‘Economy like a bird flying on one wing’
Mr Power said consumers were gripped by irrational exuberance as consumer spending has gone back up to levels reminiscent of the Celtic Tiger at its height.
In contrast to the boom forecasts from the NCB Stockbrokers report, also published yesterday, Mr Power, in his quarterly economic review, warned the boom figures published by economists have very little meaning for indigenous firms struggling to survive.
“The indigenous manufacturing sector has shed more than 9,000 jobs from 2003-2005. It is time policymakers support this sector by supporting investment in marketing activities, R&D and product innovation.
“The cost base also has to be controlled and the State cannot continue to feed into the rising cost base of Irish business. “Our policymakers need to ensure that a sustainable indigenous economy is created alongside the housing sector and the public sector,” he said.
His stance was supported by one of the leading professional bodies in the country. The Professional Insurance Brokers Association (PIBA) “strongly support economist Jim Power’s view of the economy, PIBA chairman Tommy Coyne said.
“It is heartening to hear such a powerful call for policymakers to create a sustainable indigenous economy and alleviate the economy’s over- dependence on the construction sector.”
Speaking at the launch of the Quarterly Economic Outlook, Mr Power said Irish housing stock was currently valued at about €530 billion and represents a significant level of personal wealth.
Given the high level of home ownership in Ireland and the value of the housing stock, the fortunes of the market have a significant effect on consumer confidence and consumer spending.
“A significant correction to house prices would have a substantial negative wealth effect on consumer confidence and would undermine the overall economy,” he warned.
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