John Gerard Hanafin (Fianna Fail)

The finding of Forfás on inflation can be attributed to several conditions that prevailed in the economy for recent years. The first is the fact that we imported much of our inflation and the second is demand. There was a demand in the legal sector because we have established many tribunals of inquiry. There have been other causes of our compensation culture that have led to demands on the legal profession and, sadly, that has meant that there has been plenty of work to go around. The effect of the terrorist attack on New York on 11 September 2001, and the subsequent cost of reinsurance, has been a major factor in the insurance business, as has been the demand in building which can be attributed in part to the growth in the economy. The last and most important aspects are greed and opportunism, which have manifested themselves in many different ways and are traits we need to tackle. The inflationary effects from abroad may be easing because we are now paying less for oil, the exchange rate has turned around and we are buying more with our euros in the world markets than previously. This has a knock-on effect on indigenous industry.

Notwithstanding that, if the high euro continues, we could see over the next few months and years a deflationary effect which will be carried into the Irish economy. I would like to see the deflationary effect passed on immediately. I want to see the price of oil, which was $32 a barrel during the Gulf War, the price of oil today and the expected price of oil over the next few months and years passed on. It seems to be difficult for prices to come down. I would also like to ensure that when we take measures, for example, in the insurance industry if we begin with the PIAB and ensure that there is less fraud, and give effect to regulations to make road safety a feature and there are fewer accidents, that the benefits do not go to the bottom lines of the companies but are passed on to the consumer.

It is worth noting the key findings of the Forfás consumer pricing report. It states that "increases in consumer prices over the past five years have sharply outpaced those of our European neighbours." They also imported inflation so why have we gone so far ahead?

This has resulted in an estimated overall consumer price level which is 12% above the euro area average. The strong inflation differential has continued into 2003, resulting in a further divergence in consumer price levels, adding to already high competitiveness risks.

Ireland is now estimated to have been the second most expensive country in the eurozone in 2002 for consumer prices, marginally behind Finland. It is likely that Ireland will become the most expensive country in the eurozone during 2003. The non-internationally traded sectors were the primary drivers of consumer price inflation in Ireland in 2002. Among individual expenditure categories, "pubs and restaurants", [to which I will refer again later] were the most important drivers of national inflation – accounting for nearly 30% of the increase in the price of the standard basket of consumer goods-services in the year to end January 2003. Combined with alcoholic beverages and tobacco, 19% increase, transport, 16%, and miscellaneous goods and services, 15%, these non-internationally traded sectors accounted for 80% of national inflation in 2002.