Maintaining competitiveness was a key theme in the presentation of the ESRI's latest quarterly economic commentary yesterday.

The commentary repeats what we already know about the economy this year: that it will grow by just under 5 per cent, with consumption and construction driving the performance. Then, like a well-trained marketing consultant, it points out that Ireland Inc is "losing market share" as our export growth fails to keep pace with growth in world trade.

One problem is that our rate of wage growth has exceeded that of our main competitors. Another related problem is our high cost of living, but let's leave that aside for a minute. It is on the question of social partnership - the negotiations for which are due to restart this week - where the ESRI is at its most interesting.

In presenting the commentary, ESRI economist Dr Alan Barrett said yesterday that generous public sector pay increases would worsen our competitiveness problem by feeding into higher taxes, higher prices and higher wages.

He made his case yesterday by referring to a previous edition of the commentary which referenced published research by three economists from Maynooth University, Boyle, McElligott and O'Leary. They showed that public sector pay levels were already well ahead of private sector levels even before the benchmarking process, by 13 per cent no less.

Old news, surely, given that the paper was published two years ago? The Irish Bank Officials Association (IBOA) has decided that it isn't. Following a strategy session over the weekend, their general secretary Larry Broderick yesterday announced that public sector pay would be crucial to IBOA's approach to the talks.

Private sector, IBOA says, has fallen "way behind" pay in the public sector. More relevant was the following statement by Broderick: "A national wage agreement that does not address this anomaly is not worth the paper it is written on."

So in its commentary the ESRI has put its finger on the fact that benchmarking pay increases are now a live influence on our economy.

The ESRI maintains that further pay increases are not needed to attract good staff to the public sector. And not being one of those right-wing think tanks with an anti-public sector bias, the trade union movement will find it less easy to reject what they are saying.

On SSIAs the ESRI is soothing. Most of the early entrants are natural savers so money released from the scheme in 2006 will largely be re-saved.

But it questions the prudence of this year's budget.

The relevant sentence in the commentary - "Principles of macroeconomic management would suggest that it is preferable not to add demand to an economy that is performing strongly as this can lead to inflationary pressures" roughly translates as "don't throw matches into a petrol tank".

The budget is a done deal, but this week Brian Cowen will publish the Finance Bill and determine whether SSIAs are to be let loose in the economy or steered into pension savings.

As well as its commentary on the economy, the ESRI's latest offering has an interesting paper by Dr Frank Barry of UCD examining the causes and constraints of our economic success to date. He finds that our planning system has conspired to restrict land supply and keep house prices high, in turn damaging our competitiveness.

These are probably the most fundamental issues facing our economy over the long-term. Will they be the subject of partnership negotiations? Two chances.