The Central Bank appears to have thrown its customary caution to the winds. It has increased its growth forecasts for the Irish economy quite significantly and has declared that there is no house price bubble.

Its position - outlined in its spring economic bulletin, published yesterday - is in stark contrast to the views of the Economic and Social Research Institute (ESRI) expressed in its quarterly report last week.

The bank's main worry is that an escalation in payments above the 5.5 per cent per year permitted in the new national wage agreement would have a two-pronged effect. It would push up pay rises to a level that many domestic firms would simply not be able to afford. And, in the process, it would be very damaging for the industrial relations climate, undermining the attraction of Ireland as a location for foreign business.

Last year, job losses hit a record in terms of recent years, but were counter-balanced by job creation which was even more substantial.

Figures released by the Central Bank yesterday tell their own story. Agriculture now accounts for just over 5 per cent of total output. Industry, however, accounts for some 40 per cent, high even by international standards. Overseas firms probably account for three-quarters of that, at about 30 percentage points.

According to Dr Michael Casey, the bank's assistant director-general, two-thirds of growth is generated by multinationals. That trend is likely to continue as more multinationals move here or acquire Irish firms.

In the Central Bank's analysis, this means there may be pressure on Irish-owned business and on young people trying to get on the housing ladder. But the economy itself is not in danger, with labour and capacity shortages merely serving to slow it down, which is good news in itself.

Nor does the Central Bank see the dangers in attracting skilled workers into this State outlined by the ESRI last week when it warned about their potential to fuel further demand for housing and other services.

Dr Casey stressed that this had not been discussed by the board of the bank, but he contended that the composition of these newcomers would be important. Engineers and architects, for example, could help ease the constraints being faced at the moment.

Almost more surprising are the bank's new growth estimates. It has increased its estimate for growth in gross domestic product in 1999 and this year to 9.5 per cent. At the same time, the bank believes GNP will be 8.5 per cent this year and 8.25 per cent last year. Its forecast for inflation is in line with other commentators at a 4 per cent average this year, falling back next year as oil prices and cigarette price rises fall out of the index.

In a report published by AIB yesterday, its chief economist, Mr John Beggs, concurred with the Central Bank, saying he did not subscribe to the "asteroid theory", whereby Irish economic expansion would be ended by a sudden unexpected shock.