Rapidly rising costs and poor productivity have resulted in a sharp decline in Ireland's share of international trade, business body Ibec warned today.
In its recommendations for the 2007 Budget, Ibec said the Government should use the current period of high revenues to build up sufficient reserves to allow it to boost activity when the economy slows.
Turlough O'Sullivan, the director general of the business and employers body, said: "Budget 2007 should have a moderating impact on inflation and must maintain tight control on government current expenditure.
"Government should freeze the price of publicly administered services for a period of at least 12 months."
He said the next Budget should alleviate the pressure of higher energy costs on business by introducing a series of measures to promote energy efficiency.
"Short-term relief is also required through reductions in excise on auto diesel and industrial oils," he added.
"To help meet Government's target of boosting R&D activity to 2.5% of GNP, the Budget must create the conditions to encourage multinationals to shift a greater part of their research programmes to Ireland. A number of amendments are required to the R&D tax credit scheme in order to increase its relevance to Irish business."
In Ibec's Budget submissions, Mr O'Sullivan urged the Government to consider indexing the personal credit, the PAYE credit and the standard rate band to wage inflation.
"There should be no increase in labour costs through employers' or employees' PRSI," he said.
"Government should extend equal tax incentives to all income earners to provide for a pension by giving relief to everyone at the higher rate."