Dáil Éireann Debate, Thursday - 14 October 2004
110 Mr. Durkan asked the Minister for Finance the most important steps that he can take in his Department to improve the competitiveness of the economy; and if he will make a statement on the matter. [24970/04]
Amharc ar fhreagraGiven the importance of trade and investment to the continued development of the Irish economy, regaining and improving the competitiveness of the economy is a key priority for the Government and also for social partnership. Keeping a downward pressure on costs is essential. The consensus approach to wage determination has a crucial role in improving competitiveness, by delivering moderate wage increases. In this context, wage increases must be limited to those negotiated under Sustaining Progress. My Department participates fully in the negotiations of these agreements. Officials from my Department are also participating in the anti-inflation initiative set up as part of Sustaining Progress with a view to examining ways of reducing inflation.
It is also important to maintain spending growth in line with revenue growth, thus keeping the burden of taxation low in order to maximise our economic growth potential. Finally, we can maintain capital expenditure at the current high levels relative to GNP in order to reduce the existing infrastructural deficit.
111 Mr. Durkan asked the Minister for Finance the merits and demerits of a high wage economy; the extent to which this will be reflected in the future; and if he will make a statement on the matter. [24971/04]
Amharc ar fhreagraWages in Ireland have risen significantly over the last number of years as we have successfully repositioned large parts of the economy in more knowledge intensive, higher value added employment. As a result, incomes in Ireland have converged to, and subsequently exceeded, the EU average.
One of the potential downsides of this is the fact that Ireland has become a high cost base, particularly for some lower skilled sectors. As a result, there have been job losses in some of these sectors. While this may be considered as part of an ongoing process of moving up the value added chain, it nonetheless has adverse implications for those whose skills have become relatively less important over time. This highlights the importance of investment in training and education. Moreover, for those sectors which have relatively limited scope for productivity growth, restoration of cost competitiveness is a crucial concern.
The challenge is to maintain and build on our performance over the last decade. We will need to be in a position to adapt and to develop our strengths, as highlighted in the recent report of the enterprise strategy group, if we are to succeed in the knowledge economy.
