Economist says government spend must be on capital projects and not on public sector pay

If Government is ramping up spending in the run up to a 2016 election, it should be directed at capital projects, rather than public sector pay.

Economist says government spend must be on capital projects and not on public sector pay

And, it should also adjust personal taxation to put money back into the pockets of the squeezed personal sector, economist Jim Power told a property and business briefing in Dungarvan, Co Waterford.

Saying it’s better to help out people through a reduction in the direct tax burden rather than through wage increases, Mr Power also said that Central Bank changes on property borrowings made prudential sense in curbing any return to reckless bank lending. But, he cautioned “the new measures will have negative side effects, such as pushing some first-time buyers out of the market, and into a rental market that is already under strain. In the year to December 2014, private rents increased by 8%,” Mr power noted.

Thursday last’s Sherry FitzGerald Reynolds Dungarvan conference — attended by Frank Daly of Nama, who gave an address there last year - heard both Mr Power and Sherry FitzGerald economist Marian Finnegan agree that the economy was out of recession and in recovery, although Mr Power noted that consumer spending was still the most fragile part of that recovery.

Ms Finnegan said “there’s no doubt the Irish housing market in the opening quarter of 2015 is operating differently than it did during 2014. There may be a myriad reasons for this depending on where you are, however there is also every reason to believe that the Central Banks’ intervention in January 2015 had a role to play in the market’s performance in the intervening period”.

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