It’s curious how comments made based on the projections of an economic model take on a life of their own and often invested with a level of certainty far removed from the caveats surrounding any model based simulation. Brexit was a good case in point, with dire warnings about the hit to the Irish economy that would unfold , and we now have a recent example, relating to the 2025 Budget and the claim that ‘by breaching its (spending ) rule,the Government is estimated to add \u20ac1,000 to the cost of a typical household\u2019s yearly outgoings’.<\/p>\n\n\n\n
That statement comes from the Irish Fiscal Advisory Council’s flash release on the 2025 Budget and is in turn based on research published by the Central Bank in their June 2024 Quarterly Bulletin . The article (‘Fiscal priorities for the short and medium term’)<\/em> attempted to quantify the impact on the economy of Government spending in excess of the target 5% annual rise, using one of the Bank’s economic models, based on the assumption that the higher spending is current as opposed to capital and financed by borrowing, assumptions not mentioned again by anyone, and of course at variance with the fact the Govt is actually running a very large current budget surplus , not fully offset by a capital deficit.In other words Government spending is more than offset by Government tax and other receipts. <\/p>\n\n\n\n The simulation showed that domestic demand would be boosted and inflation 0.5% per annum higher than would have been the case over the period 2022-23. Assuming a 7.1% average rise in Government spending from 2024 to 2027 the model predicted inflation to be 0.5% higher in 2024, 0.3% in 2025, 0.2% in 2026 and less than 0.1% in 2027. So over the full period , 2022 to 2027, the model puts the cumulative impact on the price level at around 2%, which multiplied by IFAC’s assumed Household average outlay of \u20ac50,000 per annum gives the \u20ac1,000 figure.<\/p>\n\n\n\n So a model based simulation, based on higher current spending, financed by borrowing, translates into the \u20ac1,000 a year cost which is then repeated as if a fact. <\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" It’s curious how comments made based on the projections of an economic model take on a life of their own and often invested with a level of certainty far removed from the caveats surrounding any model based simulation. Brexit was a good case in point, with dire warnings about the hit to the Irish economy … Continue reading “Have Irish Budgets really added \u20ac1,000 a year to Household bills?”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"class_list":["post-390","post","type-post","status-publish","format-standard","hentry","category-irish-fiscal-policy"],"_links":{"self":[{"href":"https:\/\/danmclaughlin.ie\/index.php?rest_route=\/wp\/v2\/posts\/390","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/danmclaughlin.ie\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/danmclaughlin.ie\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/danmclaughlin.ie\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/danmclaughlin.ie\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=390"}],"version-history":[{"count":2,"href":"https:\/\/danmclaughlin.ie\/index.php?rest_route=\/wp\/v2\/posts\/390\/revisions"}],"predecessor-version":[{"id":392,"href":"https:\/\/danmclaughlin.ie\/index.php?rest_route=\/wp\/v2\/posts\/390\/revisions\/392"}],"wp:attachment":[{"href":"https:\/\/danmclaughlin.ie\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=390"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/danmclaughlin.ie\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=390"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/danmclaughlin.ie\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=390"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}