Tom Parlon (Laois-Offaly, Progressive Democrats)

I thank my colleagues in the Progressive Democrats for tabling this motion for discussion today. It is right that this House should have the opportunity to comment on the measures announced in the other House by the Minister for Finance.

Senators will be well aware of the difficult economic circumstances in which this budget has been framed. They will also be aware that those difficulties are driven by international factors that, to a large extent, are outside our control. As a small open economy, we rely heavily on international trade and the health of the international economy has a direct effect on Ireland's prosperity and prospects. Unfortunately, the upturn expected this year in the major economies has not happened and the current weakness is continuing. The international economic picture is cloudy in the short term and this uncertainty makes economic projections even more difficult. Forecasts for the economy of the eurozone and the United States for 2003 indicate growth rates of 1.8% and 2.3%, respectively. However, it is hoped that international growth will pick up in the second half of next year.

We expect GNP growth this year to be as low as 1.8% rising to 2.25% in 2003. GDP growth is forecast at 3.5% in 2003, although 2004 and 2005 should see higher growth. Indications are that jobs will increase in the year ahead by 11,000 with unemployment up to 5.25% on average. Consumer price inflation is estimated to average 4.8% next year, with the prospect of a significant reduction by 2005.

It is important to realise that the budget is set in a three-year context. We must have regard for 2004 and 2005 where pressures will still exist as witnessed by the projected need to borrow more than €3 billion in both years. The EU assesses us on a three-year basis and it makes sense to frame a budget with a multi-annual focus.

We all recognise the benefits of social partnership and I hope to see the partnership process continuing. Negotiations on a new national pay agreement and on the implementation of the recommendations of the Public Service Benchmarking Body have just begun. If agreement is reached, the cost of the first phase of benchmarking would be €565 million, including arrears from 1 December 2001. This cost is provided for in the budget.