Editorial: Common sense is crucial for an economic revival
Published 04/07/2014 | 02:30
ECONOMIC growth of 2.7pc sounds frothy. In many countries, a turbo-charged spurt like that in just three months would fuel fears of overheating, but here in Ireland it probably reflects the fact that our economic data is erratic, to say the least. The bad news is that the economy almost certainly did not grow that fast in the early months of 2014. The good news is that we know the economy expanded last year. Previous estimates, and all GDP figures are only estimates, had the economy shrinking.
There was further good news yesterday when it was revealed that the economy is bigger than previously calculated, helped in part by the inclusion of prostitution for the first time in the complex calculus used to measure the size of an economy.
In theory, this gives Michael Noonan room to introduce a fairly mild Budget in October, assuming he is still Finance Minister after the reshuffle and the economy continues to perform well.
In practice, all these revisions are a reminder that it is foolish to rely overly on ever-changing economic data when framing long-term decisions.
The idea that Mr Noonan may decide to cancel cuts to the healthcare system because more people are taking drugs or visiting prostitutes is simply absurd but that is the logic of yesterday's figures.
Economic data plays a role in sensible decision-making but we must also use common sense. Informed decision-making involves looking at what is happening on the streets, in our shops and in our factories. Almost all the indications show that economic recovery, fuelled by cheap credit, has taken hold for now.
That recovery gives the Government room to make more of the hard decisions needed to copper-fasten a genuine recovery and break the boom-and-bust cycle, which is such a notable aspect of Irish life.
The Government has already missed the unsustainable explosion in property prices by focusing relentlessly on official data which patently understates house price hikes. Officials must now look around them and begin preparing for new dangers to the economy. Constant vigilance is needed. Relying too much on official data could be fatal.