Benchmarking:Minister for Finance Brian Cowen fired a shot across the bows of the benchmarking body in his speech to the Dublin Economics Workshop in Kenmare, Co Kerry, on Saturday night.
Mr Cowen said that the first benchmarking body report recommended average increases of 8.9 per cent in public service pay and that these reflected the tightness in the labour market between 1999 and 2001. The Minister said that these conditions "do not apply on this occasion".
"In addition, the benchmarking body, in making comparisons, is likely to give greater weight to the value of the public service pension package," Mr Cowen said.
"I expect that these considerations will be reflected in the benchmarking body's recommendations on this occasion."
The benchmarking body is charged with assessing comparisons between pay in the private and public sectors and with recommending increases in public service pay where these are justified on relativity grounds. The group is due to report before the end of this year.
As the budget approaches Mr Cowen conceded that the economy's short-run prospects are for "lower but perhaps more sustainable growth rates than we have become accustomed to".
Housing completions this year will be lower than in 2006, the first annual decline since 1993, as they adjust to more sustainable levels - which Mr Cowen defined as between 60,000 and 70,000 housing units a year.
Mr Cowen said that there would be "some drag on the growth rate and employment levels" in the construction sector, at least in the short term.
The "normalisation" of the national growth rate will curb the growth in the resources available to government, Mr Cowen said, adding that it was "essential that expectations regarding expenditure adapt accordingly".
In more straitened financial circumstances, the Government will continue to afford priority to productive capital spending under the National Development Plan 2007-2013, the Minister said.
Slowing domestic demand required that resources be shifted to supporting export growth to drive the economy ahead, Mr Cowen said.
Although exports had performed creditably in the first half of 2007, Mr Cowen said it was "clear that there has been a deterioration in our cost-competitiveness in recent years, and reversing this trend will be the key to future growth prospects".
He added that incomes policies would have an important role to play in smoothing the path for a faster export growth.
Mr Cowen mounted a spirited defence of Ireland's low corporation tax rate. He also voiced strong opposition to the European Commission's proposals for a common consolidated corporate tax base.
