The Central Bank has warned in its quarterly review that the terms of the new national wage agreement must be strictly adhered to, but presents its most benign view of the economy in recent years.
The bank forecasts that the economy will slow down of its own accord, and says there are no bubbles in the housing or commercial property sectors. According to assistant director general Dr Michael Casey, the only serious problem facing the economy is a potential drift from the terms of the new national agreement. "The drift should be zero," he said.
He added that an escalation of industrial relations problems would also be very damaging for Ireland's reputation abroad. He pointed out that Partnership 2000 awarded pay increases of 2 per cent, but delivered three times that at close to 6 per cent.
"If the terms of the current agreement were to multiply by three we would be in for a hard landing," he said. "But we do not see that happening."
The bank is also fairly sanguine about house prices, although it points out that their escalation makes it very difficult for new entrants to the market. But Dr Casey said: "We are not in bubble territory."
He also noted from a prudential point of view the bank's supervisors have not been ringing any alarm bells. "There may be a correction at some point, but it will not be a serious one."
Dr Casey played down recent suggestions from the Economic and Social Research Institute that the Government should not be spending money to attract skilled immigrants.
"There is no definitive answer but, if implemented within an overall framework and targeted in some way and you get the people you want, it could be positive."