By Pádraig Hoare
The chair of the Irish Fiscal Advisory Council (IFAC) believes there is a “window of opportunity” to make the economy more resilient to shocks, with it operating at “near full” growth potential.
Seamus Coffey told the Budgetary Oversight Committee that the debt burden is still among the highest in the OECD and is understated by standard GDP comparisons.
“While the immediate outlook is favourable, negative shocks will inevitably occur in future. There are clear downside risks over the medium term — Brexit, US trade policy and the international tax environment to name but a few,” Mr Coffey said.
He said that staying within the forecasts of between 3% and 3.5% economic growth range in the coming years was sustainable, but that over the past 50 years, it was only successfully done around a third of the time.
IFAC member Michael Tutty concurred, saying that the real way to avoid an economy overheating was to avoid spending too much when the economy was performing strongly, as well as reducing debt levels.
Mr Tutty warned against relying on hikes in commercial stamp duty in the last budget as a long-term source of revenue.
Mr Coffey said he did not necessarily concur with the Public Accounts Committee (PAC) report that corporation tax posed an “unacceptable risk” to the economy.
“No doubt it is better to receive this money than not. Just to identify it as a risk should be fine,” he told TDs and senators.