12]

Deputy Michael Noonan

The budget forecast is for real GDP growth of 1.3% in 2012. This forecast was a downward revision from that published in the medium term fiscal statement published at the beginning of November and was necessitated by the deterioration in the external environment that became evident during November. The budget forecast incorporated all of the information – both domestic and international – that was available up to end-November 2011, and was mid-range at that time. Given the highly uncertain environment, the budget documentation also outlined a number of risks to this forecast, some to the downside and some to the upside.

Clearly, the uncertainty which characterised the second half of last year remains and this is reflected in the wide range of GDP projections for this year, not just for Ireland, but also for the euro area. However, there also have been positive developments since budget time, not least of which is the trajectory for ECB interest rates which appears more favourable than when my Department's forecasts were prepared. In addition, recent exchange rate movements will provide some benefit to the exporting sector. I also note that some of the economic data – domestically and internationally – has not been as poor as some have assumed.

With regard to the fiscal targets, it is important to note that the Exchequer budgetary position at end-2011 was better than anticipated at budget time, thereby providing a small safety margin in terms of achieving the 2012 deficit target. On a purely model-based approach, a reduction in real GDP by about 1% would, all other things being equal, see the general Government deficit worsen by about a 0.5% point of GDP. However, it is worth noting that while the troika has revised down its GDP growth forecast for this year to 0.5%, it still sees the overall deficit target of 8.6% as achievable. In this respect, I would also highlight that it is the nominal growth rate of GDP - that is volume and price changes - which drives tax revenue and affects the various fiscal ratios, as opposed to just real or volume changes.

To sum up, the level of uncertainty surrounding macroeconomic forecasts for Ireland and internationally is very high. However, given that the forecasts were produced in early December and that the fiscal position ended the year marginally better than had been anticipated on budget day, there is no reason to believe our fiscal targets will not be met. As always, my Department will continue to monitor the economic and budgetary situation over the coming months, in particular the monthly Exchequer situation, and this analysis will inform official thinking on these matters. As is the norm, my Department will publish a revised set of economic and budgetary forecasts in the April stability programme update.

Deputy Michael McGrath

We can all agree that growth is central to bringing us out of our economic difficulties and that forecasting is an imprecise science. However, five different bodies have downgraded Irish growth predictions since the beginning of this year. These range from Davy's saying growth will be 0.4%, Goodbody's 0.7%, ESRI 0.9%, the troika 0.5% and NCB 0.3%. The Department's current forecast is 1.3%. The issue is not the achievement of the fiscal target but, to take up the point raised by Deputy Boyd Barrett, the risk that if the fiscal target looks like it is slipping because of the growth projection, we will be forced to introduce additional fiscal measures during the year. That is a risk we all want to avoid.

I welcome the Minister's comments with regard to our starting position in 2012, which is somewhat better than anticipated. This gives some welcome headroom on the fiscal side for 2012. However, the downgrade of the Irish growth forecast by all of the bodies mentioned is a major concern. The medium forecast is now only 0.5%. The Minister's medium term fiscal statement points out that if growth is 1% less than anticipated by Government - then 1.6% - the outturn would be a deficit of 9.1%. Based on the data available to him at this point, is the Minister satisfied we will be in a position to achieve the overall target without additional measures beyond what was announced in the budget in December?

Deputy Michael Noonan

The simple answer is "Yes". I did not say I anticipated a deficit of 9.1%. What I said was that if one had a model where one put in a lower growth, one would come out with a projection and one could do the sums that way. However, there are many other variables, which I pointed out. Both the troika and the Department of Finance believe that 8.6% is still an achievable target.

I agree that matters are very uncertain. Looking, for example, at the forecasts made by the Department during 2011, one can see that in April we forecasted growth of 2.5%, which was mid-way in the estimates of growth at the time. In early autumn, we pulled back that forecast to 1.5% or 1.6% and by budget day we pulled it back to 1.3%. These were all prudent positions given the data available at the time. I foresee a further pull-back when the forecasts are revisited in April. However, there are margins and buffers built into the budgetary position which, despite the pull-back in growth figures, will allow us to reach the deficit target of 8.6%.

