Sunday 22 July 2018

Prudence still key for the economy

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Editorial

Editorial

Exchequer returns for the first quarter of the year showed solid revenue growth but there was also some cause for concern with a fall in income tax receipts in March, which is being put down to a dip in returns from the self-employed sector. Lower-than-expected income tax receipts have been a feature in previous returns which is difficult to understand in a strong labour market. While the Department of Finance expects this downturn to unwind later in the year, the returns do serve as a salutary reminder that caution and prudence must remain the watch words. That said, the figures for the first three months of the year are on target and up 5.7pc on 2017. The economic news, therefore, is to be generally welcomed.

But while the domestic economy has maintained its strong momentum there remain a number of risks to the economy, most notably the threat of Brexit. There are also other issues of serious concern, particularly impending international tax changes which highlight Ireland's exposure to a small group of companies, as well as supply shortages and the strong increases in residential prices and rents.

These potential threats make it even more important that the Government maintains a careful stewardship of the country's finances, and this is particularly so in advance of a Budget which is already beginning to fill the political vacuum. The Minister for Finance has said that the Government will continue to focus on prudent management of the economy and on implementing competitiveness-oriented policies to ensure the country remains resilient in the years ahead. This is to be welcomed. That said, at this stage it has become critical that the Government makes greater effort to address issues affecting the residential housing market. While house prices appear to be in line with fundamental factors, pressures on the market are reducing affordability. Rapid price increases are now widespread across the country, although significant regional differences in absolute terms remain. The European Commission has made a good case for housing policy to be underpinned by a concrete regulatory framework that facilitates higher densities. In this regard, the Government has made proposals to lift height restrictions. These proposals should be given urgent consideration. Problems in the housing market must be offset by an acceleration of supply, in the private sector but also the public sector.

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