A new report by the National Competitiveness Council, to be published today, will argue for pay restraint in the forthcoming national partnership talks, as well as the establishment of a new national inflation target. Martin Wall, Industry Correspondent, reports.
The report, to be launched by the Minister for Enterprise, Trade and Employment, Micheál Martin, will say that the continuing appreciation of the euro and relatively high inflation in pay and non-pay costs in Ireland are affecting cost competitiveness.
The council will argue that a new national programme should be developed with the aim of restoring this competitiveness. It will say that such a programme should include the establishment of a national inflation target which would be close to the 2 per cent target of the European Central Bank.
"In the upcoming social partnership talks, it will be critical that we manage our labour costs to support employment creation and to safeguard competitiveness," the report will also maintain. It will argue that this will require co-ordination to manage both consumer and pay inflation.
The report will also maintain that specific actions to manage the costs of property, utilities and domestic services are critical.
The report will say that consumer price levels in Ireland are almost 20 per cent higher than the EU-15 average and that inflation has been growing at a faster rate than the EU-15 average.
The council document will maintain that Ireland has experienced a loss of international price competitiveness. It will say that Ireland is now the second most expensive location for consumers in the EU-15 and has the third- highest inflation rate.
The report will maintain that non-pay costs in Ireland compare poorly with other countries across a range of headings, including property costs - purchase and rental - utilities such as electricity, water and waste, mobile communications costs and accountancy and legal services. It will say that Dublin is particularly expensive.
The National Competitiveness Council will argue that productivity levels in Ireland remain strong, but that productivity growth rates have weakened in recent years. It will say that last year Irish productivity growth was below the OECD average.
The report will say that re-invigorating productivity growth will require a number of actions across a broad range. Policies that enhance competition and reduce barriers to market entry should be pursued vigorously especially in the locally-traded sectors of the economy where inflation pressures are greatest. The report will also argue that the provision of adequate funding is essential to enable higher education institutions to achieve excellence and high performance.
It will suggest an "investment needs" analysis to determine the funding requirement to develop a higher education and research system to meet the country's future economic and social needs.
