Worrys of a Downturn To Affect Party Spending

The Indo sounds the first real note of realism so far this election by asking the very pertinent question “what if there is a down turn?”. We noted earlier that the Green Party went with a 4% average estimate for growth in the coming years while FF are also below 5% on their last economic document. This was a pretty realistic move considering the projections of the IMF about a world economy which we are highly leveraged towards and worries about inflation and a property market collapse.

Worryingly it is Goodybody stockbrokers who have prompted this story from the Indo with a review downards of Growth targets for this year and next years (from 10% combined to 8%). The effect of this on party spending plans is in the region of E1 Billion if the predictions are right. The paragraph below gives a flavour of how dependent the economy is on simply building houses and why Fianna Fail are so worried about a slow down in the market (one which I think is about far more factors than stamp duty proposals as cheap credit gets mopped up, belts get tightened and people refuse to keep paying crazy prices).

House building has been such an enormous industry that each drop of 5,000 houses is reckoned to knock 1pc off economic growth. It will be no consolation to the minister that actual houses (or flats) are still being put up at the remarkable rate of 70,000 a year. It does not help either than the parties squeezed the last drop out of the numbers. Not only must the economy keep growing strongly, but day-to-day spending on pay and public employment must grow by only 7pc a year, compared with 13pc a year at present.

Last night on Prime Time, Brian Cowen and Richard Bruton went head to head but it was Mark Little who caught Biffo out with his question on competitiveness, the erosion of which was masked slightly by the contribution of housing to growth numbers.

If the Goodbody and the Indo are right we might want to see a bit more questioning on what hte parties won’t do if elected and a downturn ensues. I would like to know which gets cut from policy documents? Health spending? PRSI cuts? More Gardai?

It might be a good time to begin to exercise Sliabh’s three rules before voting, with bonus points to the party who recognises there might be trouble ahead and tells you how they will steer us out of it.