The Government was attacked for its record on inflation yesterday by Opposition parties and business groups, who warned that any further wage increases would fuel even higher rates of inflation and pose a threat to economic prosperity.
The annual rate of inflation crept up again last month to 5.1 per cent, coming surprisingly close to January's six-year record high of 5.2 per cent. The annual rate of Consumer Price Index (CPI) inflation measured by the Central Statistics Office (CSO) has now averaged at 5 per cent this year.
It is expected that the higher than anticipated rate will prompt trade unions to seek bigger wage increases in the next round of pay talks, as workers have seen much of the Towards 2016 pay increases eaten up by the higher prices. But business groups called on the Government to hold firm on public sector pay claims.
Labour Party finance spokeswoman Joan Burton described the inflation figures as "a black mark" against the Government's management of the economy. "Today's figures will undoubtedly create further difficulties for social partnership as trade union members watch the benefit of pay rises being wiped out by inflation," Ms Burton said.
Fine Gael finance spokesman Richard Bruton said it was young families who were bearing the brunt of increasing costs, while Green Party finance spokesman Dan Boyle said inflation would be a key election issue.
Although the Government said higher oil prices and rising mortgage costs are responsible for much of the inflation pressures, the Opposition parties and business groups said it was the Government-controlled sectors that were at the heart of the problem. Ibec director general Turlough O'Sullivan said the rise in inflation had been driven by substantial increases in public spending.Ibec said the Government had a key role to play in ensuring it does not add to inflation through public sector wages or excessive growth in general public expenditure.
Small Firms Association director Patricia Callan said the Republic would be faced with many more job loss announcements unless the Government moved to curb inflation.
The "dramatic" increases in inflation in the services sector, which is now rising at an annual rate of 9.3 per cent, are unsustainable, Ms Callan said. "History has clearly taught us that a wage/inflation spiral is simply a lose-lose scenario for all involved."
Business organisation ISME urged the Government to hold firm on pay claims by nurses and teachers, saying that these would result in further inflation hikes.
"To cave in to these demands and the follow-on claims that will inevitably occur will set off a spiral of wage increases," said ISME chief executive Mark Fielding.
Mr Fielding said it was "a cop-out" and a complete abdication of responsibility for the Government to blame the high inflation rate on the European Central Bank. The Harmonised Index of Consumer Prices (HICP) annual rate of inflation, which excludes mortgage interest repayments and is the measure used across the euro area, was 2.9 per cent in March, up from 2.6 per cent the previous month.
This was 1 per cent ahead of the average euro zone HICP rate, which was 1.9 per cent.
Bloxham Stockbrokers economist Alan McQuaid said consumers would not be easily convinced by calls from employers to use the lower HICP rates of inflation in wage negotiations.
Asking people to look only at underlying inflation trends that strip out certain costs when seeking compensation for price pressures "just doesn't wash", he said.
ECB president Jean-Claude Trichet signalled yesterday that it would increase interest rates in June or beyond to prevent an acceleration in inflation rates.
