Inflation still twice Euro average despite fall

THE cost of living hit a three-year low yesterday, but is still running at twice the EU average.

Government claims that the sharp fall in inflation rates from 4.3% to 3.7% was a direct result of its policies have been dismissed by the Opposition and business and consumer groups.

Economists pointed to lower oil prices as the main reason for the fall, contradicting the Government's claims.

According to the Consumer Price Index, there were sharp reductions in home heating oil and motor fuel but increases in the cost of medical products, doctors' and dentists' fees, alcohol and eating out. Prices in the health sector have increased by 7.8%, alcohol and tobacco by 9.8%, hotels and restaurants by 6.3% year on year.

Government chief whip Mary Hanafin said the drop in interest rates was a clear vindication of the Government's economic policy.

"The figures show the Government's overall economic strategy is working. While this is a clear vindication of Government policy, there is no room for complacency," she said.

However, Fine Gael spokesperson Richard Bruton described the Government claims as laughable. "The Government is living in a world of make-believe. If they were having to make ends meet like an ordinary working family facing stealth taxes, then they would really understand the cost of living," he said.

IIB chief economist Austin Hughes said 1.8% of the 3.7% inflation rate is directly

attributable to the Government. The Consumers' Association of Ireland said certain sectors are also continuing to cause problems.

"Restaurants, pubs, hotels these are all the sectors that have been causing problems since 1999 and are still the ones that are way, way up," said chief executive Dermott Jewell.

The director of the Food and Drink Federation Ciaran Fitzgerald said the fall in food and clothing prices contradicts a view the groceries order should be abolished. The order prevents below cost selling.

ISME's chief executive Mark Fielding echoed opposition to the abolition of the order.

"It's nothing but a hapless attempt to assign blame outside the sheltered sector, where Government-managed services are out of control, accounting for a massive 59% of the inflation rate," he said.