Brian Cowen (Laois-Offaly, Fianna Fail)

——which were, in some cases, opposed by Members of the Opposition in trying to represent vested interests. There is no room for complacency in terms of our competitiveness, of which we must be mindful. Making the comparison with European economies, the difference is not 0.8% but 0.3% on the harmonised index of consumer prices inflation versus the euro area since 1999.

Looking at the relative inflation performances of Ireland and the euro area since the beginning of monetary union, the inflation rate in Ireland has been reduced from the highest in the euro area between 1999 and 2003 to being broadly in line with the average in the past two years. Where an economy is growing strongly and is at or about full employment, as is the case in Ireland, this can lead to excess domestic demand as people spend the additional money in their pockets putting upward pressure on prices and inflation. This particularly arises in the services area, which are domestically produced rather than imported. It is a side effect, albeit an undesirable one, of an economy which is doing well.

In terms of EU comparisons, the harmonised index of consumer prices is used by the EU member states and the European Central Bank. It is a statistical measure using a basket of goods which has been agreed between all member states so that we have a common inflation index to compare member states and the euro area as a whole. The basket of goods is revised periodically but currently the main item where it differs from the consumer price index, which is our national inflation index, is the exclusion of mortgage interest and some types of insurance.

I acknowledge there has been an increase in the April figure compared with the previous one. Hopefully, we will not see further interest rate increases, although we cannot anticipate what will happen with the European Central Bank. The first of the interest rate rises last autumn comes out of the base in the autumn. Depending on oil prices, were everything to stay static, one would hope there would be some moderating influences in terms of year on year inflation by the end of the year.

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