Minister for Enterprise Simon Coveney has said the Government will “stick with” its budget spending plan despite a warning from the Central Bank that further stimulus could lead to inflation being higher for longer.
His comments come after the Central Bank of Ireland warned the path back to lower rates of inflation is likely to be “gradual and uneven”.
Inflation, forecast to average 5.4 per cent this year, is expected to be 2.3 per cent in 2025.
The Central Bank said a more expansionary fiscal stance than already announced for 2024 adds to the risk of higher inflation.
It said additional stimulus on Budget day would amplify demand in an economy already operating at capacity, and risks “leading to inflation being higher in Ireland for longer than would otherwise be the case”.
Speaking at the annual National Ploughing Championships in Ratheniska, Co Laois, Mr Coveney told reporters: “The Government has been very consistent in terms of what we’re doing this year.
“We had a summer economic statement. We had to get the balance right between putting a budget in place that doesn’t stoke further inflation, and at the same time responds to the fact that people have to live with inflation.
“Many households across the country are under pressure, in terms of their heating bills, in terms of the cost of petrol and diesel, and indeed many other costs of living increases as well, whether it’s the cost of their basket of food every week or whatever.
“It’s the job of Government to respond to the pressures the families feel, at the same time trying to make sure that we manage an economy in a way that keeps people at work, that rewards work, that reduces the tax take when we can do that, so that people can hold on to more of their own money that they earn and also ensures that we try to do everything we can to bring inflation down.
“It’s not easy to get that balance right.”
He said Minister for Finance Michael McGrath and Minister for Public Expenditure Paschal Donohoe have been very transparent around their budgetary decisions.
“So I think we will stick with the targets that we’ve set for ourselves, I think that’s the right approach and we’ll respond to the pressures that families are feeling and businesses are feeling while at the same time, obviously, trying to do what we can to drive inflation down.”
Social Democrats leader Holly Cairns has previously criticised tax measures being floated by Government TDs ahead of the budget as an attempt to buy votes.
Asked about that criticism, Mr Coveney said: “If the Social Democrats want to continue to make the argument that higher taxation is necessary, that’s a matter for the Social Democrats.
“Fine Gael’s approach in Government is we want to have fair and stable tax revenue coming into the country, but we also want to recognise the fact that middle income earners in Ireland, who are paying their taxes, who are paying for everything, who are above the thresholds for most Government supports – apart from the universal supports that we’re giving them to respond to cost of living – actually those people need to get a break in terms of holding on to a little bit more of their own money.”
Also speaking in the Fine Gael tent at the Ploughing Championships, Minister of State at the Department of Agriculture Martin Heydon said the Government has “not been found wanting” in terms of support for the tillage sector in response to a question on whether there would be specific measures in the upcoming budget.
While he said there would be recommendations in the Food Vision Tillage Group report due to be published soon, he added it would be “inappropriate to speculate” on what would be included in the budget.
