Saturday 21 April 2018

Ease up on austerity in Budget, says Goodbody

Goodbody's Dermot O'Leary
Goodbody's Dermot O'Leary
Colm Kelpie

Colm Kelpie

GOODBODY Stockbrokers has weighed in behind the Labour Party and said the Government should ease back on austerity in October's Budget.

Tanaiste Eamon Gilmore has said the planned €3.1bn of Budget cuts and tax increases to be imposed next year should be scaled back, claiming the target for reducing the Budget deficit can be met with less.

Goodbody said that the call to ease back on the adjustment reflected the fact that Ireland had been beating its targets and had received some relief through the scrapping of the controversial Anglo Irish Bank promissory note.

And in a boost for Mr Gilmore, the stockbrokers said it made sense to ease up. "With some signs of life in domestic demand and a 3pc of GDP deficit target within reach, it makes sense to ease back somewhat in our view," said economist Dermot O'Leary.

"However, it will be important how this is done, with our preference for an increase in capital spending." But Goodbody's also warned that from a market point of view, as long as the deficit targets are being met, the Government's credibility should not be questioned.

"From a domestic point of view, signs that a five-year austerity period looks like easing may provide some fillip to confidence," Mr O'Leary said.

Mr Gilmore has said the target this year was to cut the Budget deficit to 5.1pc of the value of the economy.

An adjustment of €3.1bn could bring the Government in ahead of that deficit target, with Labour arguing the €1bn benefits of the promissory note deal could be used to ease up on the adjustment. Mr Gilmore told the 'Financial Times' that imposing that level of austerity risked damaging the fragile economic recovery and society more broadly.

"We will not let the Irish economy become some type of economic experiment for austerity hawks," he said.

"Austerity alone is not sufficient for economic recovery or social stability."

Finance Minister Michael Noonan has said there were no divisions between the coalition parties surrounding the Budget, but claimed growth figures from the CSO at the end of the month would be critical in determining the adjustment.

"If the CSO marks us down, that tightens the room that we have for manoeuvre," Mr Noonan told the Irish Independent last week. "If the CSO reflects the other data that's coming through ... then if growth rates are marked up, that will give us more leeway."

Irish Independent

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