Government policies and the rising price of services are the two main drivers of domestic inflation, a new report claims.
The report by economic consultants Paul Sweeney and Associates says these factors account for almost half the annual inflation rate now running at 4.3 per cent.
The report finds the "stealth taxes" introduced in the last Budget added 1.5 per cent to prices, considerably higher than 0.9 per cent effect forecast by the Government on Budget day.
Prices rises of what are termed "administered services" such as gas, electricity and public transport also increased inflation in the first half of 2003. Service prices rose by 10.5 per cent on average and such services are "subject to direct or indirect government control," according to the Central Bank.
The report points out that insurance and the cost of eating out have contributed to the higher rises in prices in Ireland than in the other euro zone countries.
Insurance costs rose by a high 11.5 per cent between September and May 2002, more than three times the overall rise, thought the rise fell to just 6.8 per cent by April 2003.
Wage inflation has been a major factor in overall Irish inflation, but this is expected to moderate due to the international economic downturn leading to rising unemployment, according to the report.
Many insurance prices rises, such as public liability or employers' insurance, are not measured by the Consumer Price Index because they are not consumer products.
The report which was commissioned by the Musgrave supermarket group, also finds that food prices are now rising slower than most other items.
The general inflationary trend is downward and the rise in the euro, if sustained, will ease prices, particularly many food prices, as much processed food is imported from Britain, the report claims.