Michael McGrath (Cork South Central, Fianna Fail)
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Question 51: To ask the Minister for Finance the measures and reforms he proposes to stimulate domestic demand; when he expects domestic demand to return to growth; and if he will make a statement on the matter. [30041/12]

Michael Noonan (Limerick City, Fine Gael)
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While the economy is growing again, it will take time for export growth to feed through to the labour market and the domestic economy. This is because it will take households, firms, and government time to work through the imbalances which had built up during the boom. The Government is acutely aware of the headwinds which the domestic economy faces in this regard. We have therefore taken a number of steps to support domestic activity and job creation, including the introduction of the Jobs Initiative shortly after coming into office and the structuring of Budget 2012 in such a way as to be as growth-friendly as possible.

In addition, the Government also established NewERA and the Strategic Investment Fund within the National Treasury Management Agency (NTMA) last September, and published the Action Plan on Jobs in February. The Government has also taken a number of steps to ensure there is sufficient credit available to business. Moreover, in relation to tax-policy, we have also sought to support firms and encourage job creation through extending the three-year start-up relief scheme, improving the R&D tax credit scheme and replacing the Business Expansion Scheme with a new Employment and Investment Incentive. Furthermore, I would point out that the Taoiseach has consistently sought to have growth moved up the European agenda, and I note that the "EU growth agenda" will be discussed at the European Council meeting on the 28th – 29th June.

Moreover, following long-term negotiations, the Government has reached agreement with Troika representatives that all of the proceeds from the sale of State assets will be used, in one shape or another, to support job creating initiatives in the economy, which will in turn support domestic demand. Half of the proceeds will be available to fund employment enhancing projects of a commercial nature. The other half, while destined eventually to pay-down debt, will, in the first instance, be constituted as a fund to guarantee additional lending into Ireland, for example by the EIB, in support of further investment in job-creating initiatives.

Overall, the economy is expected to record a second successive year of positive growth this year. My Department's latest forecasts - which were published in April's Stability Programme Update - project GDP growth of 0.7 per cent this year with exports leading the way. The recovery is expected to broaden out and gain ground next year, with growth of 2.2 per cent foreseen. These forecasts are similar to those of other domestic and foreign forecasters. Regarding the domestic demand component, near-term prospects remain muted, with a further contraction envisaged for this year. However, the pace of decline is set to ease relative to 2011 and should come close to stabilising next year, before domestic demand starts to increase once again in 2014 and 2015.