The economy can continue to grow strongly over the coming years, provided policy can adjust to meet changing circumstances. That is the central message of the latest report on the economy from the Organisation for Economic Co-Operation and Development (OECD).
In an upbeat assessment, the OECD researchers conclude that "the forces of growth are firmly embedded in the economy", while playing down fears of overheating. No doubt the Minister for Finance, Mr McCreevy, will be bringing its conclusions to the attention of his EU colleagues, who recently censured the Government for its expansionary Budget, as he attempts to get them to water down their conclusions.
Growth is now likely to slow, the OECD says, but can remain well above the EU average. Gross Domestic Product - a measure of national output - expanded by well over 10 per cent last year, it says, and will rise by a forecasted 7.75 per cent both this year and next. Slower exports and a shortage of labour will be responsible for the deceleration, it says. But it sees little danger of a sharper slowdown and "no strong evidence" of a dangerous speculative bubble in house prices.
Perhaps surprisingly, the OECD is relatively sanguine about the impact of recent Budgetary policy, criticised so heavily by the EU Commission. On balance, the Government seems to be avoiding adding impetus to an already fast-growing economy, its researchers conclude. However they do say that the 2001 Budget "has taken greater risks than were advisable" by boosting public sector employment at a time when there is a shortage of labour and by increasing demand in the already-pressured construction sector.
But while the EU called for immediate corrective measures to slow the economy, the OECD confines itself to advising that a significant surplus of revenue over spending be maintained over the next few years. And it is notably relaxed about inflation, saying that much of the reason lies outside the Government's control and that the situation is "not simply one of overheating."
In other areas the OECD is more prescriptive. New measures may be required to keep Government spending under control, it suggests. It will be essential to target overseas contractors to undertake much of the work on the National Development Programme, it advises. And it quite correctly points out the difficulty of planning infrastructural investment before the Government has completed its long-overdue National Spatial Strategy.
The OECD normally takes a pro-market line. It thus comes as no surprise that it reiterates its calls for more active competition policy, a greater use of taxes to achieve environmental goals and reform of the public sector to increase the efficiency with which services are delivered to the public. Nor is it surprising that it advises that the national agreements may need to become less definitive in terms of budgetary strategy
In short, the OECD is not calling for any major new policy departure. But it is highlighting the enormous body of work which the Government - and its successors - must tackle in building infrastructure, encouraging competition, protecting the environment and ensuring efficient public services. With the Republic now part of a currency union, it is in these areas that policy-makers can now really make a difference.