Written answers

Wednesday, 3 February 2010

Department of Finance

Economic Competitiveness

9:00 pm

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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Question 194: To ask the Minister for Finance the action he has taken or proposes to take to improve the competitiveness in the economy; and if he will make a statement on the matter. [5555/10]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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Ireland in recent years has lost competitiveness as our prices have grown ahead of other euro area countries and our wages have increased at rates above that justified by our productivity.

As I said in my recent Budget there is an urgent need to improve the competitiveness of the Irish economy, and in this regard there are already a number of positive developments. Consumer prices in Ireland are now declining at the fastest rate in the euro area and the European Commission now suggest that, uniquely in the euro area, our unit labour costs fell last year when all others rose somewhat. These developments will assist in going some way towards addressing our competitiveness problem.

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. 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 if we are to position ourselves to benefit as EU and global growth resumes. A highly educated workforce as well as the policies outlined in the Government's Smart Economy document will also help. I want to assure the Deputy that improving the competitiveness of Ireland's economy is a key priority for this Government.

Photo of Bernard DurkanBernard Durkan (Kildare North, Fine Gael)
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Question 195: To ask the Minister for Finance the extent to which reduced costs in the public and the private sectors respectively has contributed to improved competitiveness in the economy in the past two and a half years to date; and if he will make a statement on the matter. [5556/10]

Photo of Brian Lenihan JnrBrian Lenihan Jnr (Dublin West, Fianna Fail)
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Ireland in recent years has lost competitiveness as our prices have grown ahead of other euro area countries and our wages have increased at rates above that justified by our productivity.

Nonetheless there have been some improvements over the last year although more must be done if sustainable economic recovery is to be achieved. The Consumer Price Index fell by 4.5 per cent in 2009 and is now down 7 per cent from peak. As measured by the HICP — the harmonised European measure — consumer prices are falling at the fastest rate in the euro area. Many business input costs are down in Ireland while commercial rents have fallen substantially. The European Commission estimate that unit labour costs — wages adjusted for productivity — will fall by a cumulative 6 per cent between last year and this year. This compares to an estimated increase of 3 per cent for the euro area over the same period and implies an improvement in competitiveness.

Many sectors of the economy need to restore competitiveness and the Government's pursuit of appropriate wage policies in the public service is providing an important demonstration effect at this time. A highly educated workforce as well as the policies outlined in the Government's 'Smart Economy' document will also help. I want to assure the Deputy that improving competitiveness and therefore generating future economic activity is a key priority for the Government at this time.

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