At the release of the CSO February inflation figures today (12th March), ISME, the Irish Small and Medium Enterprises Association, warned that the country’s recovery could be threatened by a deflationary spiral which would discourage consumers from spending. The Association cautioned that while there was negative price growth, the main reductions were in mortgage interest and energy, both of which are positive for the consumer and a compelling reason for wage restraint.
The February CPI inflation figure was +0.6%, with a negative annual inflation rate of -0.5%.
Speaking after the release of today’s figures, ISME Chief Executive, Mark Fielding said, “SMEs must continue to ‘hold the line’ on wage demands to help regain cost and labour competitiveness. Over-simplistic wage demands based on nothing other than trade unions’ desire to be seen, rather than an understanding of economic data, must be resisted. With negative inflation, even their spurious argument on cost of living increases is dismantled”.
“Government is relying on SMEs to create the jobs that will boost economic growth but is doing little to assist them as state-influenced business costs continue to rise, eroding any short term competitive advantage of exporters and impeding any job creation. While education and health costs are not a large part of the typical Irish family budget, the direct taxes which pay for them are and should be tackled.”
The Association urged member companies to resist unsustainable wage demands and called on the Government to:
Ensure that all state imposed business costs are benchmarked internationally.
Reduce public sector costs by addressing the increments, perks and inefficiencies.
Address energy, transport costs and exorbitant fees of the monopolistic legal profession.
Reduce labour taxes on employees and employers to promote job creation.
“The threat of deflation will hopefully be mitigated by the QE measures now in place but the threats posed by state influenced business costs and inflation in public sector costs are being ignored by Government. These are far more perilous to our economy and must be reduced”, concluded Fielding.