Sunday 28 December 2014

Noonan still wants €2bn in budget cuts and taxes

Published 15/04/2014 | 17:47

Michael Noonan
Michael Noonan

The government is predicting employment will grow at a faster-than-expected pace over the next five years.

About 42,000 new jobs will be created this year – 12,000 more than thought at the Budget last October.

And unemployment is expected to dip below 10pc by 2016 – two years earlier than forecast – according to draft revised figures from the Department of Finance.

This will likely provide a boost to the economy by pushing down social welfare and the health bill, while increasing income tax and consumer spending.

But the so-called Stability Programme update, published by the Department, cautioned that the €2bn in tax hikes and spending cuts was still penciled in for Budget 2015, despite suggestions from the ESRI last week that we could be in for much less austerity.

Economic growth, as measured by gross domestic product, will remain largely the same as the Budget forecast as changes in Ireland’s volatile pharmaceutical sector will act as a drag on the figures.

Finance Minister Michael Noonan said the recovery was translating into jobs. He will appear before the Oireachtas Finance Committee this evening to discuss the revised figures.

Revised figures from the Department of Finance show:

:: Employment will surge 2.2pc this year, with 42,000 new jobs being created.

:: The unemployment rate will fall to 11.5pc in 2014, before dropping to 10.4pc next year and 9.7pc in 2016. It will hit 8pc in 2018.

:: GDP will rise 2.1pc this year, surging to 2.7pc in 2015 and jumping further to 3pc in 2016.

The unemployment rate fell to 11.8pc last month, with 61,000 new jobs created last year.

It comes as one of the country’s leading stock broking firms said that while the recovery is gaining strength, the Government shouldn’t ease off on the planned €2bn of cuts in the Budget.

Goodbody economist Dermot O’Leary said Finance Minister Michael Noonan doesn’t have much wriggle room.

“The debt level will fall in 2014 for the first time in a decade, but at 122pc, Irish sovereign debt remains high in both an historical and international context,” he said. 

“At this level, Ireland does not have much room for manoeuvre in the event of another international shock, such as a long period of low inflation or even deflation in the euro area.”

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