The latest figures from the Central Statistics Office, showing a fall in the annual rate of inflation from 4.9 to 4.3 per cent, indicate some welcome moderation in price pressures.
However, the figures provide no cause for complacency. The rate here is still twice the euro-zone average and price pressures remain in many sectors, particularly in parts of the services sector.
While the monthly figures may rise and fall due to particular factors, the outlook is that the trend in the rate of inflation will be gradually downwards over the balance of the year. Unfortunately, this will provide only a limited boost to competitiveness. Inflation is also low - and in some cases falling - in many of our trading partners and for as long as costs here are rising at a faster pace than the average, then price competitiveness will suffer.
Competitiveness is, of course, reliant on other variables besides costs. Factors such as employee and management expertise, the research base and infrastructure are also significant. However, such is the cost squeeze on many exporters from the rising euro and relatively high inflation here that cost issues are bound to dominate business decisions in the months ahead.
The Cabinet discussed inflation and competitiveness at a special meeting last Monday, but so far there has been no sign of any new policy measures having been decided. Arguments from senior ministers that the Government is not responsible for inflation are a little disingenuous. True, the general economic buoyancy of recent years and the absence of competition in some sectors has driven inflation higher in recent years. However, the indirect tax increases and the rise in the cost of a range of public sector charges has contributed significantly to the high level of the consumer price index this year.
Against this background, the Government must now make competitiveness a top priority. It is encouraging that there is a continued flow of investment projects into the State - most recently an expansion of a German pharmaceutical company announced yesterday by the Tánaiste, Ms Harney. However, unless the competitiveness issues are tackled in a sustained way, then inevitably the numbers of jobs lost will outpace new employment and gains made in recent years will start to dissipate.
The necessary policy initiatives cover many areas, ranging from budgetary policy to competition and infrastructure development. During the boom years the economy was able to grow despite shortcomings in many of these areas. However, from now on progress will be harder to make and will depend on building an economy which can deliver sustained increases in productivity.