Michael Noonan (Limerick East, Fine Gael)
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Question 81: To ask the Tánaiste and Minister for Enterprise, Trade and Employment her views on the International Monetary Fund's opinion that Ireland is the most expensive country in the Eurozone for business; and if she will make a statement on the matter. [40956/09]

Mary Coughlan (Donegal South West, Fianna Fail)
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In its report on Ireland published in June, the IMF acknowledged Ireland's transformation from a location for low cost manufacturing to a centre of high value-added production and services. In this context, it noted that, with the possible exception of Luxembourg, Ireland had become the most expensive location in the Eurozone in recent years. However, the IMF also noted the "incipient" decline in wages, which has been evident in recent months.

Restoring Ireland's cost competitiveness is a key action set out in the Framework for Economic Renewal. We are aware that strong domestic demand in recent years led to significant increases in the costs of doing business in Ireland. However, the economy is now undergoing a radical adjustment that can lead to the necessary change required to restore external competitiveness. As part of this process there are a number of factors that can influence our cost base.

Irish inflation declined by 6.5 percent in the year to September 2009, for the ninth month in succession. Inflation fell significantly across most goods and services groups in 2009. The NCB purchasing manager's index for October shows that input costs have fallen for the 12th consecutive month. Similarly, the Services Purchasing Manager Index showed a steep decline in input costs was recorded in October. Input costs in services have fallen for the past 10 months.

While Irish wage levels are moderate when compared to other high income economies, wage inflation in Ireland had been running at up to 50 percent higher than the eurozone average during the 2005-2008 period. The Government has stepped in to exert downward pressure on prices and costs through the pension levy that was imposed on all public sector workers. In the European Commission's Autumn Forecasts, which were published last week, growth in unit labour costs was forecast to be significantly lower in Ireland than the EU average between 2009 and 2011. This will lead to considerable gains in competitiveness in the medium term.

In line with the commitment in the Smart Economy Framework, we will implement the recommendations of the Competition Authority and tackle excessive costs in the non-traded sectors, where they can best contribute to overall competitiveness. A report will be submitted to Government before the end of this year outlining progress on the implementation of the various recommendations.

We are working to bring costs in administered sectors of the economy under control such as local authority charges and also easing the administrative burden that regulations can create. Minister Gormley and I have met with the County Managers on a number of occasions regarding possible actions that may be implemented.

Finally, with regard to energy costs for businesses, the trend of energy prices has been downward in recent months. Following the double-digit energy price reductions in May 2009, from this October there has been a further significant reduction in gas prices and a modest reduction in electricity prices for medium business customers. Overall, all categories of business, including SMEs, have benefited from significant energy price decreases in 2009. These reductions will result in a further easing on cost pressures for businesses.