Deputy Michael McGrath

While we have tended to focus on the picture in 2012 because we can look at that with the highest degree of certainty, the forecasts beyond that, for 2013 of 2.4% and 2014 of 3% and our medium-term outlook are very much dependent on those rates being achieved. The Minister's medium term fiscal statement lays out clearly that if there is 1% slippage in that, our debt-to-GDP will peak at 123% and if there is 2% slippage, our debt-to-GDP will reach 133%. At what point will we begin to look at the potential for change to the growth rates beyond this year? Will that be reviewed in April with the stability programme update?

Deputy Michael Noonan

We will keep everything in mind, but we can control only that which is under our control. Many events are international and are outside our control. One must remember all the time that the budget is not built on real growth figures, but on growth plus inflation. The recent figures from the Central Statistics Office make a projection of an increase of 1.8% in the Consumer Price Index for next year. Therefore, if one adds 1.8% onto half of the budgetary growth figure of 1.3% we get 2.5%, and the budget is built on 2.5% growth in nominal terms.

I take the point made by Deputy Boyd Barrett. Obviously, there will be a reduction in economic activity and that runs counter to growth and job creation. However, in purely fiscal terms, even with half the growth rate on which the budget is built, taken with the latest figures from the CSO on the Consumer Price Index, we still have a nominal growth rate without taking into account any of the other factors I mentioned.

Economic Competitiveness

Questions (5)

Mick Wallace

Question:

5Deputy Mick Wallace asked the Minister for Finance in view of statements that our recovery will be export-led, the country’s financial situation is unlikely to improve until we deal more directly with the problems facing the domestic economy; and if he will make a statement on the matter. [5931/12]

Oral answers (9 contributions)

Deputy Michael Noonan

Over the last number of years, the Irish economy has suffered enormously, and by extension so too have the Irish people. The bursting of the property bubble has had severe adverse implications for the economy, the public finances and the banking sector, and the fallout has been exacerbated by a global downturn.

However, the Deputy should also remember that it was strong export-led growth which provided the basis for the original pick-up in economic activity in the early to mid-1990s. This is how growth in a small open economy such as Ireland's should be driven, and we are once again seeing evidence of that, with exports growing by over 6% in 2010 and by 4.5 % in the first nine months of 2011. This growth is broadening out into the indigenous export sector, with areas such as agrifood and tourism performing well. The growth in our exports reflects significant improvements in competitiveness, which are allowing us to trade our way to recovery. Indeed, economic growth has returned, with my Department projecting that last year saw real GDP growth of 1%. As a result of the export-led recovery, the current account of the balance of payments has also returned to surplus, which shows that Ireland as a whole is once more paying its way. This is a crucial signal to investors.

Evidence of Ireland's enduring attractiveness as a location for foreign direct investment was underlined by the IDA's recent announcement that a record number of new investments were won last year. This will underpin further export growth into the future.

While the economy is growing again, it will take time for export growth to feed through to the labour market and the domestic economy. Moreover, it will take households and firms time to work through the imbalances which had built up during the boom. The Government is acutely aware of the headwinds which the domestic economy faces in this regard. We have therefore taken a number of steps to support domestic activity and job creation, including the introduction of the jobs initiative shortly after coming into office and the structuring of the 2012 budget in such a way as to be as growth friendly as possible.

The jobs initiative is an important part of the Government's overall strategy to establish the correct conditions to allow our domestic economy to recover, while at the same time respecting the requirement to return our public finances to a sustainable position. It should be viewed as one element of a wider strategy to support economic activity and will be followed up shortly by the action plan on jobs which the Minister for Jobs, Enterprise and Innovation will publish shortly.

Additional information not given on the floor of the House.

The establishment of NewERA and the strategic investment fund within the National Treasury Management Agency, which the Government announced last September, is a further major initiative within the domestic economic sphere. The Government has also taken a number of steps to ensure there is sufficient credit available to business. I have also sought to support firms and encourage job creation through extending the three-year start-up relief scheme, improving the research and development tax credit scheme and replacing the business expansion scheme with a new employment and investment incentive.

