Government spending will have to be cut back sharply in the upcoming budget, Minister for Finance, Brian Cowen, has warned the Fianna Fáil parliamentary party.
However, Mr Cowen said the State's €180 billion National Development Plan will play a key role in spurring economic activity in coming years, and compensate for the fall in house construction.
Speaking in Wicklow during a two-day meeting of Fianna Fáil TDs, Senators and MEPs, Mr Cowen insisted that the economy was still doing very well, even if the 4.5 per cent growth target for this year will not be met.
Warning that this year's 13 per cent rise in public spending would not be repeated, he said: "Double-digits are out, but I am not saying where we are going to end up. It will depend on the budgetary out-turn."
Though economic growth predictions will fall shy, Mr Cowen insisted that existing State services and planned improvements could be met "if we take the right decisions now".
Acknowledging that new housing starts are down from historic highs, both Taoiseach Bertie Ahern and Mr Cowen said some of the slack would be taken up by commercial property and home improvements.
However, Mr Cowen said the implementation of the National Development Plan would be "a critical factor in getting through these challenging times well and being ready to pick up again as we did in the early part of the decade".
Mr Ahern said Ireland had enjoyed 15 years of economic growth in a row and would grow again in coming years.
"For nine of the last 10 we have had surpluses. For 15 years we have been growing at an average of 7 per cent. Next year it might be 4 per cent and some people are saying that the economy is ruined.
"Anyone who says that are not economists. Anyone who says that knows nothing about nothing. You wouldn't give them a dime going down to the shop," he told reporters. Pressed to identify areas that could suffer from lower rises in State spending, Mr Ahern said: "It isn't always just about adding on. We have to make sure that the money that is being provided by the taxpayers is used properly."
Questioned about the drop in house prices, Mr Ahern said the market was "still in a good position", even if housing starts will fall next year to 75,000 from 95,000 this year.
"Thank God that they have come down a little bit. Last year we were talking about what chance the first-time buyer had. We were trying to get supply and demand in equilibrium. Thankfully, it is happening. I don't want house prices to go up."
In a speech to Fianna Fáil colleagues, Mr Cowen said: "We have seen rapid increases in public spending in recent years, much needed increases to bring our spending on services up to an appropriate level.
"However, if we are to avoid the stop-start cycle which has plagued so many developed economies, we have to accept that double-digit spending increases are a thing of the past."
A gradual movement to long-term economic growth rates of between 3 and 4 per cent a year would be "a very good outcome and a very good performance", following 15 years of exceptional rises.
"That is the way that we need to present it. Yes, they will be more challenging times, but still good times, or relatively good times for the economy compared to any other economy in the euro zone," he said.
Mr Ahern also told the parliamentary party that a children's rights referendum could finally be held next year, though no agreement has been reached on the age of sexual consent for minors. Mr Ahern said the referendum may be held on the same day as one dealing with the new EU treaty. "If we can find and move very quickly to get an agreed wording we could do it next year. Perhaps we could do it with the European referendum," he said.
Last November, Mr Ahern proposed a constitutional change to give children stronger rights, following the crisis caused by the release of a man found guilty of statutory rape.