The sustained economic boom leaves many of us living through it, and all outsiders, slightly bemused. Will midnight arrive and will we find ourselves sitting in rags on a pumpkin?

The current success of the economy is no accident, as many of the building blocks were put in place over a long period. The first ingredient of the success is a plentiful labour supply.

There are a number of factors affecting the supply of labour which make Ireland different from most of its EU neighbours:

We still had a high birth-rate up to 1980. The post-war baby boom ended 20 years earlier in much of the rest of the EU.

Female labour-force participation was very low by EU standards. As Irish women have traditionally been better educated than men, the women not in the paid labour force represented a potential resource to the market economy, a resource which has fuelled growth in measured output in the 1990s.

The improvement in the Irish education system came at least 20 years after the rest of the EU, beginning in the late 1960s. Thus, the benefits are accruing to us now in the 1990s, long after the benefits have already been built in to the Dutch and the German economies.

When taken together, these factors are probably worth a bonus of 3 percentage points a year on to our growth rate. This is a bonus which the rest of the EU experienced in the 1960s and the 1970s but which we lost out on due to poor strategy in the years immediately following the second World War.

However, the Irish economy is today a little like a clockwork mouse which is fully wound up. It is going really fast in the 1990s, but the clockwork motor will inevitably wind down over the next decade. The winding down will occur as the economy runs out of young people (due to the low birth rate post-1980); runs out of women as the participation rate reaches the EU average; and as the education bonus is built in to our labour force.

The "mouse" is probably still good for a burst of speed for the next decade, but by 2010, on demographic grounds alone, Ireland will be a middle-aged economy, just like the rest of the EU today, with a "middle-aged" growth rate.

In the past Ireland's problem was too many people and not enough jobs. While many still remain unemployed, the problem today is almost too many jobs and not enough people with the skills to fill them.

Why are so many finding jobs in Ireland today? The answer lies in many factors which have all contributed to Ireland's current competitiveness. Not the least of these has been the "partnership" approach to the formation of economic policy. This has helped produce more moderate wage settlements in return for an amazing burst of employment growth.

However, the flexibility of the labour market has also meant that the rapid growth in skilled labour supply over the last decade has maintained downward pressure on skilled wage rates.

Finally, the fruition of the policy of encouraging foreign investment in the economy, a policy consistently pursued for 40 years, has itself made a big contribution to the rapid growth in employment and output.

Northern unionists and German taxpayers alike both suffer from a fairy-godfather delusion about the Irish economy. They view the current spurt of growth as largely the product of the EU structural funds. While welcome, the structural funds had their major impact at the end of the 1980s when the EU had faith in the Irish economy.

They forced us to invest in Ireland at a time when we had lost our faith in ourselves, and the EU helped make this strategy change possible. Since then the structural funds have been very welcome, but over the course of the 1990s only around 0.5 percentage points a year of the average growth rate of 5 to 6 percentage points a year can be directly attributed to that inflow.

Looking to the future, the potential increase in labour supply will begin to run out over the next decade, and the mouse will wind down. However, if properly managed, it will still be moving faster than most of our EU neighbours. Where are the traps that might cause this benign scenario to come unstuck?

Among the wide range of possible external risks is that any shock to the US economy, which caused a major slowdown in the high-technology sectors, especially IT-related industries, could cause bad economic flu in Ireland because of our industrial structure.

To some extent our exposure to external shocks is out of our hands. But we have learned from the past that we are quite capable of derailing the economy ourselves. It only seems right for Scrooge to make his appearance at this time of year and, in this guise and slightly late, I confess to considerable concern that the economy could overheat. We could over-wind the mouse.

I WOULD have been much happier if the current Budget (and the previous two) had acted to push some of the current boom into future years by raising taxes or cutting current spending temporarily. It is not that Scrooge needs the money but rather that, if we spend it all today, the economy may explode. A better strategy would have been to adopt deflationary budgets now with a promise that the Government would give it all back, and more besides, when the economy began to slow.

As it is, wage rates are rising far more rapidly than in our EU neighbours. This is clearly not a problem for today - employers are short of labour. But the danger is that this will continue so long as the good times continue, although when the first recession comes along we will find ourselves priced out of our markets, facing a choice between cutting nominal wages or accepting a big rise in unemployment. It would have been better to take it easy and ensure that the jobs, which are created today, are sustainable in the longer term.

The final home-grown potential iceberg is that the economy will choke to death from congestion. The level of house prices is only one manifestation of the fact that the infrastructure of the State is inadequate for the current level of economic and social activity, which it is being asked to service.

Unless we undertake a major programme of investment to remedy some of the shortcomings, the potential for continued growth will not be realised. With many unemployed still waiting to benefit from this future growth, a premature end to the current boom would have significant social costs.

John FitzGerald is a Research Professor with the Economic and Social Research Institute. He is joint author of the landmark document on the Irish economy, The Medium Term Review 1997-2003, published in 1997

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