I propose to take Questions Nos. 99 to 102 together.
Measuring competitiveness is complex and requires an assessment of the full range of factors which enable firms to improve their productivity levels and compete in international markets. There are a number of international indices of competitiveness produced by international bodies, each with their own methodological constraints. The National Competitiveness Council's annual report, "Benchmarking Ireland's Performance", provides a comprehensive assessment of Ireland's competitiveness.
Taking a narrow view of competitiveness in terms of real effective exchange rates or price and labour costs is only one part of such an assessment. Table 1 shows labour cost (i.e. average industrial wage) developments since 1999.
Table 1: Labour costs 1999-2009
CSO, Earnings data
|
Average Industrial Wage
|
|
Hourly
|
Weekly
|
Q1 1999 in Irish Punts
|
7.61
|
305.95
|
Q1 1999 converted to €
|
€9.66
|
€388.46
|
Q3 2009
|
€21.30
|
€778.47
|
Q3 2009 in January 1999 constant prices
|
€15.49
|
€566.28
|
Nominal Difference between 1999 and 2009
|
€11.64
|
€390.01
|
Percentage change required in nominal terms
|
54.64%
|
50.10%
|
Difference between 1999 and 2009 using constant prices
|
€5.83
|
€177.81
|
Percentage change required in real terms
|
37.64%
|
31.40%
|
Table 1 shows that labour costs, as measured by the average industrial wage, would have to fall by 31.4% in real terms to be restored to levels seen in Q1 1999.
The Central Bank in collaboration with the European Central Bank have developed a whole economy relative cost index, the Harmonised Competitiveness Indicators (HCIs), which provide an indication of trends in competitiveness. The nominal HCI is a nominal effective exchange rate for the Irish economy that reflects, on a trade-weighted basis, movements in the exchange rates vis-à-vis 56 trading partners. The real HCI (deflated by consumer prices) takes into account relative price changes along with exchange rate movements. The HCI has been deflated by consumer and producer prices to show the level both would need to fall to reach 1999 levels.
Table 2: HCI, Consumer Price and Producer Prices 1999-2010
Harmonised Competitiveness Indicators for Ireland (HCIs)
|
|
|
Nominal HCI (Monthly average)
|
Real HCI (Deflated by consumer prices)
|
Real HCI (Deflated by producer prices)
|
1999
|
January
|
100.00
|
100.00
|
100.00
|
|
February
|
98.53
|
98.73
|
98.55
|
|
March
|
97.21
|
97.33
|
97.21
|
|
April
|
96.27
|
96.38
|
96.98
|
|
May
|
95.83
|
96.36
|
96.67
|
|
June
|
94.55
|
95.16
|
95.74
|
|
July
|
94.65
|
95.19
|
95.74
|
|
August
|
95.39
|
96.24
|
96.37
|
|
September
|
94.36
|
95.36
|
95.33
|
|
October
|
95.01
|
96.07
|
95.61
|
|
November
|
93.31
|
94.63
|
94.35
|
|
December
|
91.99
|
93.90
|
94.79
|
2000
|
January
|
91.90
|
94.11
|
