Earlier this week, members of the Government rejected the recent reiteration by the Economic and Social Research Institute of its October 1999 recommendation that further tax cuts should be postponed until the economy begins to slow down in a couple of years' time.
This is scarcely surprising: the Government was unlikely to admit that its Budget, and the subsequent adjustments to it, were "over the top" - giving away much more than was needed for the purposes of the latest national agreement. Nevertheless, the fact remains that in the light of the December Budget the Central Bank has now raised its growth projections for the current year from 6.5 per cent to 8.5 per cent.
That is a growth rate almost twice what the Central Bank considers wise - for the bank has made it clear in its recent report it believes "the optimal policy is to contain demand and bring it closer into balance with feasible supply growth, which is reckoned to be of the order of 4.5-5 per cent a year".
The dangers to which the ESRI adverted are not imaginary. An external shock to our economy could indeed precipitate a sharp reversal of the expectation of continued house price increases, and this could in turn produce a recession involving a return of unemployment, at least for a period. On the other hand, if, as is more probable, we are fortunate enough to avoid this danger, because of the expansionist thrust of Government policy we are likely to face a further unwelcome 15 to 20 per cent escalation in house prices during the year ahead.
Once pay increases had been "talked down" by the 1982-1987 government from almost 20 per cent in 1981 to under 5 per cent in 1987, national agreements on pay and tax policy became possible. And, thereafter, these agreements contributed notably to our economic success during the decade between 1987 and 1998.
However, during that period we had the capacity to regulate our economy by means of interest rate changes, as well as, ultimately, by modifying our exchange rate - which we did, albeit reluctantly, in early 1993.
Consequently, over that decade we could afford to secure agreement to pay moderation even though this meant giving up, for periods of two to three years at a time, our power to tackle any overheating of our economy by raising the level of personal taxation.
However, when we decided to join the single European currency in 1999, we ought perhaps have given more thought to whether in these greatly changed circumstances it might have been wiser to abandon a pay negotiation system which, for multi-annual periods, deprived us of the capacity to slow down excessive economic growth by the only other means that was going to be available to us: tax increases.
Given that this issue was not much discussed, it is not, perhaps, surprising that the Government elected in 1997 set out to negotiate yet another national pay agreement in 1999. However, once it had decided to embark on that course, which would clearly inhibit its capacity to control excessive growth in the years 20002002, it was strongly advised to bring our economic growth under reasonable control in 1998 and 1999, by limiting the expansionary impact of budgetary policy to the minimum required by the terms of the earlier Partnership 2000 agreement.
Instead, the Minister for Finance brought in unnecessarily expansionary Budgets in both of these years.
The result? As we approached the buffers of full employment in an EMU context, our economic train not merely failed to slow down, its pace actually increased slightly, with GNP increasing by 8.1 per cent in 1998, by an estimated 8.25 per cent in 1999 and by a projected 8.5 per cent this year. (These are the latest Central Bank figures.)
Our average GNP growth rate of 7.8 per cent for the six years between 1993 and 1999 was generated by a combination of a productivity increase of 3 per cent a year (after allowing for reduced hours of work) and a 4.5 per cent annual average increase in the numbers at work. But an annual increase in numbers at work of that magnitude simply cannot be sustained indefinitely.
The fact is that one-third of this employment growth came from the flow of unemployed into the work-force - and, with unemployment now below 5 per cent, and our labour market approaching full employment, we cannot expect to continue for much longer to draw additional workers from this pool.
EVEN allowing for a possible temporary increase in the number of women working at home who may decide to enter employment if and when our childcare problems are resolved, it is clear the huge increase in the number of people at work that has been a feature of the past seven years cannot be sustained for much longer without a massive increase in the number of immigrant workers. That brings us up against the housing problem. First of all, the level to which Irish, and especially Dublin, house prices have risen - significantly higher than in many other European countries where pay rates are above ours - is now a serious deterrent to increased immigration.
At the same time, recent immigration has itself been a prime factor pushing up house prices: the additional housing demand emanating from this source has undoubtedly contributed substantially to the price escalation that has now put housing beyond the range of many Irish young people.
Undoubtedly we must be open to importing particular skills that are in short supply here. However, it simply does not make any sense to seek to operate the Irish economy deliberately at a level that runs far beyond our capacity to provide the necessary labour supply from domestic sources.
That is especially the case when this results in the younger generation being prevented by the level of house prices from buying or renting accommodation in which to settle down and establish families - as earlier generations of Irish people have been able to do.
Such a policy of growth for its own sake, regardless of consequences, is perverse and ultimately anti-social.
We have to live with the consequences both of the 1998 and 1999 Budgets, as well as of that for the current year - which the Central Bank has just described as providing "a sizeable expansionary stimulus to the economy . . . of the order of 2.5 per cent of GDP".
It would, however, be nice to know that the Government, even belatedly, has recognised the need henceforth to move away from traditional growth-maximising policies, which are simply no longer appropriate to our stage of economic development. We should be content to grow at twice the average European rate, rather than overstraining ourselves by attempting to treble the European growth performance.
But the tone of the Government's reaction to the ESRI's most recent Quarterly Bulletin does not suggest that it has yet faced up to the need thus to shift fundamentally the direction of national economic policy. Nor, indeed, has the Opposition yet seemed prepared to grasp this nettle. In this important respect the political system seems in fact to be lagging seriously behind the needs of our current economic situation.