Bernard Durkan (Kildare North, Fine Gael)
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208. To ask the Minister for Finance the extent to which deflationary measures remain adequate to achieve results; and if he will make a statement on the matter. [56034/22]

Bernard Durkan (Kildare North, Fine Gael)
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210. To ask the Minister for Finance the extent to which he remains satisfied that deflationary measures are sufficient to meet the challenges arising from inflation; and if he will make a statement on the matter. [56036/22]

Paschal Donohoe (Dublin Central, Fine Gael)
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I propose to take Questions Nos. 208 and 210 together.

The Consumer price (HICP) inflation picked up sharply over the course of the last year and in October stood at 9.6 per cent. Almost every advanced country in the world is in the same position, with euro area inflation reaching a record 10.7 per cent in October.

The key driver of global inflationary pressures at present is the sharp rise in energy, food and other commodity prices as a result of the war in Ukraine. Spillover effects from higher energy prices are also being felt in other sectors, such as food (via fertilisers and fuel costs) and consumer goods and services (via higher energy inputs). As a result, non-energy inflation has picked up sharply in recent months, indicating broad based inflationary pressures.

Looking ahead, inflation is expected to continue to rise over the coming months driven primarily by energy prices, with a very gradual easing of the inflation rate anticipated over the course of next year. Overall, my Department is forecasting average annual inflation of 8½ per cent for 2022 as a whole, with inflation of just over 7 per cent projected for 2023. Despite the easing of the inflation rate anticipated for next year, it is important to bear in mind that the price level consumers face will remain elevated.

The Government is acutely aware of the impact of rising prices on households and businesses, in particular the increase in fuel and other energy prices. That is why Budget 2023 focused on mitigating inflationary pressures. Budget 2023includes an overall package of €6.9 billion for next year, including adjustments to income tax bands and increases in social welfare and pension rates. Complementing this is a set of one-off measures amounting to €4.1 billion, which take effect from the final quarter of this year. The one-off package includes three €200 electricity credits to each household, an additional social welfare payment, a double payment of child benefit, the extension of the reduction in excise duties and the VAT rate on gas and electricity to end-February as well as the Temporary Business Energy Support Scheme.

A distributional analysis of Budget 2023 shows that the impact of the budgetary measures is strongly progressive, with the lowest income deciles seeing the highest proportional gains in their disposable income. Additionally, this approach balances the need to provide necessary fiscal support to households and firms while at the same time, avoiding a situation in which the Government’s fiscal response becomes part of the inflation problem.