Cost of living soars to highest level in four years

THE recent rise in mortgage and energy rates has driven the cost of living to its highest level in almost four years, with more bad news on the way.

According to the latest consumer price index, interest rates rose from 3.9% in June, to 4.2% last month. However, economists are predicting it will rise to 5.5% by end of the year.

The CSO said most notable changes were in housing, water, electricity and other fuel costs which rose by 3.3% in July and by 16.5% in the last 12 months.

Transport costs went up by 0.9% in July due to increases for air fares, car rental and petrol, and restaurants and hotels put up their charges by 0.6%.

Decreases in clothing and footwear by 10.6% and in furnishings and household equipment and maintenance by 1.7% were due to traditional summer sales.

With the economy running at full capacity Davy Stockbrokers warned the economy was looking at an annual inflation rate of 5.5% by end December 2006 as rising consumer demand boosted by SSIA money would keep pushing up the cost of living.

“We can be fairly certain of a range of price increases that will push CPI inflation towards 5.5% year on year in December,” Davys said.

The Government blamed the latest interest rate rise on development over which it has “no control” namely higher oil prices and increased interest rates by the ECB.

However Fine Gael deputy leader Richard Bruton claimed the figures confirmed that Ireland was now the most expensive country in the Eurozone.

He said the warning signs were clearly apparent. “There are dangerous signs of fragility in our economy. It has become over-reliant on construction and consumer spending, much of it funded by borrowing.”

Kathleen Lynch, of the Labour Party, claimed inflation was now spiralling out of control. “This is appalling news for hardworking families throughout the country, and makes a complete mockery of finance minister Brian Cowen’s forecast of 2.7% for the year,” she said.

The Green Party’s finance spokesman Dan Boyle said the figures could be partly attributed to policy failures on the development of renewable energy sources.

“The Government can do little about global oil and gas prices. But it can make Ireland less dependent on dwindling energy sources,” he said.

Union leaders made fresh calls for a reduction in excise duty on motor fuels, which are severely impacting on the cost of living.

SIPTU general president Jack O’Connor said the increase confirms the Union’s prediction that inflation would soon rise to 4.5%, resulting in an average annual figure of at least 3.9% for 2006.