The Minister for Finance, Mr McCreevy, has warned that the recent positive data about the economy does not signal a return of the Celtic Tiger era.
Speaking at the mid-term review of Sustaining Progress in Dublin Castle today, Mr McCreevy said although the latest economic growth figures were "encouraging", the economy was "nowhere near" the double-digit growth rates experienced before the recent downturn.
He said: "We are now moving towards our medium-term potential rate of economic growth of about 5 per cent."
But he warned of the risks posed if US or euro area growth falters or from further rises in oil prices
"Given the openness of our economy, if any of these risks come to pass, there is no doubt that they would have an adverse impact on our economic growth," he said.
Mr McCreevy warned the next benchmarking process may not give rise to "any significant" increases in pay. He said it was wrong to assume that every benchmarking process would result in significant pay awards.
"Increases should only arise if pay in comparable private sector jobs across the economy increased faster than provided for in the national round increases."
Mr McCreevy said benchmarking was a "fair way of setting pay in that it allows public service pay levels to follow pay developments in the private sector rather than focusing inwards as was the case previously".
The Government's decision to hold a second benchmarking exercise next year has been criticised by some economic commentators who say the first process lacked "transparency".
Civil and public servants were awarded an average pay increase of 8.9 per cent in the last benchmarking round, which ended in July 2002.
