Le: Aire Airgeadais; Jack Chambers
Foilsithe
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Good afternoon Ladies and Gentlemen,
It is my pleasure to be with you here today at the Department of Finance’s eighth annual policy conference, hosted in conjunction with the Foundation for Fiscal Studies. I would like to thank the Foundation for their support in organising this Conference, and I would also like to express my thanks to the Central Bank for their hospitality and for providing us with today’s venue.
It’s my first visit to the Bank since my appointment and I look forward to many more visits here.
The theme of this year’s conference is ‘Planning for the Impact of Global Megatrends’, and I note from the agenda that there is a particular focus on how the effects of deglobalisation and digitalisation may impact on our economy, and society as a whole.
As noted at this year’s National Economic Dialogue, the global economic landscape is in a state of flux – geopolitical strains are spilling over to the global economy, mainly via changing trade and investment patterns, increased protectionism and the re-emergence of industrial policies.
Ireland’s successful integration into the European and wider global economy has been a key driver behind the transformation of our living standards in recent decades. So we must be alive to the threat posed by the de-coupling of trade and investment.
At the same time, we are on the cusp of a transformative digital revolution. The rapid adoption of fast-developing Artificial Intelligence technologies is at the forefront of this change.
AI technologies hold the potential to deliver extraordinary benefits for businesses, workers and society at large. They can support innovation, inform decision-making and deliver efficiencies across the value chain. We have seen how previous technological advances have transformed communications systems, productivity levels and living standards.
However, we also know that these advancements can create winners and losers in the labour market. A recent report, published by my department and the Department of Enterprise, Trade and Employment, has highlighted the potential effects of AI adoption on Irish workers and businesses.
AI can augment worker’s abilities, but it can also displace certain tasks, putting some jobs at risk. The Report demonstrated how the government has responded positively but more work will be required to ensure that the potential benefits are fully realised, while risks are mitigated.
Taking account of the challenges posed by the ‘Four Ds’ - Decarbonisation, Digitalisation, Deglobalisation and Demographics; it is crucial that our capital investment is forward-looking and at a scale that will allow us to fully realize the opportunities presented, while also safeguarding our economy from potential risks.
Our policies must encourage and facilitate resilience, innovation and adaptability, while also recognizing the need to boost productivity, continue to build our fiscal buffers and improve our competitiveness. This will mean counter-cyclical policies that allow government expenditure to build capacity and encourage competitiveness, without creating new fiscal commitments or overheating our economy.
On balance, the Irish economy is in reasonably good shape, at least in aggregate terms. Inflation is now firmly on a downward trajectory (1.5pc according to the latest FLASH update) without any increase in unemployment. Indeed, the unemployment rate is now consistent with any meaningful definition of ‘full-employment’. The fall in the rate of inflation which we are experiencing, taken together with increases in earnings and welfare payments means that I am confident that we will see an improvement in real living standards this year and next.
The general good health of our economy is reflected in the public finances where, at least in headline terms, the budget position remains in positive territory. Exchequer Returns posted yesterday show a €3.1 billion Budget surplus. We must be conscious, however, that our fiscal position is somewhat flattered by cyclical effects and some revenue streams are temporary in nature.
It is imperative that these exchequer funds are not used to build up permanent fiscal commitments. As policymakers, we face a number of constraints in calibrating budgetary policy: as well as the simple question of what resources are available, there is the more important decision of what approach is appropriate in view of economic conditions and the long-run sustainability of the public finances.
There is also the revised European fiscal framework, which will have substantial implications for the formulation of budgetary policy in Ireland as it introduces commitments for 5-year plans and binding net-expenditure limits. This framework will involve a substantial change to how we prepare our budgetary policy; placing greater focus on our medium-term, and also promoting greater national ownership.
Our fiscal framework plan must promote sustainable growth and an economy that is well prepared for the potential impacts of the ‘Four Ds’. These global trends will play a central role in the future of our economy and society more broadly. Policymakers, businesses and academics will all need to consider their impacts and how we can best utilise our skills and experience in response to the challenges and opportunities the ‘Four Ds’ will present.
We have challenging but necessary commitments to decarbonise our economy, we also have a population that is growing and getting older. Technological developments may help us with these challenges but we must focus our capital expenditure priorities to ensure that we have in place the people, systems and infrastructure to fully harness these digital advancements.
This may all be played out against the backdrop of a changing geo-political landscape. Maintaining our competitiveness and ability to innovate and adapt will be crucial. Minimising domestic constraints to growth such as addressing barriers in the planning system and increasing investment in key infrastructure such as energy, water and housing, should be our collective medium-term priority to maintain Ireland’s competitiveness.
As beneficiaries of globalisation and multilateralism, we must not contribute to its erosion through protectionism, the expansion of state subsidies or trade tariffs. We must make every effort to maintain the integrity of the EU Single Market during this global transition to ensure that Ireland and Europe remains an attractive place to invest and do business.
All of this requires strong and effective budgetary policy so that we have sufficient resources in the medium-to-long term to ensure that Ireland is well placed to deliver sustainable and equitable growth.
And that is what today’s event is about – interrogating the various issues that may arise from these global trends and identifying how to best prepare ourselves for a changing world.
We are very lucky to have with us today such a wide range of experts to speak on these issues and give their insights on the challenges and opportunities we face, and the potential actions available to us.
In conclusion, I would like to thank you all for giving your valuable time to attend today’s conference. I would especially like to extend my thanks to Professor Frances Ruane and the Foundation for Fiscal Studies’ Colm Kelly for acting as the Chairs for today’s sessions.
Thanks to all our speakers and panellists for taking the time to come here today and share their wisdom with us.
I look forward to the discussions we will have in the course of the afternoon, which I know will help inform my own, and my officials’ deliberations.
Thank you.