Bernard Durkan (Kildare North, Fine Gael)
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Question 229: To ask the Minister for Finance if he is satisfied that Government economic policy is sufficiently focused to meet all eventualities with particular reference to lower wage economies; and if he will make a statement on the matter. [33529/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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In an increasingly integrated global economy, greater competition from low wage economies is inevitable. In these circumstances, we must remain focused on restoring and enhancing national competitiveness in order to maintain employment and to continue to attract inward foreign direct investment.

Developments in domestic prices and wages are a key component of competitiveness. Government policies are focused on this. On an EU harmonised basis, inflation is projected to average 2.2% this year, broadly in line with the euro area average. My decision not to increase indirect taxes in the budget has played a part in this. In addition, sensible incomes policies and a greater role for competition in the economy are also critical to enhancing competitiveness. The consensus approach to wage determination, therefore, has a crucial role to play in ensuring that wage developments evolve in a manner that is supportive of our competitive position. It is also important to maintain spending growth in line with revenue growth, thus keeping the burden of taxation low in order to maximise our economic growth potential.

However, as a high income economy, Ireland cannot compete with low wage economies on the basis of wages alone. We must be cognisant of other factors which enhance our attractiveness as a business location, such as the skills of the labour force, the quality of our infrastructure and the stability of the business environment. Going forward, we must seek to continue moving up the value-added chain, attracting investment increasingly from sectors such as information technology, business services and pharmaceuticals, where the skills of the available workforce, the quality of the business environment and the available infrastructure are critical. It is for this reason that the Government remains committed to maintaining capital expenditure at the current high levels relative to GNP in order to reduce the existing infrastructural deficit. Investment in education is also critical in order to provide the Irish workforce with the skills to successfully compete in the future.