Inflation will be well ahead of forecasts

Inflation is set to average around 5 per cent again this year, well ahead of official forecasts, after the latest monthly figures showed an unexpected rise.

Rising drink, food and transport prices pushed inflation up for the third month in a row to 5.6 per cent in April, according to the latest data from the Central Statistics Office, prompting a call for the immediate full liberalisation of pubs and the imposition of a price freeze.

Economists now predict inflation will average 5 per cent this year, above the most recent prediction of 4.5 per cent from the Central Bank and the Department of Finance .

It could even exceed 5 per cent for the second year running, according to Mr Alan McQuaid of Bloxham Stockbrokers, if the euro and oil prices do not turn more favourable over the rest of this year. On the EU harmonised basis, inflation reached 4.3 per cent in April up 0.8 per cent on the month.

Fine Gael and Labour attributed the latest rise in inflation directly to Government policy, saying international factors could not be blamed for sharp price rises in domestically produced goods.

The Irish Congress of Trade Unions called on the Government to liberalise pubs and, in the meantime, to reimpose a prices order. "The publicans simply do not appear to understand any other language," a spokesman for Congress said. He added that there may be a need to launch an investigation into food prices.

The Labour's Party's finance spokesman Mr Derek McDowell said the Government's budgetary policy rather than international factors were the cause of the latest price rises. "This is not imported inflation. You can't blame oil prices or the weak euro. The Minister's reckless stoking of domestic demand in the last Budget has fuelled inflation, as all reasonable people knew it would." Fine Gael's finance spokesman Mr Jim Mitchell described the figures as a major setback to the economy. "They will add fuel to the gathering wage frenzy which is the greatest threat to our competitiveness," he said.

"The overwhelming cause of inflation is the Government's inflationary policies. The validity of the criticisms by the EU of the Government's budgetary stance is now evident."

The director of the Small Firms Association Mr Pat Delaney warned that a wage price spiral "would see Ireland return to economic and social management based on conflict rather than consensus which is of no benefit to anyone".

Overall prices rose by 0.9 per cent in April higher than the monthly rise of 0.7 per cent last year. Alcoholic drink rose 1.5 per cent and food rose 1.4 per cent with higher prices for all meat and meat products.

Transport costs rose 1.1 per cent as the price of motor insurance, taxation, fuel and car maintenance all rose.

Services prices also rose with increases in the cost of package holidays, telephone charges, childcare and medical fees.

Over the year as a whole, food prices were up 7.7 per cent, while drink prices were up 5.6 per cent. Housing was up 23.5 per cent due to past mortgage rate increases as well as substantial rent rises.