The Tanaiste has warned that the inflation rate is the "biggest political issue" facing the Government.

In Galway, Ms Harney said competition policy would have to be used to drive down prices, but consumers must also be discerning. Consumers must "shop around" and be more vigilant, when either buying or selling houses, she said. "Don't just go for a standard rate that you are charged - do a deal with somebody," she urged.

Competition policy was the only tool which the Government had left in a euro zone environment to try to reduce prices, she said. "I believe that this is the biggest political issue which we will have to confront over the coming months."

Responding to criticism of the third Bacon report on the housing market regarding its failure to tackle the price of land, she said she believed the recommendations would make a "major difference" to those trying for their first homes.

"Clearly we have to take quick, dramatic action to ensure that ordinary people can afford to buy a house in Ireland," she said. Issues relating to land price and availability were long term and had constitutional implications, she added.

Ms Harney was speaking to reporters at a ceremony hosted by Westbic, the business and innovation centre for the west and north-west region, to mark European awards won by one of its client companies, Celtel Communications Ltd.

Celtel, which deals in telecommunications resale, won this year's European Euroleaders Innovation/Entrepreneurship Award and also secured the National Shell LiveWIRE Entrepreneur of the Year 2000 title. Among its products is a coinless payphone, which offers a one-minute free call when users listen to an advertisement.

Ms Harney said the award marked the success of the Business Innovation Centres' seed capital fund, which she had initiated in Galway last year. This fund, amounting to £1.5 million, provides equity for new "fast track" enterprises and is supported by the private sector and Enterprise Ireland.

Also in Galway, Ms Harney opened premises for Yac.com Ltd and Advance Learning at Ballybrit Business Park. Yac.com Ltd is a high-technology company, founded by Mr Mike Feerick last year, and employs over 60 research and development staff in Galway, along with 20 in London. Mr Feerick also founded Advance Learning, a multi-media training company in the west.