While the Government is taking every step to support the recovery of the domestic economy, there is no quick-fix solution. We must continue to deliver on our commitments under our EU-IMF programme and, in so doing, we will ensure that the programme works for us. The challenges are substantial and this is why the Government has focused on three main priorities; restoring order to the public finances, repairing the banking system and restructuring the economy towards a sustainable growth model. We are on track to bring the deficit below 3% of GDP by 2015, the banking system has been recapitalised and the economy returned to growth last year following three successive years of annual declines. In short, the Government is delivering a return to sustainable growth which capitalises upon the underlying strengths of the Irish economy.

Deputy Mick Wallace

The Minister must surely agree that the relationship between the export figures and the number of people involved looks unusual. For example, I believe the top three export companies in Ireland at the moment are Johnson & Johnson, Microsoft and Google. They export over €24 billion in products and services and account for 15% of our exports. Given that they account for 0.3% of the workforce, that is a bit uneven. The pharmaceutical industry has exports worth over €56 billion, yet employs only 2.6% of the workforce. It looks from the figures as if each worker is producing €1.2 million worth of work each year. Clearly there are sales funnelled through this country for tax avoidance purposes which are inflating these figures.

If the Government is serious about job creation, we need to look more closely at doing something for the domestic economy. We need to look at the rates structure, which is linked to our poor local government structure, our huge energy costs, upward only rent reviews, which I know are difficult to deal with-----

An Leas-Cheann Comhairle

I must call on the Minister to reply. I will come back to you for another supplementary question.

Deputy Mick Wallace

Incentives for people investing in small businesses would be a help as well.

Deputy Michael Noonan

The best way to project the future is to look at what happened in similar circumstances in the past. It was export-led growth that brought us a great recovery in the 1990s. Between 1994 and 2000, nearly 700,000 extra jobs were created. However, the jobs lagged behind the growth. I am not sure if the Deputy's statistics are correct, but I accept what he says about different components of the multinational industry base in the country. Overall, there are over 200,000 people working in these industries and they generate double that number in employment in the ancillary industries that supply them and support them. That is out of a total number of 1.8 million still at work in this country. I remember that at the height of the crisis in the late 1980s, employment in the country was down to about 940,000. Today it is still at 1.8 million. There are many people still going to work every morning.

The level of employment is not acceptable and we must do everything in our power to address the unemployment problem and get people back to work. However, we are not as badly positioned as the gloom and doom merchants would have us believe, and we can work our way and grow our way out of this.

Deputy Mick Wallace

I assure the Minister that I am not a doom and gloom merchant.

Deputy Richard Boyd Barrett

There are none in this House.

Deputy Mick Wallace

However, indigenous industry would be far more likely to create secondary industry, given that many of our multinationals bring in much of their material from abroad. There is not quite as much the same spin-off from that.

I saw a statement today from Mark Fielding of ISME, who said "How many more people must we lose to emigration and unemployment before we see some action from this ... Government?" The seasonally adjusted live register figures confirm that almost half a million people are unemployed. The domestic economy has a huge impact on everybody in the country. It accounts for 90% of the workforce. The amount of money that people have in their pockets has such a dramatic effect on small businesses. They are suffering at the moment and while it is great that the export market is looking good, if the Government can do a bit more for the domestic economy, it will have a much bigger impact on people's lives.

Deputy Michael Noonan

I fully agree with what Deputy Wallace is saying. Sector after sector in the domestic economy is targeted with initiatives in the budget. In a couple of weeks we will be able to discuss them when we implement them in the finance Bill. There are incentives targeted across the board from agribusiness to the food sector to the property business. We must get the domestic economy going again. We will not get people going back to work with the numbers we require until the domestic economy is booted up once more.

However, we cannot go back to where we were. Reverting to a property bubble will not solve our problems. We must go back to the economy we had from the mid to late 1990s, when we were very competitive, when we invested in skills and education and when almost 700,000 extra people went to work over six years.

Labour market figures are very interesting. In 2011, a total of 144,000 people left the live register to go back to work. It shows the enormous amount of change that took place. Other people lost their jobs and went onto the live register. This shows the flux and flexibility of the labour market when 144,000 left the live register and got jobs, yet a whole other tranche of people lost their jobs and went on it. If we could stop the losses, there are things happening in the economy that are encouraging.