State spending is causing price increases, writes Marc Coleman, Economics Editor

'The reason it's [ inflation] on the rise is because probably the boom times are getting even more boomer." It's the sort of heartwarming error you'd find in a primary school essay on economics. You know, the sort of thing that turns a fond smile in the mouth of the hardest of teachers, the most stressed of parents. The question asked was: "Would you agree that there were indications that the boom times are over?" But the person asking was not a teacher.

And although it's a schoolboy error, the person answering was definitely not a schoolboy.

Come on, you know already. The charming grammatical flamboyance gives the game away.

The most cunning, the most ruthless of them he may be when it comes to politics. But when talking about economics, Bertie Ahern is a charming six year-old with funny grammar.

But maybe we should stop being so grown up and boring. Perhaps he has a point. This is a very boomy boom, one of the boomiest of booms we've ever had, in fact. But is that why inflation is inflationer? Probably not.

Between 1993 and 1998, we had a very boomy boom. Gross domestic product (GDP) - one of those boring adult terms that means how much the economy produces each year - went up on average by almost 8 per cent a year. But in that whole six-year period general prices - as measured by the Consumer Price Index - rose by just 9.9 per cent, which implies an average yearly inflation rate of just 1.7 per cent.

Unit labour costs - the cost of producing a unit of output - rose by just 3.2 per cent. In that competitive era, our exports rose by 128 per cent in volume terms.

In the six years since then, between 1999 and 2004, the boom continued to be quite boomy.

GDP grew by an average of 7 per cent. But general prices rose by 22.5 per cent, implying average inflation of around 3.7 per cent.

For slightly less boom, we got a lot more inflation. By 2005, however, things were starting to pan out nicely. Inflation moderated to 2.5 per cent. House price inflation moderated as well, slowing to around 6 per cent by this time last year.

Then, three things happened:

Firstly, the deadline for the release of SSIAs came close enough in time to be bankable.

Secondly, the Government decided that - it being a pre-election year - it was going to spend lots of lolly on sweets and toys so it could become even more popular with the other boys and girls in the school. Thirdly, the banks decided that existing rules on mortgage lending were for boring adults and threw them away.

Yesterday, the Central Statistics Office (CSO) told us that inflation was 3.9 per cent in June.

They also produced the latest national accounts, showing GDP growth running at 5.8 per cent in the first quarter of this year.

But that growth is driven by investment, which is growing by a far faster 11.1 per cent. That in turn is driven largely by housing construction, up by 12.6 per cent.

Yes the boom times are getting boomer. And the boomer they get, the buster will be the bust, if and when it comes.