Electorate 'dissatisfied despite growth'

Interest rates are likely to rise by 1.5 per cent over the next 18 months, Jim Power, chief economist with Friends First predicted yesterday.

Speaking at the launch of Friends First's latest quarterly economic outlook, Mr Power said that the electorate was dissatisfied with its economic position in spite of strong recent economic growth.

In a special analysis on the next election, contained in the outlook, Mr Power called on the election debate to focus on the quality of public services, immigration and the cost of living.

The European Central Bank (ECB) will increase its base "main refinancing" interest rate from 2.75 per cent to 4.25 per cent by the end of next year, according to the Friends First forecast.

Despite this, economic growth is set to remain strong, averaging 5 per cent for the remainder of the year.

According to the forecast, consumption and investment growth will continue to dominate economic growth, with export growth remaining weak while house price inflation will reach 10 per cent this year before moderating to 7 per cent in 2007.

Despite a strong economy, there was concern that quality of life was deteriorating, Mr Power said yesterday. "While the key economic indicators look good, many people feel that the quality the supposed wealth of the new Ireland - the quality of life in Ireland - has deteriorated. The Government parties have a significant uphill battle to fight in the coming year".

Mr Power urged political parties to focus on the quality of economic growth and employment, rather than their quantity. "Exorbitant house prices, large mortgages, an increasingly dangerous society, a significant overall tax burden, a high cost of living, poor infrastructure and strained public services are all combining to make people question the quality of life that they now enjoy in this country," Mr Power said.

A radical improvement in planning laws and the provision of transport infrastructure was needed to ensure that housing supply would meet demand, Mr Power added.