The 5.5 per cent national pay deal provisionally agreed last week is just about at a level that would stabilise competitiveness according to the Irish Business and Employers Confederation (IBEC).
According to IBEC's Quarterly Economics Trends survey growth could be over 3.5 per cent and even exceed 4 per cent in 2005.
However, IBEC warned that external events such as rising oil prices could throw the economy off course if not carefully managed.
"The government has a strong role to play in maintaining a favourable domestic climate. We know that the impact of oil price hikes will increase inflation close to 3 per cent. It would be total folly to add any further taxation to energy products in the next budget," the survey warned.
The survey said that inefficient local authority services must be tackled and "must not simply be offset by easy price hikes, borne mainly by business."
IBEC also said that even though exchequer finances will be in much better shape than was budgeted for in December 2003 it called on the Government to resist pressure to increase expenditure.
Earlier today IBEC welcomed the Government's announcement of the creation an all-Ireland energy market.
According to Ms Tanya Harrington, IBEC energy executive "the move towards the creation of an all-island energy market must be done on a progressive basis that allows business to compete effectively on the international stage."