Dáil Éireann Debate, Thursday - 29 June 2023
62. Deputy Fergus O'Dowd asked the Minister for Enterprise, Trade and Employment how he and the Government will take action to address the most recent European Commission report indicating that Ireland is now the most expensive country in Europe for household expenditure on goods and services last year, at 46% above the EU average; and if he will make a statement on the matter. [31633/23]
View answerIt is important to examine the European Commission data in context.
In several categories, Ireland performs better than, or on par with, other small and open EU economies. For example, when it comes to the price of food and non-alcoholic beverages, Ireland outperforms economies such as Norway, Denmark, Luxembourg, and Malta, and EEA members, Switzerland and Iceland. We also outperform in terms of clothing and furniture, for which we fall below the Euro Area average. Ireland has introduced minimum unit pricing for alcohol, and we have relatively high rates of tobacco taxation – these policies inflate the price of affected products, but are part of a considered national public health strategy.
Despite our high price position, Ireland remains a competitive economy. Last week, Ireland was ranked as the second most competitive economy in the globe under the IMD World Competitiveness Rankings.
This follows the publication of Ireland’s Competitiveness Scorecard 2023, by the National Competitiveness and Productivity Council. The evidence in the report suggests that Ireland remains a competitive economy, however, the Council highlighted that as an open economy, Ireland is effectively a price taker on most international markets, and many of the drivers of Irish inflation are outside our control. As a small island nation, there will be additional costs associated with transport and our small market size, and we are a significant importer of energy and food produce.
Inflation in Ireland – although elevated at 5.4 per cent in May – is declining, and is down from 9.4 per cent in October. This is also below the EU average of 7.1 per cent and the Euro Area average of 6.1 per cent.
The impact of rising prices over the last year is not unique to Ireland, but an issue facing major economies including the UK, Germany, France and the US, as the effects of the pandemic unwind with the rapid resumption of economic activity, and geopolitical uncertainty following Russia’s invasion of Ukraine. These tensions are disrupting supply chains and leading to large rises in international prices for energy, food and other commodities. As a significant importer of energy and food produce, Ireland is exposed to these global inflationary pressures.
However, inflation is expected to ease through this year and next. The most recent forecast from the Central Bank of Ireland predicts HICP inflation of 5% for 2023, down from 8.1%.
The Government has been proactive in limiting the fallout from inflation. A total of €12 billion – 4½ per cent of national income – has been provided in direct relief to absorb some of the impact and ease the burden on households and businesses. These measures are intended to increase the value of people’s wages, in the face of cost-of-living pressures.
