Wages, infrastructure deficits 'threaten economy'

The National Competitiveness Council has warned of the threats to Ireland's economy posed by escalating prices, wage costs and infrastructural deficits.

The council, set up by the Government to report to and advise the Taoiseach on key competitiveness issues for the economy, warned the economy faced tough times ahead.

In its annual report, it identified rising costs, increasing wages, a higher-than-acceptable inflation rate and lower investment in infrastructure than is required as "significant threats" to competitiveness.

It warned that any decrease in international competitiveness could have "adverse effects on employment and income levels in Ireland" and would undermine the future health of public finances.

It said recent economic data had shown deterioration in a number of key areas of competitiveness.

The report also said: "The council believes that reductions in consumer price inflation must be accompanied equally, and in parallel, by an easing of nominal wage growth, thus allowing real wage gains to match productivity gains."

The Council warned wage costs were continuing to rise rapidly - at around three times the EU average.

"While in the past, gains in labour productivity justified significant growth in incomes and wages, recent falls in productivity trends suggest that wage inflation will have to ease if low unemployment and competitiveness are to be sustained," it said.

The Council said "infrastructure bottlenecks" were worsening and adding to business costs. Problems are very acute in the transport sector and the National Development Plan should remain a priority despite the tighter budgetary position, it said.