Eamon Gilmore (Dún Laoghaire, Labour)
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Question 140: To ask the Minister for Finance his views on the fact that inflation remains persistently high; if he proposes measures to bring down the inflation rate; if he has or intends to instruct the National Consumer Agency to take specific steps to tackle inflation and predatory pricing; if he will take steps to protect the real incomes of workers during the upcoming national pay talks; and if he will make a statement on the matter. [21959/08]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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As measured by the Harmonised Index of Consumer Prices (HICP), annual inflation in Ireland was 3.3% in April 2008, the same as the Euro area average. Using the domestic measure — the Consumer Price Index (CPI) — the annual inflation rate was 4.3% in April 2008. This represents an improvement on the CPI inflation rate of 5.0% recorded a month earlier.

The pick-up in inflation in recent years has been driven primarily by external developments, namely the global rise in oil and food prices and increases in interest rates. In the year to April 2008, food costs rose by some 8.4%, contributing 0.9 percentage points to the annual increase in prices while the cost of energy rose by 7.3%, contributing 0.6 percentage points. If the effect of last year's interest rate increases were removed, CPI inflation in the 12 months to April 2008 would have been 3.5%.

Achieving a moderate rate of inflation is a key economic policy priority given its importance in helping to restore national competitiveness. In recognition of this, the Government is taking positive action to control inflation. Before I outline the nature of this action, I would first draw the Deputy's attention to the fact that as a small open economy, Ireland is largely a price-taker which means that there are few direct measures we can use to reduce the inflationary impact of recent external developments.

Notwithstanding this, the Government is committed to doing what it can. This includes implementing responsible fiscal policies and promoting competition and increased price transparency through the work of the Competition Authority and the National Consumer Agency. As the Deputy is aware, the Tánaiste and Minister for Enterprise, Trade and Employment met with the Chief Executive of the National Consumer Agency on May 21 to discuss a range of issues, from which a series of follow-up actions resulted. More recently, the Tánaiste met with IBEC and its affiliated body 'Retail Ireland', and is scheduled to meet with further retailers this week.

In terms of protecting the real income of workers, I note that pay increases under partnership agreements combined with tax reductions have resulted in the disposable income of the average Irish worker being the second highest in the EU. In the years ahead, the best way to protect the real incomes of ordinary workers is to pursue policies that sustain competitiveness and employment. To this end, I would stress the importance of ensuring that the externally-driven price increases that we are currently experiencing are not exacerbated by internally–generated second-round effects. Securing a sensible and sustainable outcome to the current round of pay talks will have an important role to play in this respect.