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

256. To ask the Minister for Finance the extent to which he and his Department continues to examine the contributory factors to inflation; the extent to which each and any can be controlled; if he will outline any trends likely to emerge in this regard; and if he will make a statement on the matter. [11565/23]

Michael McGrath (Cork South Central, Fianna Fail)
Link to this: Individually | In context | Oireachtas source

Over the past year, almost every advanced economy has had to grapple with the effects of multi-decade high levels of inflation, driven by the surge in global energy prices. In Ireland average annual inflation stood at just over 8 per cent for 2022 as a whole, significantly higher than the ½ per cent average rate of inflation recorded for the previous decade. This has had a significant impact on all facets of our economy. Spillover price pressures from higher energy prices have become evident in other sectors apart from energy, such as food (via higher fuel and fertiliser costs) and consumer goods (via higher energy inputs). Indeed, non-energy inflation stood at 5.8 per cent in February 2023.

A positive development is the recent easing in wholesale energy markets which suggests that inflation has now peaked and is on a downward trajectory. While inflation remained elevated at 8 per cent in February, this represents a decline of over 1½ percentage points from the peak of 9.6 per cent recorded last summer, and the more recent 9.4 per cent recorded in October. At the time of Budget 2023, the Department forecast average annual inflation of just over 7 per cent for this year. However, due to the recent easing of wholesale energy prices, inflation this year is now expected to be lower than previously anticipated. Despite this easing, however, the price level consumers face will remain elevated.

Furthermore, the pathway back to the 2 per cent target rate of inflation remains uncertain and may not be smooth.

The Government recognises the impact of rising prices on households and firms and has provided a total of around €12 billion in cost of living supports to date. Budget 2023 was a “cost of living” Budget, primarily focused on mitigating inflationary pressures. Budget 2023 included a total package of €11 billion, of which €4.1 billion consisted of one-off cost of living measures which took effect from the fourth quarter of last year, with the €7 billion in permanent measures also containing a large cost of living element. This built upon a number of policy interventions already in place prior to the Budget which amounted to €3 billion. Additionally, the Government, last month, announced further supports amounting to around €1.3 billion, including both taxation and expenditure measures. The one-off or temporary nature of these measures balances the need to provide timely and targeted fiscal support to the most vulnerable households while, at the same time, avoiding adding to inflationary pressures.

My Department will continue to monitor inflationary developments closely over the coming months and publish updated inflation forecasts as part of the Stability Programme Update in April.