Hey, big spenders, your crippled country needs you
Persuading the public to splash cash rather than save is a tall order given our higher taxes, warns Marc Coleman
So Michael Noonan wants us to start spending again? That, at least, is what he told a gathering of the Irish Financial Services group over lunch last Thursday. I am sure most of us would be delighted to oblige. Then again if only we had the gilt-edged salaries, job security and gold-plated pensions of his advisers, we might feel more confident in doing so. But that's another story.
"Until we get the domestic economy running. . . we won't pass the first step of recovery," Noonan told us. And he is, of course, right. Sadly, the Government still doesn't grasp why, despite handsome export-led growth, domestic demand is collapsing. And both the minister and much of the commentariat are wrong to see the latest growth figures as the beginning of a recovery. A recovery actually began as early as the first quarter (Q1) of last year. And compared to the growth figures released a few hours before the minister spoke, they showed a recovery that was more broadly based than we are seeing now.
In terms of headline growth, there isn't much to separate the 1.3 per cent GDP growth recorded in the last quarter with the 1.2 per cent GDP growth recorded in Q1 of 2010. External demand growth rates, 3.8 per cent and 3.9 per cent respectively, were also close. But while domestic demand actually grew by 0.5 per cent in Q1 of 2010 -- modest but significant -- it fell 4.3 per cent in the first three months of this year.