Friends First economist Mr Jim Power today warned that the December Budget could be the toughest in a decade.
Announcing the Friends First Quarterly Economic Review today, Mr Power also said measures must be taken to restore Irish companies' competitiveness or dole queues will continue to lengthen.
He said economic conditions remain flat and the unchecked inflationary pressures have put the Irish economy at a serious competitive disadvantage.
Mr Power warned Ireland's traditional manufacturing base is now under "considerable pressure" while consumer spending is moderating. Under these conditions Government finances will come under pressure as tax revenue is likely to disappoint again.
A sluggish global economy and the strengthening euro all point towards the December Budget being the most difficult for ten years, Mr Power said.
"The daily spate of job losses which we are witnessing is a worry and if the US economy fails to recover at a stronger pace than is currently apparent, this negative newsflow could continue," Mr Power said.
Mr Power predicts that the tax shortfall this year will come in at €750 million rather than the predicted €500 million shortfall.
Commenting on the Government's patchy record on tackling inflation, Mr Power pointed out it is the public sector that is a significant driver of inflation, citing health inflation (7.8 per cent), rail transport (11 per cent), motor tax (11.9 per cent) and health insurance (18.7 per cent).
For these reasons Mr Power described the introduction of greater competition into the economy and ongoing deregulation as "absolutely essential".
"Increased competition would help in bringing down insurance costs, but it is also the case that Irish insurance costs are high because Ireland has become a very litigious nation. The legal profession has a role to play in this regard, but the national psyche also needs to change," he said.