Expansionary Budget ‘makes little economic sense’ – Nevin Economic Research Institute

October 7, 2023

The Nevin Economic Research Institute (NERI) has said an expansionary Budget next week “makes little economic sense” at this time.

This is because it believes the economy is at, or close to, capacity with full employment.

The union-backed think tank said that the level of spending outlined in the Government’s Summer Economic Statement will “add moderately to overheating and inflation”.

NERI’s Co-Director Dr Tom McDonnell said caution is required over “regressive tax cuts”. These would be tax cuts that might benefit the better off disproportionately.

He believes taxes and social contributions will need to “meaningfully increase over the medium term in order that we have the resources necessary to deal with the range of coming challenges”.

Dr McDonnell also said Ireland needs to move away from year-to-year “tactical and political budget making” to planning five years ahead to address future challenges.

The report said Budget 24 should focus on the income adequacy of poorer households and reverse a rise in poverty and deprivation over the past year.

It states that universal cost of living supports are “unnecessary and badly targeted”.

The report suggests that windfall corporation tax receipts should be saved in three funds: one for future ageing costs; one to protect future funding for capital investment and the green transition and one specifically to ensure there’s enough ongoing investment in housing.

The outlook from NERI, which is supported by unions from the Irish Congress of Trade Unions (ICTU), is for Modified Domestic Demand, which is a measure of the domestic economy- to grow by close to 2.5% next year.

This is based on a number of conditions including no further increases in interest rates.

It also expects a return to real wage growth next year as inflation subsides.

Article Source: Expansionary Budget ‘makes little economic sense’ – Nevin Economic Research Institute – Robert Shortt – RTE

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