Irish consumer prices 18% higher than EU average

Even after six years of austerity, consumer prices in Ireland are on average 18 per cent higher than the European Union norm, prompting renewed concern about the country's competitiveness.

According to figures from Eurostat, Ireland is considerably more expensive than most of its European neighbours when it comes food, alcohol, restaurants, hotels, transport and electronic goods.

The figures, which are based on data from last year, ranked Ireland as the fifth most expensive of 28 member states, behind Denmark, Sweden, Luxembourg and Finland, with prices estimated to be 118 per cent of the EU average.

This placed us ahead of countries like the UK, France, Germany and Spain.

Despite the country’s large agricultural sector, the price of food and non-alcoholic beverages here was 17 per cent higher than the average.

In terms of alcohol and tobacco, Ireland ranked as the most expensive state in the EU and by some way, with prices 78 per cent higher than the average.

However, the study noted the large price variation in this category reflected, in the main, differences in taxation.

The Drinks Industry Group of Ireland called for the reversal of excise duty on alcohol, saying the “unfair” excise rate was a tax on jobs, tourism and consumers.

The cost of restaurants and hotels in Ireland was found to be 28 per cent above the average, placing Ireland third behind only Sweden and Denmark as the most expensive place to stay and eat out.

Ireland was also ahead of the norm in terms of the cost of personal transport equipment (111 per cent) and when it came to consumer electronics (105 per cent).

Clothing was the only category in which prices here were found to be below the average, in this case by 2 per cent.

Alan McQuaid, economist with Merrion Stockbrokers, described the figures as disappointing, especially as the only countries with higher prices than Ireland were the traditionally tax-high states of Scandinavia and cash-rich Luxembourg.

“We were a lot closer to the EU on the prices front at the height of the crisis, though we were higher on average at the height of the boom.”

“The data highlight that Ireland is in danger of becoming uncompetitive, charging more for its goods than other EU member states.”

Mr McQuaid said higher taxes were clearly a factor, noting the VAT and excise duty hikes that were implemented as part of the fiscal austerity process.

“With an increase in corporation tax being ruled out, and little scope left for income tax hikes, then the only option left is indirect taxes, which of course add to prices.”

“The other key issue which these figures highlight is the underlying cost for retailers - eg rents, insurance and wage costs - are higher than elsewhere. You cannot look to have one of the highest minimum wages in Europe, and then not be surprised that prices are more expensive than the rest of the bloc.”

Whatever about wages, he said the Government need to address the issue of high insurance, rents and other administrative costs.

“Overall, the figures are no great surprise and despite the low headline annual inflation rate, should be a reminder to policymakers not to rest on their laurels and take things for granted.”

Recent consumer price data from the Central Statistics Office showed suggested annual inflation was running at just 0.4 per cent in May.

A breakdown of the figures showed, however, the cost of renting a home rose more than 20 times faster than the average level of inflation over the past 12 months.