However much it tries, the Government cannot escape blame for the rapid escalation in the cost of living evident in the latest inflation statistics. The Central Statistics Office consumer price index shows that annual inflation averaged 4 per cent last year, up from an average of 2.5 per cent in 2005.
Furthermore, inflation has gained a yet more alarming momentum in more recent months rising from 3.9 per cent in October to 4.4 per cent in November and 4.9 per cent in December. As we enter 2007, it threatens to reach 6 per cent before the election.
The blame for this cannot be laid on the outside world. Other euro-zone economies took December's rise in interest rates in their stride. By contrast this Government's failure to contain growth in house prices has magnified the impact that interest rate changes have on Irish inflation. And even when the impact of such changes are excluded, Ireland's inflation performance continues to deteriorate compared to the rest of Europe and the world. According to Ulster Bank economist Pat McArdle annual inflation excluding housing costs is running at 3 per cent in Ireland, over a full percentage point higher than in the euro zone.
As day follows night, a reckless and electorally inspired approach to managing our macroeconomy is at last taking its toll. It was not enough that some €14 billion of SSIAs should enter the economy in the 12 months preceding the election. On top of this the Government had to increase public spending by an annual average of 12 per cent in each of the years 2006 and 2007.
But the Government has also failed to reform what economists refer to as the microeconomy, with devastating consequences for Ireland's competitiveness.
From opposite sides of the social partnership spectrum, the Government was warned about the consequences of the rising cost of living caused by its inaction across a host of issues. On Wednesday Microsoft's Joe Macri warned that our only remaining source of advantage to foreign companies operating here - low corporation tax - is being eroded by the rapid increase in the cost of living and the resultant wage pressures. Yesterday Ictu general secretary David Begg pointed out that inflation is now running above the rate of pay increases negotiated under the Towards 2016 pay agreement. Should inflation deteriorate further, that agreement will not be worth the paper it is written on and his members would be justified in calling for its renegotiation.
Both interventions demand an answer from Government: Opposition politicians have correctly pointed out the fact that Ireland's high inflation reflects rising costs in sectors of our economy which the Government has failed to adequately reform, including electricity, health and transport. As the Government approaches the election, it may find itself facing an electorate whose patience with the rising cost of living is coming to an end. A further increase in interest rates is due next March and will push up April's inflation rate just as voters prepare to go to the polls. That increase may turn out to be the straw that breaks the camel's back.