The Government needs to place a renewed focus on restoring business competitiveness if the economy is to expand according to its potential, the Small Firms Association (SFA) says.
Launching the association's Spring Economic Statement, SFA director Patricia Callan said the changing economic environment makes "a compelling case" for spending growth to be limited to revenue growth. Wage moderation and "major changes" in local authority charges for services such as water and waste must be delivered, according to the association.
The SFA expects growth in gross domestic product of 4.75 per cent for this year and is forecasting an unemployment rate of 4.4 per cent. Inflation is set to average at 2.6 per cent, according to the statement.
Ms Callan said the Government must aim to keep inflation below 2 per cent. She pointed out that the rate grew from 2.5 per cent in December to 3.3 per cent in February, with "stark differences" between the traded goods and services sectors.
"The SFA is of the view that the impact of administered prices is a critical issue," said Ms Callan. She noted that the February figures showed a 12.3 per cent increase in the cost of housing, water, electricity, gas and other fuels.
"When public sector inefficiencies are passed on to the rest of the economy in the form of tax increases and administrative charges, competitiveness deteriorates and jobs are lost," Ms Callan said.
The SFA wants to ensure that any future increases in commercial rates would not be above inflation and would be tied to "agreed performance targets".
User charges now account for 60 per cent of local government income, with most of this levied on the business sector, according to the SFA.
The association also used the spring statement to raise concerns about "an overpriced labour market" which it says will undermine the ability of manufacturing and tourism companies to compete.
It will also create problems for the construction sector when it comes to delivering major infrastructural projects on time and within budget, the SFA cautioned.
