The economy's growth has become over dependent on the construction sector and its productivity performance has deteriorated, the governor of the Central Bank, John Hurley, has warned.
Addressing a day-long conference on productivity in the economy, Mr Hurley said that Europe's productivity performance was lagging behind that of the US.
The conference also heard evidence that, while education was a strong contributor to Ireland's recent growth performance, our economic competitiveness was being damaged by high house prices.
The conference, the first of a series, was organised following concern at the highest levels of the Central Bank that, despite the continued momentum of the economy's growth, "the much-discussed era of exceptionally strong growth - representing a delayed catch-up process, if you like - is clearly behind us", in Mr Hurley's words.
He added that Ireland's growth was increasingly unbalanced and overly reliant on the construction sector.
"The productivity performance of the economy has also weakened, partly in response to this shift in the pattern of activity."
According to data released by the Central Statistics Office (CSO) this week, the construction sector accounted for 20,300 of the 87,800 new jobs created in the economy in the 12 months to May.
Prof Frank Barry of UCD said successive governments had failed to address flaws in the system of land rezoning, which he said was keeping land and house prices unnecessarily high.
Citing research evidence from the UK, he said high house prices in the Republic were contributing to rising wages and increases in the cost of living.
"Most of the increase in house prices results from artificial scarcity of building land. The proportion of the house price represented by land costs used to be 15 per cent - the international average. Now it is 50 per cent."
The present approach to land zoning gave local interests and politicians strong incentives to drive up land prices in developing areas, he added.
"It's amazing that this system remains in place in the light of all the corruption allegations and facts that we now know today.
"Those of us who grew up on the penny catechism know this is what we referred to as an 'occasion of sin'."
Improved education contributed almost half of the economic growth that occurred between 1994 to 2003, Bank of England economist Rob Hamilton told the conference.
"Labour quality and employment growth together account for 2.1 percentage points of the average 4.7 per cent of growth in the period," Mr Hamilton said.
The impact of younger workers on the welfare of older workers with less education was more favourable in Ireland than in the US, he added.
"The low education group in Ireland did not experience an increase in unemployment."
But citing a recent study by the Organisation for Economic Co-operation and Development (OECD) highlighting unequal performance in Irish second-level schools, Prof Barry warned that a significant segment of younger workers had been left behind by the boom. "It's amazing to think today that one in five students drop out before the Leaving Certificate and that's quite shocking.
"This whole chunk of the younger generation are essentially lost to Irish society and the Irish economy."
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