Mr McCreevy's first Budget will provide a major boost to the economy next year. But inflation remains a danger, despite the Department of Finance's own forecast that it will be no more than 2 per cent next year.
There is a risk that the giveaway Budget, coupled with lower interest rates, could boost inflation next year and thus undermine our competitiveness. However, as yet there is no sign of inflationary pressures and it remains to be seen whether price pressures will emerge next year, or whether the recent extraordinary record of strong growth and low inflation can be continued.
the biggest tax and spending package in the history of the State will boost growth, and could feed through to higher inflation next year. According to Irish Intercontinental Bank the tax cuts and social welfare increases should boost consumer spending by about 2 percentage points, while the corporate tax measures should boost investment by more than 3 per cent. As a result the Budget itself is likely to boost economic growth by about 1.5 per cent next year.
Meanwhile, along with strong growth, the continuing decline of the pound and the likely impact of higher cigarette and petrol prices will add somewhat to inflation. Against this background, officials at the Central Bank will worry that the extent of the fiscal boost, coming on top of expected decline in interest rates of 2 percentage points, could feed through to inflation and further surges in house prices.
As a result it could also make a revaluation of the pound's central ERM rate more likely in the run up to monetary union, as the Bank seeks to use a strong currency as a bulwark against inflation.
However, Mr McCreevy argued that the Budget would not stoke inflation. "It is not in any way inflationary at all," he said. He pointed out that after four years of strong growth, Irish inflation remains negligible - a situation, he said, which economists have failed to explain.
Looking at the overall Budgetary arithmetic, there are sound economic reasons which suggest we should be running a significant surplus on the exchequer finances, particularly with the run-down of the structural funds in sight.
Indeed, the Department of Finance's economic background to the Budget warns that there is a "compelling case" for running a budget surplus in periods of strong growth.
However, the Minister is borrowing again this year, although continued growth and tax buoyancy should ensure he actually ends up in surplus.
One of the main problems - and a reason the Minister found this hard to deliver - appears to be continuing large-scale increases in the public sector pay bill. The bill is expected to rise by 6 per cent over 1997 on top of an increase of 10.5 per cent in 1997. This is one of the main reasons Mr McCreevy is aiming to borrow £89 million - although he is expecting a surplus in 1999.
Despite these problems, the Budget painted a further rosy picture of continued growth. Gross national product is expected to rise by 7 per cent next year and by 5.3 per cent on average in 1999 and 2000. At the same time, 48,000 new jobs are pencilled in for next year with a rise of 37,000 on average in 1999-2000. And inflation will remain low at around 2 per cent.
However, this favourable outlook does have its risks. According to the Department's document these include skills shortages, excessive pay demands, inflationary pressures and the need for a Budget surplus. Not all were addressed in the Budget.
It is not clear whether the Minister's move to control numbers in the public service will be enough to put a lid on spending, for example. And the Department also warns that if inflationary dangers are not contained there will be a loss of competitiveness; again the need to ensure continuing "moderate" pay terms is stressed.
A further risk is the dramatic escalation in house prices. This Budget failed to take any measures to control these and indeed is likely to add impetus to a further spiral moving into next year.
The danger of losing EU funding and the need to address the infrastructural deficit are also alluded to by the Department.
This requires "significant investment in the economy to generate strong output and employment growth just to stop unemployment increasing," the Department warns. And we must be able to meet more of our own investment needs from our own resources.
However, the Minister can claim credit for his move to significantly cut corporation tax, which should boost competitiveness of firms located here, as well as the plan to tackle the skills shortages in the economy through the new high tech educational fund.
The Minister can also claim credit for serious moves to cut the numbers unemployed. Cuts in PRSI contributions by employers and employees should boost the numbers at work. The additional allowance for the unemployed moving into work should also go some way to removing some of the welfare to work disincentives. However, the underwhelming treatment of those in low-paid employment will not have increased the incentive to take up jobs at that level.
Overall the Budget is likely to have little impact on the financial markets. And despite concerns about the persistently high level of Government expenditure, it is a world away from the position a decade ago.