Tom Parlon (Laois-Offaly, Progressive Democrats)

I thank all the Senators who contributed to the debate on Second Stage of the Finance Bill 2003. Senators Higgins, Kenneally and others raised the issue of inflation and spoke about the importance of maintaining and improving our competitiveness. As a small open economy, Ireland's ability to trade, to a large extent, determines our living standards. Therefore, it is vital, as Senators said, that Ireland remains competitive primarily in relation to our trading partners but also in a global context. Inflation in Ireland, as measured by the CPI last year, was 4.6%. Bringing it down as quickly as possible towards levels comparable with our trading partners' performance must be a top priority if our competitiveness is to be maintained and jobs secured. If relatively high wage and price inflation were to be sustained, it would present a serious threat to the competitiveness of the economy. This is particularly the case in the context of the euro's recent appreciation against both the dollar and sterling.

A number of factors, both external and domestic, are impacting on our current inflation trends. However, it is the domestic components of inflation on which we must focus our attention. In this context, the adoption of the pay arrangements set out under the new national partnership agreement, Sustaining Progress, is important. Following discussions with both employer and trade union representatives, the agreement makes provision for moderate pay increases for the next 18 months. Moreover, the anti-inflation package contained in the agreement will see representatives of employer and union organisations working with the Government to target domestic sources of inflationary pressure. Issues such as excessive pricing, competition, particularly in more sheltered areas of the economy, and public awareness will be examined in this context. I am confident that, working together in partnership, we will address the issue of domestic price pressures in the economy.