Brian Lenihan Jnr (Dublin West, Fianna Fail)

In the recent budget, my Department projected that GNP would contract by 8% this year and by 2.8% next year. Combined with the 3.1% contraction which was recorded last year, this implies a cumulative decline in national income of almost 13.5% over the 2008-10 period. In other words, over the period there is virtually no difference between my Department's assessment of aggregate national income trends and that of the ESRI.

In terms of labour market developments, the recent budget is based on the assumption that employment will fall by 7.8% this year and by a further 4.6% next year; this is the equivalent of a quarter of a million job losses between this year and next. As a result, an average unemployment rate of 12.6% is projected for this year, rising to 15.5% next year. The ESRI assessment is somewhat more pessimistic, with the unemployment rate assumed to average 13.3% this year and 16.8% next year. However, I point out that the latest data show the unemployment rate to have been 11.4% in April so that, in the absence of data revisions, an average figure of 13.3% for this year seems excessively pessimistic. Although they are not designed to measure unemployment, trends in the live register can provide a more up-to-date indication of trends and in this regard the latest figures provide tentative evidence that the rate of increase has slowed down somewhat.

With regard to next year, it should be noted that the ESRI projection for unemployment is at the upper end of the range of forecasts. The current consensus among economic forecasters is that the unemployment rate at the end of 2010 will be 15.4%. Focusing on minor differences among the various sets of economic forecasts misses the point. We are in for a very sharp fall in economic activity and unemployment has risen sharply as a consequence.

In broad terms, the Government's response to the rise in unemployment consists of both demand and supply side elements. We are working to improve our competitiveness and achieve export-led growth, thereby boosting the demand for labour. At the same time, we are investing in education and skills so that those who are losing their jobs in contracting sectors of the economy are able to secure employment in new, expanding sectors. In the recent supplementary budget I announced a range of activation initiatives which will go further to encourage individuals into employment.

See this speech in context