The pace at which inflation is decreasing is notable, yet Ireland’s price levels still surpass European norms. A recent Eurostat report reveals that Ireland has the second-highest prices across the EU, a massive 42% higher than the average. The task of comparing the varying expenses of common spending behaviour in different nations isn’t simple. However, it’s evident that Ireland’s cost of living maintains a position at the upper extremity of the European scale.
Understanding the reasons behind this isn’t uncomplicated. In the past few years, Ireland’s economic expansion has outpaced the EU average, resulting in an increase in demand and pricing. Ireland’s geographical isolation also contributes to the escalated costs of importing certain goods, and the modest size of the Irish market may restrict competitiveness.
Consumers often find themselves disadvantaged. Taxes such as VAT and excise duties on consumer goods are notably elevated by EU standards in particular areas, contributing to the comparatively high costs of items like alcohol and tobacco. The justification for increased expenses in sectors such as mobile phones and household gadgets is less obvious.
Ireland’s economic structure is characterised by high wages and high expenses. Although many can handle higher costs, the impacts are harsh on others, leaving the median group with limited surplus. The elevated price levels help to clarify why in spite of robust growth, life quality for many remains strained.
There’s no one-size-fits-all solution, but with descending inflation, there’s a compelling argument for focusing supports for households on long-term welfare initiatives to aid those who find it hard to meet expenses in high-cost Ireland, as opposed to resorting to standard giveaways. And taking steps where possible to minimise expenses within sectors where state intervention can make a difference, such as childcare, healthcare, and public transport. Appropriate regulation to motivate competition and executing an active policy to enforce this, is highly significant.
Budgetary policy must also exercise caution to avoid triggering inflation. The aim is to maintain a lower inflation rate in Ireland compared to other EU nations – mirroring the scenario in 2023 – and thereby slowly lower our rank in the price level hierarchy.