Budget 2024 was “imprudent” and will likely further fuel inflation, Ireland fiscal advisory watchdog has warned.
The Irish Fiscal Advisory Council (IFAC) is worried the Government has spent too much and could push up prices.
“This is not an economy that needs a big stimulus,” Acting Chairperson Professor Michael McMahon told Newstalk Breakfast.
“We called for the Government to stick to their own spending rule - which was to limit the net core spending growth to 5%, they went over that.
“Not just this year but this Budget has violated that rule all the way out to 2026.
“We think that is imprudent; this is a time when we need to avoid adding to inflationary pressures."
Professor McMahon said the risk of increasing spending by too much is that it could mean sharp reductions at some point in the future.
“We also need to avoid what we call pro-cyclical policies - that is, spending money when we have it," he said.
"Ireland has a history of that and while it's fine when you spend the money, the really difficult time comes when things get tougher - as they naturally will - they always do in economies.
“Then that will involve much tougher cuts and that’s not what anybody wants.”
— Department of Finance (@IRLDeptFinance) October 10, 2023
Speaking afterwards on The Pat Kenny Show, Taoiseach Leo Varadkar said he “respects” IFAC but disagrees with them on the risk of inflation to the economy.
“It [inflation] is now down around 5% and we’re confident it will fall to around 3% next year,” he said.
“Of course, any time you increase someone’s pay or pension, anytime you reduce their taxes, anytime you increase social welfare, that is inflationary.”
He also noted the Government had set up two saving funds to deal with the cost of an ageing population and another to pay for infrastructure, nature restoration and climate change.
You can listen to Taoiseach Leo Varadkar's interview here:
Main image: Minister for Finance Michael McGrath and Minister for Public Expenditure Paschal Donohoe (right) arrive at Leinster House in Dublin, to unveil the Government's Budget for 2024. Picture date: Tuesday October 10, 2023.