Bernard Durkan (Kildare North, Fine Gael)
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Question 42: To ask the Minister for Finance the extent to which he has identified by reference to the consumer price index or other mechanisms the precise cause or causes of inflation in the economy in each of the past ten years to date; the degree of inflation in each of the contributory causes; the degree to which he proposes to address such issues directly with a view to the restoration of competitiveness throughout the economy in the near future; and if he will make a statement on the matter. [44906/09]

Bernard Durkan (Kildare North, Fine Gael)
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Question 117: To ask the Minister for Finance when it was last perceived that the economy here was competitive in international markets; the causes of erosion of this status; the measures he has taken or intends to take to bring about the restoration of competitiveness; and if he will make a statement on the matter. [45232/09]

Bernard Durkan (Kildare North, Fine Gael)
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Question 118: To ask the Minister for Finance the steps he will take over the next two years to improve the competitiveness of the manufacturing and service sectors; and if he will make a statement on the matter. [45233/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I propose to take Questions Nos. 42, 117 and 118 together.

Ireland's loss of competitiveness and the need to improve it is something that has been signalled already. Prices grew faster than those in the euro area for most of the last decade. In general, inflation over the last ten years was driven more by developments in the non-traded (services) sector of the economy, while the price of goods (which are mainly imported) did not increase by as much. In many cases wages grew at a rate faster than productivity growth would justify.

The National Competitiveness Council has outlined a range of wider cost factors that have damaged our competitiveness as well. Although the global economy is showing some signs of recovery, the appreciation of the euro against the dollar and sterling is not helping Irish firms.

As such, we need to improve our competitiveness as quickly as possible and there are already a number of positive developments in this regard. Consumer prices in Ireland are now declining at the fastest rate in the euro area. In addition, we are also seeing the benefits of our labour market flexibility: much available evidence points to recent downward pressure on wages in the economy. Falls in commercial rents are set to ease business costs too. Unit labour costs – wages adjusted for productivity – are forecast by the European Commission to fall in Ireland this year, uniquely in the euro area. In 2010 and 2011 they are predicted to fall by a cumulative 5 per cent, the largest fall in the euro area over the two years.

As a small member of a currency union we have no control over the exchange rates we face so we must focus on improving competitiveness at home. A highly educated workforce as well as the policies outlined in the Government's 'Smart Economy' document will help. While the falls in domestic prices, easing wage pressures and improvements in productivity are helpful we must not be complacent as further improvements in our competitiveness are essential to take advantage of the global recovery.