Friday 26 December 2014

Irish prices have fallen, but not as fast aswages

Charlie Weston Personal Finance Editor

Published 09/02/2013 | 04:00

THE deal that this country secured on the repayment of the debts associated with the former Anglo Irish Bank was not the only good news this week.

An index appears to indicate that economic reforms are working in Ireland.

The latest version of the so-called Big Mac Index has found evidence that consumers and businesses in this country have tightened their belts when other EU countries have not.

The price of a Big Mac has been used by the weekly magazine, 'The Economist', for decades as a partially tongue-in-cheek way of judging global purchasing power, the gist being that it costs the same to make but is charged at different prices around the world.

By studying the different prices for a McDonald's Big Mac burger throughout the eurozone between July 2011 and January 2013, Buregel think tank economist Guntram Wolff concluded that reforms are working in Ireland.

Mr Wolff took the data and found that the price rise in Greece, Portugal and Spain has been less than the eurozone average, while in Ireland the price actually fell. This contrasts with price rises above the eurozone burger average in Germany.

Mr Wolff concluded from this that economic adjustment is working.

In Ireland, multi-billion euro spending cuts have been put in place since the international bailout. The burger price has fallen from €3.80 to less than €3.50, the study found. A Big Mac in Germany costs €3.64.

Despite the cheaper Big Mac, prices here are still higher than in the rest of the EU.

In fact, many consumer goods and services are far more expensive here than other countries.

Alcohol, food, eating out, health services and professional services such as legal and medical are higher than in other countries within the EU.

Healthcare is particularly expensive here, with private insurance polices having doubled in price since 2009. The cost of a GP visit is around €50 for something that is free in the UK. A visit to an accident and emergency unit costs €100, while the price of prescription medicines is high compared with a low flat fee in Britain.

The most recent figures from Eurostat show that average prices for a basket of goods and services are 17pc more expensive here than in the other 26 EU countries.

When it comes to food and non-alcoholic beverages, prices in Ireland are 18pc higher than the EU average. And booze and cigarettes are 63pc dearer than in the EU as a whole.

Clothing and consumer electronics are cheaper here than the EU average, but restaurants and hotels are 26pc dearer, despite there being a glut of hotels.

When it comes to incomes, the latest figures show household earnings are 3.8pc above the average. This is down from 6.6pc in 2009.

What all of this shows is that prices have fallen, but not as fast as incomes.

Irish Independent

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