95.08
|
|
February
|
90.98
|
93.39
|
93.98
|
|
March
|
89.98
|
92.51
|
93.07
|
|
April
|
88.91
|
91.76
|
92.69
|
|
May
|
87.81
|
91.08
|
92.20
|
|
June
|
90.23
|
93.59
|
94.37
|
|
July
|
89.81
|
93.49
|
94.41
|
|
August
|
87.96
|
91.82
|
92.70
|
|
September
|
86.77
|
90.41
|
91.34
|
|
October
|
85.80
|
89.81
|
90.72
|
|
November
|
86.37
|
90.65
|
90.80
|
|
December
|
88.58
|
92.44
|
93.48
|
2001
|
January
|
91.11
|
94.70
|
95.29
|
|
February
|
90.48
|
94.45
|
94.63
|
|
March
|
90.33
|
94.55
|
95.07
|
|
April
|
89.71
|
93.98
|
94.30
|
|
May
|
88.57
|
92.83
|
93.75
|
|
June
|
87.66
|
92.21
|
93.14
|
|
July
|
88.17
|
93.07
|
93.99
|
|
August
|
90.16
|
95.23
|
95.62
|
|
September
|
90.52
|
95.74
|
95.82
|
|
October
|
90.54
|
96.30
|
96.30
|
|
November
|
89.61
|
95.37
|
95.53
|
|
December
|
89.98
|
96.22
|
96.38
|
2002
|
January
|
89.72
|
96.11
|
96.42
|
|
February
|
89.10
|
95.55
|
95.97
|
|
March
|
89.31
|
96.12
|
96.77
|
|
April
|
89.58
|
96.70
|
97.30
|
|
May
|
91.03
|
98.61
|
99.02
|
|
June
|
92.89
|
100.66
|
100.86
|
|
July
|
93.90
|
101.69
|
101.24
|
|
August
|
93.47
|
101.40
|
100.39
|
|
September
|
93.55
|
101.67
|
100.32
|
|
October
|
93.77
|
102.14
|
100.54
|
|
November
|
94.50
|
103.21
|
101.43
|
|
December
|
95.27
|
104.28
|
102.93
|
2003
|
January
|
97.19
|
106.81
|
104.01
|
|
February
|
98.22
|
108.17
|
104.55
|
|
March
|
98.77
|
109.03
|
105.08
|
|
April
|
99.06
|
109.69
|
106.54
|
|
May
|
101.96
|
112.85
|
109.03
|
|
June
|
101.96
|
112.78
|
108.50
|
|
July
|
100.95
|
111.56
|
107.51
|
|
August
|
100.18
|
110.93
|
106.69
|
|
September
|
100.11
|
110.81
|
106.88
|
|
October
|
101.43
|
112.29
|
107.80
|
|
November
|
101.33
|
112.19
|
107.56
|
|
December
|
103.46
|
114.61
|
109.08
|
2004
|
January
|
104.12
|
115.10
|
109.31
|
|
February
|
103.84
|
115.02
|
108.53
|
|
March
|
102.50
|
113.43
|
107.08
|
|
April
|
101.33
|
112.03
|
105.78
|
|
May
|
102.01
|
112.74
|
106.07
|
|
June
|
102.08
|
113.08
|
106.73
|
|
July
|
102.46
|
113.48
|
105.95
|
|
August
|
102.36
|
113.66
|
105.32
|
|
September
|
102.74
|
114.01
|
105.52
|
|
October
|
103.70
|
114.90
|
105.43
|
|
November
|
104.94
|
116.39
|
106.70
|
|
December
|
105.90
|
117.33
|
107.73
|
2005
|
January
|
105.06
|
116.20
|
106.82
|
|
February
|
104.43
|
115.42
|
106.30
|
|
March
|
105.02
|
115.77
|
106.44
|
|
April
|
104.19
|
115.04
|
105.92
|
|
May
|
103.40
|
114.29
|
105.72
|
|
June
|
101.38
|
112.14
|
103.67
|
|
July
|
101.68
|
112.52
|
104.17
|
|
August
|
102.20
|
113.02
|
103.96
|
|
September
|
101.89
|
112.98
|
102.91
|
|
October
|
101.49
|
112.55
|
102.43
|
|
November
|
100.83
|
111.66
|
102.61
|
|
December
|
100.91
|
111.28
|
102.71
|
2006
|
January
|
101.51
|
112.17
|
102.61
|
|
February
|
100.91
|
111.78
|
102.50
|
|
March
|
101.42
|
112.37
|
102.71
|
|
April
|
102.25
|
113.25
|
102.94
|
|
May
|
103.25
|
