Booming economy sees incomes soar to record levels
Household income is at a record high and continuing to grow sharply, underpinned by jobs and investment, according to a new report.
In contrast to the Celtic Tiger, when notional wealth was linked in many cases to debt-funded property assets, rising incomes are underpinned by what are described as “exceptional levels” of business investment and related employment effects, in the new research from employers’ group Ibec.
In its latest ‘Quarterly Economic Outlook Q1 2019’, Ibec says per-person household income is at a record high and growing 6pc annually. That trend has been flattered by low inflation boosting the impact of wage growth.
“Since 2015, Irish households have seen growth of real income, per person, of just over 11pc cumulatively. UK households on the other hand saw their incomes fall by 1.2pc over the same period,” the Ibec report said.
However, it said the pace of growth will not last indefinitely as the global economy shows signs of slowing.
A no-deal Brexit would also be expected to have a significant impact including cancelled investment, falling consumer confidence, rising prices, and trade disruption.
For now, however, disposable income per person is now back above pre-crash levels for the first time, according to Ibec, driven by the drop in unemployment levels and labour market participation of 83.5pc for prime-age workers (25-54 years), which has never been higher.
Those figures may be the reason consumer spending held up last year despite a drop in consumer sentiment linked to fears over the risks of a no-deal Brexit in particular.
“The Irish economy is in a sweet spot, with growth in employment and wages both hitting close to 3pc in 2018,” the report said.
Meanwhile, Finance Minister Paschal Donohoe claimed spending has been brought under control and promised there will not be a repeat of last year’s €600m Department of Health spending overrun.
Mr Donohoe published a Stability Programme Update 2019 yesterday, effectively kick-starting the Budget 2020 process.
He said he will deliver a budget surplus both this year and in 2020 helped by strong corporation tax receipts already forecast to come in €500m above expectations this year.
“We are aiming to deliver a significant improvement in performance on health expenditure for this year,” Minister Donohoe said on Tuesday.
The first quarter exchequer receipts showed net Government spending of €12bn was up 7.2pc on the year but 2.6pc below plan.
“But given the experience that I had last year, I am not at all being complacent this year,” Mr Donohoe said.
The number of people working for the Government last year hit almost 400,000, driving a surge in the public wages bill to €22.2bn.
Pressures on the budget are growing, from overruns on the new children’s hospital to expensive drugs and the now rising cost of paying for the Fair Deal for nursing home care schemes.
However, surging corporation tax receipts enabled the Government to eke out a modest budget surplus last year and are already running ahead of budgeted spending increases, creating extra wriggle room this year and for Budget 2020.
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