Finance | Budgetary measures to discourage inflation, self generated or imported

QUESTION

To ask the Minister for Finance the extent to which he remains confident that budgetary measures taken here are adequately focused in order to discourage inflation, self-generated or imported; and if he will make a statement on the matter.

To ask the Minister for Finance the extent to which he remains confident that budgetary measures taken here are adequately focused in order to discourage inflation, self-generated or imported; and if he will make a statement on the matter.

REPLY

Inflation reached multi-decade highs in 2022, averaging 8.1 per cent with a peak of 9.6 per cent in June 2022 (as measured by the HICP). Whilst the initial driver of this inflationary pressure was a surge in global energy prices, it subsequently became increasingly broad-based as price pressures spread throughout the economy.

Since then, enormous progress has been made in reducing inflation with headline HICP inflation of just 1.6 per cent in April. Looking forward, my Department forecasts an inflation rate of just over 2 per cent, on average, across this year as a whole.

The temporary and targeted nature of Government budgetary measures over this period of high inflation have been crucial in protecting households from the burden of the rising cost of living, whilst avoiding adding to inflationary pressures. Research has shown that these measures were progressive, with those most in need benefiting most.

As part of Budget 2024 Government announced a package of once-off measures (net of windfall gains from the energy sector) amounting to some €2.7 billion. This built upon multiple cost of living packages introduced over the last two years, which amounted to some €12 billion.

While these exceptional supports helped households and businesses to absorb the worst impact of rising prices, inflation is now on a downward trajectory. I am conscious of the need for clarity on how this new environment will affect policy decisions in the context of our budgetary framework. The appropriate way to do this is as part of the normal budgetary process. In this regard I will be discussing economic policy issues with stakeholders as part of the National Economic Dialogue later this month and will then set out the broad parameters for the upcoming Budget in the Summer Economic Statement.