I propose to take Questions Nos. 57, 59 and 64 together.
Ireland’s economic recovery has been underpinned by a significant improvement in competitiveness. The latest figures from the Central Bank of Ireland show that Ireland's real harmonised competitiveness indicator, a widely used measure of competitiveness in Europe, has improved by approximately 20 per cent between its peak in 2008 and January 2018. Progress can also be seen in our improved international rankings. For example, Ireland ranks 6th in the IMD World Competitiveness Rankings. This compares to a ranking of 24th at the height of the crisis in 2011.
The restoration of Irish competitiveness since 2008 has been hard-won through productivity improvements and wage and price moderation. It is important that this competitiveness is preserved and continues to support growth. This is all the more important given the significant economic risks we face both internationally and domestically.
On the external side, the impact of Brexit is being felt through the strengthening of the euro against sterling. Similarly, gains from the fall in oil prices may unwind in the future. Other international risks include the policy stance in the US, including in relation to taxation. In terms of domestic risks to competitiveness, housing supply pressures are of particular concern. The housing sector can adversely impact on competitiveness through for example, restricting the mobility of labour.
These risks highlight the importance of maintaining competitiveness oriented policies, including sustainable fiscal policies, to help address emerging uncertainties. With regard to housing, a number of initiatives were introduced in Budget 2018, in addition to the measures implemented in ‘Rebuilding Ireland: An Action Plan for Housing and Homelessness’, to tackle the underlying problem of a supply shortage:
- Home Building Finance Ireland (HBFI) will boost the supply of debt funding to residential development. Utilising up to €750 million from the Irish Strategic Investment Fund, HBFI will fund new housing construction across all regions in the country.
- An additional €500 million was allocated to the Department of Housing, Planning and Local Government to build a further 3,000 social housing units by 2021.
- An extra €75 million is also being provided under the Local Infrastructure Housing Activation Fund.
- Budget 2018 included an increase to the rate applicable under the vacant site levy in the second and subsequent years of vacancy. This will provide a strong incentive to landowners to either develop their land or sell them for the purpose of development.
In summary, competitiveness has improved but we must not be complacent. My Department will continue to monitor all relevant developments closely as we seek to ensure that the economy is best placed to weather economic shocks to the greatest extent possible. Competitiveness is an important factor in this.