Escalating business costs and consumer prices are putting Ireland's economic success at risk, according to a new report from the Government's competitiveness watchdog, write Joe Humphreys and Una McCaffrey
In a Statement on Inflation, published yesterday, the National Competitiveness Council (NCC) warned that Ireland was fast becoming the most expensive country in the eurozone.
Ireland already has the highest prices in the eurozone for food, non-alcoholic beverages, tobacco and housing rents, and the second-highest prices for alcoholic beverages, restaurants and pubs.
NCC chairman Mr William Burgess said without action now "a further significant deterioration in Ireland's cost competitiveness (was) all-too-possible, putting at risk employment and living standards".
The NCC, which advises the Government on economic issues, said inflation fell significantly in early 2004 in part due to the action of the Government and social partners, but has since accelerated again.
Mr Burgess said, "There is considerable evidence to suggest that both business costs and consumer prices in Ireland are now out of line with other advanced economies. Our relative cost position is not justified by economic fundamentals, and poses a threat to our continued economic success."
The NCC recommends that the Government avoid large increases in excise duties and VAT in December's budget, and improve regulation in areas such as energy, telecoms, transport, retailing and professional services.
It said the Government should also support the efforts of the European Commission in opening up Irish and other EU markets.
The body was particularly critical of recently-sanctioned price rises in electricity, claiming that they had contributed to an increase in electricity tariffs of about 40 per cent since September 2001.
It said that while recent rises in domestic energy costs were partly due to increases in international fuel costs, "which are a major input into Irish electricity prices; they do not, however, justify the high price levels for electricity".
Mr Dermot Jewell, chief executive of the Consumers' Association of Ireland, said the report highlighted the need for "some system of price transparency" which would allow consumers to see who exactly was responsible for inflation.
While he acknowledged the recent "backlash" against rising prices in restaurants, Mr Aidan MacManus, president of the Restaurants Association of Ireland, argued that "as restaurants are the final line in the supply chain, we must pass on costs to our end users".