State’s attempt to claim credit for inflation rate drop dismissed

GOVERNMENT claims that the sharp fall in the cost of living is because of its policies were dismissed yesterday by consumer groups, business associations and opposition parties.

Lower oil prices globally have been identified by economists as the main reason for the fall in the May inflation rate, from 4.3% to 3.7%, directly contradicting the Government’s belief it is a “clear vindication” of its policies.

Despite the fall, the rate remains nearly twice the EU average of 1.9%.

Large falls in fuel costs contrasts sharply with continuing hikes in the cost of health services and recreation, including drinking and dining out, the latest Central Statistics Office figures reveal.

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. Year on year, prices in the health sector have increased by 7.8%, alcohol and tobacco by 9.8%, hotels and restaurants by 6.3%.

Government chief whip Mary Hanafin said: “(The) figures are in line with expectations and show that the Government’s overall economic strategy is working...while this is a clear vindication of the Government’s economic policies, there is no room for complacency.”

This view was described as “laughable” by Fine Gael finance spokesman Richard Bruton. “The Government is living in a world of make-believe. If they were having to make ends meet week by week like an ordinary working family facing stealth taxes, then they would really understand the cost of living.”

IIB chief economist Austin Hughes said his estimate, broadly in line with Forfás, is that 1.8% of the 3.7% inflation rate is directly attributable to the Government.

The Consumers’ Association of Ireland believes 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 claimed the fall in food and clothing prices contradicts any contention the groceries order should be abolished. The order prevents below cost selling and restricts the building of superstores.

ISME’s chief executive Mark Fielding echoed opposition to the abolition of the groceries order as a way of tackling inflation. “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.