February 16, 2011
By Staff Reporter
By Andrew Bushe
DUBLIN — Finance Minister Charlie McCreevy has again revised his predictions of the inflation rate for the year upward — to almost double what he estimated when the new national pay deal was agreed in the spring.
Addressing a plenary session of the social partners on July 27, chaired by Taoiseach Bertie Ahern, the minister assured them the government is "very concerned" about the impact it could have on the country’s economic performance.
Talks are to begin in September on measures for the December budget with McCreevy and cabinet colleagues expected to be under strong pressure from the unions to compensate workers and those on fixed incomes hit by rising prices.
The latest figures show that annualized inflation rose to 5.5 percent in June — a 15-year high.
The minister told leaders of unions, employers, farmers and representatives of the voluntary sector that every effort must be made to avoid action that would hit competitiveness and lead to job losses.
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"Assuming that interest and exchange rates and oil prices do not change, I expect that inflation will increase further in the short term, before falling back somewhat in the figures published for December," McCreevy said.
"Present estimates by market commentators and analysts for average inflation this year seem to be largely in the 4.75 to 5.25 percent range and I do not expect that my Department’s estimate will break with this consensus."
A range of government measures to control inflation was recognition of the "seriousness" with which the government viewed the problem.
The inflation spike is eroding the benefit of the first phase of 5.5 percent phase of the 33 month Program for Prosperity sand Fairness.
The government maintains that, with tax cuts in last December’s budget, workers will get increases of 9-14 percent this year.
McCreevy said it was crucial to avoid actions that would damage economic stability.
Economic growth had cut unemployment from 16.3 percent in 1988 to 4.5 now, had pushed GNP growth to 7.8 percent last year and boosted living standards from 60 percent of the EU average in 1993 to 90 percent last year.