By Andrew Bushe
DUBLIN — A month before the budget, the Irish government’s economic policy was delivered a blow by a surge in the inflation rate to 6.8 percent after it had remained static for three months.
Prices increased by 0.6 percent in a month to bring inflation to the highest rate since August 1984, according to the Central Statistics Office.
Inflation has been increasing since it bottomed out at 1.2 percent in July 1999 and is now almost three times the EU average.
The rate had remained at 6.2 percent during July, August and September but was expected to increase in October as a result of higher international oil prices and interest rates.
Prices rose by 0.7 percent in October, compared to 0.4 percent in September.
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The most significant increases in the consumer price index during the month were fuel and light up 4.5 percent, house mortgages up 1.3 percent and transport costs up 1.1 percent.
The biggest annual changes have been for housing up 22 percent, tobacco up 17.4 percent, fuel and light up 12.4 percent and transport up 8.1 percent.
As a result of rising prices, the key national partnership pay deal is being reviewed in talks that started on October 17 involving the government, employers and unions. Workers are seeking an extra pay increase to compensate for inflation.
Taoiseach Bertie Ahern said progress was being made in the discussions and he was confident that difficulties with inflation could be overcome.
"The government has clearly stated that, in framing Budget 2001, we will have particular focus on the appropriate response to inflation," Ahern said. "In doing so, we will take fully into account the views of the social partners."
The talks chairman, Dermot McCarthy, said all involved recognized that strikes and industrial action had damaged confidence and could undermine the pay agreement’s provisions on industrial peace and stabilization.
He said each side recognized that any response to inflation must take into account differing circumstances of firms and employers and their need to remain competitive.
The Program for Prosperity and Fairness was agreed last March on the basis of a projected 2.5 — 3 percent annual inflation rate during its 33-month lifetime.
Rising prices have eroded the PPF’s first 5.5 percent pay rise. The deal is set to deliver 15.75 percent in pay increases and 10 percent in tax cuts in three phases.
The unemployment rate is down to 3.7 percent. As a result, many employers are already paying over the odds to keep staff, particularly in the buoyant computer and high-tech industries.
Many unions are also ignoring the deal’s terms and have submitted extra claims.