US tax cuts and trade wars, as well as Brexit and high rents at home, have put Ireland’s business competitiveness under threat, the National Competitiveness Council (NCC) said.
Its “2018 scorecard” found that even as the economy prospers, significant threats are growing from the US-China trade spat and corporation tax cuts in the US.
“Events which influence the performance of the Irish and global economy are unfolding rapidly,” said Peter Clinch, who chairs the NCC.
“Global economic uncertainty, particularly in trade policy and international tax policy developments pose a threat to growth. Brexit remains the single biggest, and most immediate, threat to Ireland’s medium-term prosperity,” he said.
The NCC said that developing the skills of workers and encouraging staff from abroad remain key. Policies to boost childcare and new homes would help to increase the supply of labour, as unemployment rates fall.
“The availability of affordable high-quality child and after-school care, and policies encouraging older workers to remain in the labour force longer, could help to address skills shortages and improve Ireland’s attractiveness as a location in which to work and live.
“The shortfall and affordability of residential housing can also influence decisions around relocation of talent. Despite an increase in construction activity, strong demand, particularly for apartments in urban areas, means that property price inflation is likely to continue.
“High rents push the cost of living out of line with other developed European economies. Increasing property prices and rental costs, combined with a tight labour market, are likely to result in higher wage demands and diminish Ireland’s ability to attract and retain talent,” the council said.
At the same time, it urges the Government to continue to cut debt levels and to invest in infrastructure.
Separately, the Parliamentary Budget Office said the economy continues to grow strongly but warned about “complacency” over overruns in health spending.
“The proposed increased expenditure in Budget 2019 needs to be underpinned by sustainable revenue increases. Corporation tax returns continue to over-perform profile. However, the volatility of this tax head suggests that these revenues cannot be relied on to fund ongoing spending commitments,” said director Annette Connolly.