A leading economist has called on the Minister for Finance Brian Cowen to make childcare a fully tax allowable expense at the marginal rate in the forthcoming budget.
Speaking in Dublin today Friend First economist Jim Power this year's headline grabbing budget topic will be childcare and the Minister can afford to be in generous mood with anything up to €2.5 billion to spend.
Mr Power explained that many of the 300,000 women who boosted economic growth rates by joining the labour force in the last decade are now struggling to meet soaring costs of mortgages and childcare.
Mr Power also called for the continuation of capital grants to encourage the supply of creches and daycare facilities.
Recent exchequer figures show that Government coffers are swelling from higher than forecast tax receipts leaving the Minister with plenty of room to manoeuvre in his second budget.
Mr Power said it would be desirable if Mr Cowen took a neutral stance on the tax side implying no changes in indirect taxes, full indexation of tax bands and allowances in order to help low and middle income workers.
Mr Power welcomed the broad thrust of the Transport 21 initiative as announced last week. "Such investment has to be welcomed because public infrastructure and transport infrastructure will have a key bearing on the capability of the Irish economy to deliver in the long term.
"However it is essential that the plan is carefully monitored and fully implemented on time and within budget. Those who are responsible for the implementation of the plan must be held accountable."
Mr Power said the outlook for the broader economy looked positive. Commenting on the labour market, Mr Power said job creation remains strong with 93,000 jobs created in the second quarter of the year. Employment is now at record levels and Ireland's unemployment rate is the lowest in Europe.
However Mr Power tempered his remarks by warning that manufacturing is struggling in the face of unprecedented international competition.
"The weak corporate tax receipts would suggest that it is the smaller companies whose margins are under most pressure. It is essential that the environment for such companies remains as competitive and business friendly as possible" he said.
Turning to the housing market, Mr Power said demand has continued unabated in 2005 with mortgage credit growing strongly and it now appears that house prices will grow by 8 per cent this year.
"Looking to 2006 the market seems set to remain very vibrant with prices expected to increase by at least 5 per cent. The OECD's reported suggestion that the market is over valued by 15 per cent is quite irrelevant in an environment where the fundamental forces driving demand remain so strong," Mr Power concluded.