Finance | Housing, energy and cost-of-living price increases and durability of the economy
To ask the Minister for Finance the extent to which he expects to meet the challenges arising from housing, energy and other cost-of-living price increases which currently challenge Irish consumers; if he is satisfied regarding the durability of the economy notwithstanding such challenges; and if he will make a statement on the matter.
Consumer inflation (HICP) has risen sharply over the first half of 2022 and remained at exceptionally high levels. In August, annual inflation stood at 8.9 per cent. Rising price pressures are of course not unique to Ireland with most advanced economies experiencing similar price pressures. In the euro area inflation reached a record 9.1 per cent in August.
The pandemic initially had a deflationary impact on the economy. This was followed by an inflationary period as demand out-paced supply during the re-opening phase of many economies. However, the key driver of recent price spikes has been Russia’s war in Ukraine and the knock-on impact it has had on the energy markets and broader commodities market. However, 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). Indeed, the recent rise in non-energy or ‘core’ inflation, which stood at 6¼ per cent in August, suggests that inflationary pressures are becoming increasingly broad-based.
Irish property price and rental inflation have remained at high levels, a trend fundamentally driven by a lack of supply. Resolving pressures in the housing market is a critical priority for Government and ‘Housing for All’ outlines the Government’s plan to increase affordability and home ownership. ‘Housing for All’ has the largest ever housing budget in the history of the State with in excess of €20bn in funding through the Exchequer, the Land Development Agency and the Housing Finance Agency over a five-year period. In Budget 2022, a record €4 billion was allocated towards housing.
The Government knows the cost pressures currently facing households and businesses. That is why, to meet the cost of living challenges currently facing our economy, the government has announced €2.4 billion in cost of living measures to date. Furthermore, Budget 2023 will be a “Cost of Living Budget”, aimed at cushioning the inflationary blow to Irish households and firms, in particular the most vulnerable members of society. However, it must be stressed that resources are limited, and the public finances cannot bear the full costs of this inflationary cycle.
The prudent management of our public finances over the past few years has put the exchequer in a position to fund a substantive cost of living package in Budget 2023. However, we must remain prudent to ensure that our public finances remain on a sustainable trajectory.
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