Dáil Éireann Debate, Thursday - 28 April 2022
169. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which he and his Department continue to examine the contributory factors to inflation; the extent to which each and any can be controlled; and if he will make a statement on the matter. [21575/22]
Amharc ar fhreagra170. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the causes of inflation continue to be examined by his Department with a view to addressing these issues; and if he will make a statement on the matter. [21576/22]
Amharc ar fhreagra171. Deputy Bernard J. Durkan asked the Minister for Finance the degree to which all issues deemed to be a cause of inflation are being examined by his Department with a view to ensuring that unattributable inflation does not occur; and if he will make a statement on the matter. [21577/22]
Amharc ar fhreagra174. Deputy Bernard J. Durkan asked the Minister for Finance the extent to which the alleged causes of inflation can be traced directly to their sources, thus avoiding unnecessary price spirals; and if he will make a statement on the matter. [21580/22]
Amharc ar fhreagraI propose to take Questions Nos. 169 to 171, inclusive, and 174 together.
Inflation picked up sharply over the course of the last year and in March stood at 6.9 per cent. Almost every advanced country in the world is in the same position, with inflation rates of 8, 7 and 7.4 per cent recorded in the US, UK and euro area respectively in March.
The rise in wholesale energy prices is the key contributor and reflects the rapid rebound in global demand and, more recently, the war in Ukraine. Price spikes have been seen in a range of other commodities as well, including food, fertilisers and metals. Global supply chain disruptions, including the availability of inputs and transport bottlenecks, have also added to inflationary pressures. Domestically, the speed and strength of the economic recovery has led to an imbalance between demand and supply and put additional upward pressure on both wages and prices.
Looking ahead, energy prices increases will continue to be a key driver over the coming months. Inflation is now expected to peak at around 6¾ per cent in the second quarter and average 6¼ per cent for the year as a whole. Pass-through price effects are expected in other sectors such as food (via higher fuel/fertiliser costs) and consumer goods and services (due to higher energy inputs), and will add to core inflation, which excludes energy and unprocessed food, this year. Core inflation is expected to average 3.9 per cent for 2022 as a whole.
However, given the uncertain and evolving nature of the conflict, the margin of uncertainty around these projections is significant. For this reason, my Department also published a scenario analysis in the Stability Programme Update, in which wholesale oil and gas prices return to their early-March levels and remain elevated relative to baseline this year and next. In this scenario, inflation would be 2 percentage points higher this year and peak at around 9¼ per cent in the third quarter.
The Government is acutely aware of the impact of rising prices on households and businesses and has introduced a series of measures in recent months at a cost of over €2 billion to help address the rising cost of living. This included a reduction in the VAT rate to 9 per cent for electricity and gas to end-October, an additional once-off lump sum payment in respect of the fuel allowance, a reduction in the PSO levy, an extension of the reduction in excise duty to mid-October and a €200 electricity credit for all households. However, it must be stressed that resources are limited; the priority is to minimise the impact on those who are most affected; the Government can help, but cannot fully insulate all from the burden of higher energy prices.
Given the current dynamics at play, we must remain prudent in our approach – conscious that broad fiscal measures at this point in time could lead to further inflationary pressure which would be counterproductive in nature. My Department will continue to monitor the inflation situation closely and take appropriate actions when necessary.
