Richard Bruton (Dublin North Central, Fine Gael)
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Question 53: To ask the Tánaiste and Minister for Finance his views on the rising rate of inflation here and its consequences for public policy. [15650/08]

Tom Sheahan (Kerry South, Fine Gael)
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Question 74: To ask the Tánaiste and Minister for Finance the measures he proposes to put in place to reduce inflation. [15725/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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I propose to take Questions Nos. 53 and 74 together.

Inflation, as measured by the average annual change in the Consumer Price Index (CPI), reached 5.0 per cent in the twelve months to March 2008. However, it is important that we acknowledge that the fact that price levels in Ireland are now on average 20 per cent above levels in other euro area countries is an indicator of the slippage in recent years in our competitiveness. Most of this upward pressure is due to external factors, particularly mortgage interest rate increases and rising fuel and food prices. When comparing our inflation rate to that in other EU Member States we must use the EU comparable measure of inflation the Harmonised Index of Consumer Prices (HICP) — which is a better measure of underlying inflation. The HICP differs from the CPI in terms of coverage, the most notable difference being the exclusion of mortgage interest repayments from the HICP.

Annual HICP inflation in Ireland in the twelve months to March 2008 was 3.7 per cent, compared with 3.5 per cent in the euro area and 3.8 per cent for the EU as a whole. Achieving a moderate rate of inflation remains a key priority of economic policy because of its importance in restoring competitiveness. The Government is focusing on areas it can control and taking positive actions to contain inflation by implementing responsible fiscal policies. We are promoting greater price competition through the work of the Competition Authority and the National Consumer Agency. We are also investing in public infrastructure — as evidenced by the National Development Plan 2007 — 2013. This will enhance our ability to produce more goods and services and, which by improving the economy's efficiency, should help to keep down inflation.

To the extent that inflation is externally-driven it is essential that such increases are not exacerbated by generating second-round effects through inflation-chasing pay settlements, which would have a further adverse impact on Ireland's competitiveness. In the sectors that contribute to domestically-generated inflation, pay and profit margin restraint are essential as well as increased competition so as to keep down price increases. Therefore is it essential that the upcoming pay talks under the Social Partnership agreement, Towards 2016, take account of the reality that we face.