Consumers did not need the latest report from Forfás to tell them that Ireland was an expensive place to live. However, the report does clearly highlight the extent of the problem.
The Republic's economy is likely to be the most expensive in the euro zone this year, with higher costs for everything from a basket of supermarket goods to a meal or drink out as well as to a range of services. With inflation here still running well above the euro average, the gap will continue to widen in the months ahead.
The dangers are obvious. It severely hurts competitiveness by encouraging an upward spiral of wages and prices. The price of this is being paid in job losses. High inflation here now poses particular problems due to very low inflation - and even the threat of deflation, or falling prices - in many of our overseas markets.
High prices also threaten to slowly strangle the tourism sector, particularly as the euro makes it possible to directly compare prices here with other euro members.
Part of the explanation for rising prices relates to the extraordinary growth of the economy in recent years. As the Republic moved up the EU wealth league, some increase in the price level was inevitable. However, there have been other causes: interest rates have been inappropriately low; budgetary policy pumped far too much money into the economy; competition in some sectors was inadequate; and Government actions pushed up prices either directly through higher excises or indirectly through increases in the costs of Government services.
A range of measures to tackle inflation is called for in a statement accompanying the report from Forfás, the state policy agency, and the National Competitiveness Council, a group established by the Government to advise on policy in this area.
Its most significant recommendation is that tackling inflation be given the highest priority for the remainder of this year and into 2004. While this may sound obvious, the implication of following it through would be forgoing the revenue from extra indirect taxes in next year's Budget and ensuring the minimum rises in the cost of Government services and investment next year.
Achieving this while maintaining services to the public will require a significant improvement in public-sector efficiency, which will not easily be achieved. The benchmarking pay increases to public servants are already set to add to pressure on the Exchequer, with the returns in terms of productivity still to be negotiated.
Elsewhere, there is a need for the Government and the Competition Authority to push ahead urgently with policies to promote competition in key sectors. For too long consumers have taken second place to a range of other vested interests, and it is now time to back up the Government's words in this area with decisive action.
There are indications that the Government and the social partners now realise the extent of the inflation threat. It remains to be seen, however, whether they have the stomach to tackle it.