SFA calls for an early reduction in interest rates

 

AN early reduction in interest rates and a less cautious approach to the issue by the Central Bank has been demanded by the Small Firms Association (SFA).

It claims that this can be done without any risk to Ireland's ERM position and would mean that the pound could continue to trade closer with sterling.

The SFA maintains that a reduction in interest rates would help offset the competitive difficulties faced by many small exporting firms and would benefit the domestic economy.

"This will protect existing employment and recover some of the lost competitiveness vis a vis UK and Northern Ireland companies," the SEA says in its winter report.

"Because of higher manufacturing costs in areas such as transport, energy and labour, Irish companies have a 5 per cent higher burden to bear than their competitors in the UK," the SEA says.

For companies who have developed export markets below parity, the current exchange rate means profits have been eroded and many companies face severe difficulties, it says.

The small firms lobby group has also renewed its call for tighter control of Government spending. "There has been little pressure to maintain very tight controls of expenditure because of the buoyancy of the economy," it says.

However, the SEA says Government spending is likely to increase by 5-6 per cent this year. "This represents about £600 million in lost opportunity to reduce taxation and debt," it says.

It adds that cuts in total gross spending should be reduced from the current 41.5 per cent of GNP in 1996 to 37.5 per cent of GNP in the year 2000.

Meanwhile, the SFA's director Mr Brendan Butler has said there should be a radical overhaul of the current system of calculating unemployment. "The publication last week of the annual Labour Force Survey confirms that the monthly Live Register is an in appropriate and inaccurate measure of unemployment," he said.

The two measures show a variation of 91,000, with the Labour Force Survey showing 190,000 unemployed compared with the monthly Live Register total of 281,000, he said.

Mr Butler said the SFA believed the need for regular unemployment figures should be met by a quarterly Labour Force Survey.