Marc MacSharry (Fianna Fail)

I move amendment No. 1:

To delete all words after "Seanad Éireann" and substitute the following:

welcomes the Government's firm commitment to position the economy for sustainable development over the years ahead, while adapting to the reality of more moderate growth in the future;

notes the progress to date on public sector reform and welcomes the Government's strong commitment to progressing public sector reform;

notes the Government's objective in entering talks on a second pay agreement under Towards 2016 of achieving a sustainable pay deal compatible with improving competitiveness and productivity and the Government's intention of fully informing the Oireachtas as appropriate about progress in this regard;

commends the Government for the progress made in enhancing the delivery of infrastructure on time and on budget and the measures put in place by the Government to speed up the delivery of vital strategic infrastructure;

welcomes the Government's firm commitment, as set out in the National Development Plan (2007-2013) and as underpinned by the provision in the Exchequer multi-annual capital envelope to spend an annual average of 6% of GNP on capital projects, to addressing infrastructure needs; and

welcomes the Government's firm commitment to continued support for the development, enhancement and modernisation of Ireland's education sector and Ireland's Science, Technology and Innovation sector.

I welcome the opportunity to make a contribution to this debate, in respect of which we should express our gratitude to the Fine Gael group for using its Private Members' time to deal with issues important to the economy. Given the current environment, it is imperative that we visit this subject on an ongoing basis so that the House can contribute its opinions to the Government through the Minister or Minister of State in attendance in a meaningful way.

Like many economies, the Irish economy is facing its most difficult environment for some time, with both domestic and external headwinds likely to restrain the pace of economic expansion in the short term. We all know this; it has been acknowledged on the other side of the House that we have come out of a period of unprecedented growth, the foundations of which were laid in the mid-1980s and from which we have reaped the benefits since. A series of challenges have presented themselves primarily due to external factors, particularly the credit crunch, the sub-prime issue in the United States, the dollar situation in terms of the competitiveness of our exports and a number of other matters.

While new housing output has been domestically forecasted to be approximately 55,000 — it could be less — compared to 80,000 last year, it is clear that the demand for housing remains strong. Rents are rising by approximately 11% per year. The output is likely to stabilise at equilibrium levels once confidence is restored. Speaking as a practising member of the auctioneering industry, there has been a significant increase in the number of inquiries since Christmas compared to the October-November period of last year. In itself, this is an indication of an element of confidence returning following the budgetary measures by the Minister for Finance and a growth in confidence in general terms.

The external environment is more challenging. For example, growth is set to moderate in our two major export economies, the UK and the US. The exchange rate has appreciated and, notwithstanding some improvements in recent weeks, conditions in the financial markets have not yet normalised. GNP and GDP growth of 2.8% and 3%, respectively, is expected this year. The fundamentals of the Irish economy remain strong, which will help to absorb the housing and external shocks in our medium-term prospects. We have a dynamic and well-educated labour force, as mentioned by Senator Donohoe, but we need to upskill and to keep this matter under review. With the level of ongoing and committed Government investment in education — the Minister of State will go into more detail — our markets are flexible and allow us to respond efficiently to adverse developments. We have a pro-business outward-looking society and our public finances remain sound, with one of the lowest levels of debt in the euro area. The tax burden on labour and capital is low.

Notwithstanding recent negative developments, there are substantial grounds for optimism. Domestic demand could not sustain overall GDP growth in the long term and we are witnessing a rebalancing towards more sustainable export-led growth. A renewed emphasis on improving competitiveness is required to ensure rebalancing is achieved efficiently. In this regard, the next phase of the partnership negotiations is critical and expectations must be in line with productivity growth. We cannot expect unreasonable increases above increases in productivity. I would appeal to the social partners when negotiations begin in April or May to be cognisant of this matter, which they will. They will also be mature and realistic in their expectations in light of our changed economic environment and the fact that we must be prudent in our outlook.

That the economy displayed considerable resilience in the global ICT shock in the early part of the decade is further ground for confidence in our ability to overcome challenges. The performance of service exports in recent years is encouraging, with double digit growth in the past five years. World Trade Organisation data show that Ireland is the fifth largest exporter of commercial services. We want the economy to go in the direction of high value-added tradeable services, which are high revenue, such as financial, business and computer services.

Fiscal policy plays a key role in terms of providing support for the economy. This year, current spending will rise by approximately 8% whereas revenue will increase by just 3.5%. The package of measures in the budget, on which we had a debate, is prudent while maintaining investment in our capital programmes, which I hope will support momentum in the economy and ensure that the infrastructure and foundation for the future are successful.

Notwithstanding the various matters the Minister of State will mention in respect of the amendment — pay in the next round of partnership talks, the national development plan and our investment in education — I wish to make a number of points regarding the effects of talking down one's economy. I have been greatly bothered by this and the contributions of people with an economist's education but who could not quite hack it as economists and, subsequently, turned to the media. At the beginning of the week, we expected a report from the European Commission on the state of Ireland's economy. RTE's news coverage of the report on the euro growth and stability programmes of Ireland, Greece and Spain stated: "The essential message is that Ireland is on a transition to lower growth and that there has been a deterioration in public finances". The report did not state this. Instead, it stated: "Ireland is facing challenges in its transition to a period of lower but more sustainable economic growth" and the "economy is slowing down, but the growth prospects remain good and well above the euro area and EU averages". In the past 18 months, it has been grossly irresponsible of many sectors in the media to contribute in this way to the slow-down of the economy. The fact remains there will be growth of between 2% and 3% in our economy this year and this would be the envy of most economies in the eurozone and the US. They would love to be in such a situation.

Mr. Stuart Draper, an economist, attacked the media some months ago, making the point that instead of always focusing on the negative, greater responsibility is needed. Despite the changed economic environment and the associated challenges we have a good product. Since the mid-1980s Fianna Fáil-led Governments, and the country as a whole, have excelled in rising to challenges and showing the ability to adapt, improvise and overcome. I believe this Government, with the Taoiseach, Deputy Bertie Ahern, at the helm and under the stewardship of the Minister for Finance, Deputy Brian Cowen, will rise to the challenges of today. Prudence, with the support of modest borrowing, is important with regard to our capital programme and all aspects of our infrastructure. I believe we will continue to progress as we have in the past two decades.