High inflation rates in Ireland could last for more than two years, the Tánaiste has warned.
Leo Varadkar also said living standards could fall for the first time in many years due to the cost-of-living crisis.
He was making a speech on the future of Ireland’s industrial policy to the Institute of International and European Affairs.
Earlier, a study by the Economic and Social Research Institute (ESRI) said inflation could hit 6.7 per cent this year, a level not seen in Ireland for decades.
Mr Varadkar said: “For the first time in many years real living standards could fall this year if prices rise faster than disposable incomes.
“That is certainly true for very many households already.
“It is something the Government is very conscious of and concerned about. For this reason we have provided over one billion euro in relief already to help ease the pain.
“There are many causes for this spike in inflation and living costs.
“It comes after a long period of very low inflation and interest rates which was sure to end, but unfortunately it ended with a bang.
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“We have not seen this phenomenon since the early 1980s. While I might not agree with the exact numbers, I agree with the ESRI’s assessment that the spike in inflation is not temporary.
“It could go on for two years or more. It requires a long-term response as well as temporary measures.
“As every doctor knows, it’s important to treat the symptoms, and you must also treat the underlying disease.
“I believe we need a comprehensive anti-inflation strategy to reduce the cost of living.
“Central banks must do their bit, and I believe it would be better if they reined in quantitative easing at an appropriate pace, rather than increasing interest rates at this time.
“As a Government, we can do more by helping to reduce some of the underlying high costs that Irish people endure.”
The Tánaiste said Ireland could not take its economic strength for granted.
He added: “We will not stay successful by standing still. We have to get ahead of the next wave and catch it.
“In the past few decades, we have made the right calls – pharma, medical devices, food production, digital, financial services.
“The Government has given me approval to develop a new white paper on enterprise policy.
“It will be published later this year, setting out a vision for Ireland’s enterprise policy to 2030 and beyond.
“Consultation will be central. We will make sure the white paper is informed and challenged by fresh perspectives and the latest thinking.
“An advisory panel of international experts will be established, including experts from organisations such as the OECD (Organisation for Economic Co-operation and Development), the World Economic Forum, experts from similar jurisdictions, as well as business people and academics.
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“The past two years have been a period like no other. We had to show pragmatism, adaptability and a willingness to do things we would never have contemplated before.
“The pandemic has accelerated pre-existing trends that have reshaped the way we live and work. In particular, it has accelerated the digital transition.
“The war in Ukraine adds further uncertainties on energy prices and supply, inflation, the cost of living and food supply, and will accelerate the green transition and particularly energy independence for Europe.
“For Ireland, as an open and global economy at the heart of the European Union, it is critical that we rebuild our European economy and prepare for a new world that is greener, more digital, more resilient and fit for the future.”
