Bernard Durkan (Kildare North, Fine Gael)
Link to this: Individually | In context | Oireachtas source

13. To ask the Minister for Finance the extent to which corrective fiscal or budgetary measures are required over the next five years to ensure the maintenance of sustainable economic growth without over-reliance on any particular sector; the extent to which he expects the economy to perform throughout this period and to remain amenable to job creation; and if he will make a statement on the matter. [1327/16]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

We are required to "balance the books" in structural terms. This can be achieved by keeping expenditure growth below the trend growth rate of the economy.

Budgetary forecasts for the next five years were set out in Budget 2016. The Deputy will be aware that these provided for an increase in expenditure of over €700 million in 2016, while tax reductions worth approximately €700 million were also announced.

The 2016 Expenditure Report published separately by the Department of Public Expenditure and Reform on Budget day, outlines Ministerial expenditure ceilings for the period to 2018. These amounts are reflected in the medium term budgetary forecasts prepared by my Department which also provide for demographic costs, public sector pay agreement, the public capital programme and also provide for the indexation of the income tax system.

Accordingly, the forecast level of net fiscal space available for each year over the forecast horizon, was set out in Table A9 of the Budget and is based upon these and a number of other baseline assumptions, which are also set out in the accompanying Budget tables.

The overarching objective of recent fiscal policy in recent years has been to return the public finances to a sustainable basis while promoting economic growth. Ireland will exit the excessive procedure because the general government deficit will be substantially below 3% of GDP in 2015. Indeed, the strong end-year Exchequer figures indicate that, all things being equal, the deficit for 2015 will be closer to 1½% of GDP, down from the budget day forecast of 2.1% of GDP. In terms of economic growth, Budget 2016 contained forecasts of 6.2% and 4.3% for 2015 and 2016 respectively.

Figures up to the end of last year show that the recovery is gathering pace with the OECD expecting Ireland to be the fastest growing economy in the OECD in both 2015 and 2016. Encouragingly consumer spending is continuing to grow, a component of GDP that is both tax and jobs rich. The level of economic activity is already above pre-crisis levels, but importantly it is now more balanced than was the case at the height of the bubble, when it was driven largely by construction. Indeed, employment in 12 of the 14 economic sectors, highlighted in the recent Quarterly National Household Survey, has increased. On the domestic side, consumption and investment are contributing very positively, with very strong data also recorded on the external side. Overall the data available are consistent with an economy that is performing very strongly.

Having said that, it is clear that global prospects are increasingly uncertain, with difficulties in emerging market economies and elsewhere. Accordingly, it is imperative that we remain competitive and continue to take the correct policy choices to underpin the sustainability of the public finances.