Bernard Durkan (Kildare North, Fine Gael)
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Question 148: To ask the Minister for Finance the extent to which he has identified inflationary tendencies in the economy which have caused the transfer of jobs to more cost effective locations overseas; and if he will make a statement on the matter. [6577/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I would like to reassure the Deputy that my Department monitors inflation developments on an ongoing basis. As measured by the Harmonised Index of Consumer Prices (HICP), annual inflation in Ireland was 1.1% in January 2009. Using the domestic measure — the Consumer Price Index (CPI) — the annual inflation rate was -0.1%. Factoring in the latest ECB rate cut, along with more recent data since the publication of my Department's forecasts in early January 2009, would imply an average CPI inflation rate of around -2.0 per cent in 2009. Taking account of the latest data would imply a broadly flat rate of HICP inflation in 2009.

This current and prospective easing in inflation will be of benefit in terms of the domestic cost base, thus improving national competitiveness and our attractiveness as a location for inward investment. While this is to be welcomed, it must be remembered that the deterioration in the economy's competitive position in recent times has been driven by a combination of factors, not just a relatively high inflation rate. Other relevant factors include wage increases in excess of productivity and a strong euro.

Of these, exchange rates are outside our control. However, wages are clearly within it. Restoring Ireland's attractiveness as a location for foreign direct investment will also require sensible developments in this regard as we move forward. In addition, we must continue to take steps to improve productivity. The prioritisation of productivity enhancing investment under the National Development Plan will play its part in this regard.