114.51
|
103.29
|
|
June
|
103.40
|
114.59
|
103.20
|
|
July
|
103.52
|
114.76
|
102.87
|
|
August
|
103.51
|
115.16
|
102.83
|
|
September
|
103.30
|
114.61
|
103.50
|
|
October
|
102.89
|
114.43
|
102.89
|
|
November
|
103.51
|
114.86
|
103.18
|
|
December
|
104.32
|
115.90
|
103.99
|
2007
|
January
|
103.58
|
115.31
|
103.84
|
|
February
|
103.89
|
115.62
|
103.28
|
|
March
|
104.61
|
116.53
|
103.24
|
|
April
|
105.27
|
117.33
|
103.42
|
|
May
|
105.24
|
117.28
|
103.26
|
|
June
|
104.83
|
116.75
|
103.11
|
|
July
|
105.40
|
117.54
|
103.38
|
|
August
|
105.26
|
117.44
|
104.19
|
|
September
|
106.15
|
118.30
|
104.23
|
|
October
|
106.95
|
119.04
|
105.41
|
|
November
|
108.31
|
120.45
|
105.34
|
|
December
|
108.41
|
120.49
|
106.31
|
2008
|
January
|
109.22
|
121.16
|
106.63
|
|
February
|
109.18
|
121.37
|
106.78
|
|
March
|
111.61
|
124.41
|
108.10
|
|
April
|
112.75
|
125.14
|
110.05
|
|
May
|
112.26
|
124.55
|
108.29
|
|
June
|
112.30
|
124.37
|
107.30
|
|
July
|
112.77
|
124.20
|
106.51
|
|
August
|
110.93
|
122.08
|
106.70
|
|
September
|
109.75
|
120.75
|
105.08
|
|
October
|
107.17
|
118.05
|
104.66
|
|
November
|
106.76
|
117.95
|
106.62
|
|
December
|
110.75
|
122.38
|
111.16
|
2009
|
January
|
110.45
|
121.80
|
111.18
|
|
February
|
108.89
|
119.33
|
110.21
|
|
March
|
110.88
|
121.21
|
111.90
|
|
April
|
110.27
|
120.26
|
112.05
|
|
May
|
110.73
|
120.13
|
112.14
|
|
June
|
111.16
|
120.12
|
111.59
|
|
July
|
111.30
|
119.79
|
112.14
|
|
August
|
111.60
|
119.77
|
110.96
|
|
September
|
112.85
|
120.53
|
112.50
|
|
October
|
113.82
|
121.22
|
112.90
|
|
November
|
113.63
|
120.53
|
111.83
|
|
December
|
112.79
|
119.16
|
110.68
|
2010
|
January
|
111.22
|
117.27
|
108.35
|
|
February
|
109.32
|
114.64
|
107.17
|
|
March
|
109.20
|
113.85
|
106.15
|
|
April
|
107.93
|
112.25
|
104.74
|
Fall required
|
7.93
|
12.25
|
4.74
|
Table 2 shows that consumer and producer prices would need to fall by 12.25% and 4.74%, respectively, in real terms to reach the levels seen in January 1999.
Table 3 shows exchange rates between the euro (€) and both the sterling (£) and the dollar ($) on May 28th, 2009 and January 1st, 1999. The euro has appreciated against both currencies in the past 10 years despite weakening in recent months. This means that Irish imports from Britain and the US have become relatively cheaper, while Irish exports have become more expensive to trading partners in the US and UK. To revert to the level seen on January 1st, 1999, the euro would need to depreciate by 5.1% against the dollar and almost 17% against sterling.
Table 3: Exchange Rate movements €/$ and €/£ 1999-2010 (source — www.oanda.com)
|
01/01/1999
|
28/05/2010
|
Change
|
% Change required
|
Eur — US$
|
1.1674
|
1.2301
|
0.0627
|
5.10%
|
Eur — GB£
|
0.7038
|
0.8476
|
0.1438
|
16.97%
|