Brian Cowen (Laois-Offaly, Fianna Fail)

The prospects for the economy are favourable. Strong growth is expected this year with both GDP and GNP forecast to increase by 5.3%. With more than 2 million people now employed in the State and unemployment forecast to be under 4.5% this year, we are effectively at full employment. However, we recognise that clear challenges remain, which must be addressed if living standards are to continue to improve as they have done over the past ten years.

The Government is keenly aware of the importance of Ireland's competitiveness position concerning investment, exports and, hence, jobs. Inflation is one of the factors impacting on competitiveness. Competitiveness is also influenced by exchange rates, wage inflation, public spending growth and capital spending on infrastructure.

The annual rate of consumer price index, CPI, inflation was 4.8% in February, down from 5.2% in January. A better measure of underlying inflation is the EU comparable measure of inflation, the harmonised index of consumer prices or HICP. The HICP differs from the CPI in terms of coverage. The most notable difference is the exclusion of mortgage interest repayments from the HICP. Annual HICP inflation in Ireland was 2.6% in February, down from 2.9% in January. The recent pick-up in inflation was largely due to external developments over which the Government has no control — in particular, increased interest rates by the European Central Bank. This can be seen by the fact that the CPI, excluding mortgage interest payments, averaged 2.5% in the year to February. I am confident that inflation will moderate over the course of this year.

We all recognise that the Irish economy cannot compete on the same basis as in the past. To maintain and enhance competitiveness in the context of a higher-cost economy, a greater focus on productivity across all sectors of the economy is essential because in the long run, in a small economy like Ireland's, economic prosperity ultimately depends on our ability to sell goods and services abroad. Recognising this challenge, the Government has developed policies which are designed to help Ireland's competitiveness. Important policy issues in the medium term include developing our innovation potential, improving the regulatory environment, enhancing the human capital of the country, and developing our economic and technological infrastructure.

The Government will spend an average of 5.4% of GNP per year over the period 2007-13 on capital infrastructure under the new national development plan. We are also investing in education; our strategy for science, technology and innovation will support more science and technology graduates which businesses will need in the future.

The Government has also introduced incentives for research and development, which will also help us as we build towards a more knowledge-based economy. These initiatives will enhance our competitive position and allow us to produce goods and services more efficiently, while maintaining and improving our living standards.

While some jobs losses have recently been announced in exposed sectors of the economy, this Government has developed the conditions that created nearly 90,000 new jobs in the past year.

Additional information not given on the floor of the House.

Turning to the Deputy's reference to broadband, the provision of telecommunications services, including broadband, is a matter in the first instance for private sector companies. The role of Government is to implement regulatory and infrastructure policies to facilitate the provision of affordable, high quality telecommunications services by competing private sector service providers. Since October 2004, the number of broadband subscribers has increased from 63,000 to more than 500,000 by the end of 2006. Prices have also dropped and are in line with EU standards. There is no evidence to suggest broadband availability has been a negative factor for foreign or domestic investment. The Deputy should note that the Government has committed itself to ensuring that, in those parts of the country where the private sector is unable to justify the commercial provision of broadband connectivity, it will address it via a new scheme. When fully rolled out, that scheme will ensure that all reasonable requests for broadband from houses and premises in rural areas are met.

I am confident that the stable macro-economic environment this Government has created through the pursuit of sound public finances, will support the economy's competitiveness in the years ahead and will, in turn, provide the basis for achieving further economic and social policy objectives in the long term.

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