The Government has rejected a call from the ESRI to abolish mortgage interest relief and to postpone the tax cuts promised under the Programme for Prosperity and Fairness (PPF) to reduce the risk of a property price collapse.
The Taoiseach, Mr Ahern, also strongly signalled yesterday he had no intention of seeking to reduce the number of Irish people coming back to Ireland to work, despite the ESRI warning that this will further push the housing market towards collapse.
Responding to the publication of the ESRI's quarterly economic report, which suggested economic growth should be slowed, Mr Ahern said: "It's only a short time ago I would have been here explaining how we need to do something about the 18 per cent unemployment. We didn't panic during those bad times; there is no reason why we should do so in the good times."
He said a lot of Irish people had emigrated, "to whom we owe a proper opportunity". Many of these people were returning, "and I'm not going out to try to put my hand in the dike to stop it."
Mr Ahern said that if the State continued to build houses at the rate of 50,000 per annum, the pressures in the housing market identified in the ESRI report would be eased. Speaking to reporters at the end of the Lisbon EU Summit, Mr Ahern said the National Development Plan was geared towards providing the State with the infrastructure necessary to sustain growth.
Meanwhile, the Minister for Finance, Mr McCreevy, and the Tanaiste, Ms Harney, also rejected the ESRI report findings.
In an interview with INN, Mr McCreevy said he would not be abolishing mortgage interest relief. "People have subsidised mortgages and it is not politically on to do away with this."
Mr McCreevy also made it clear that the tax benefits under the PPF would not be held back. "We have set out in the PPF how we intend to introduce these tax cuts. It is a judgment call to get right the balance between pay and tax."
In the last year or so, the Minister said, a number of economists disagreed as to what was the correct formula for the Irish economy. "The Irish economy is the most successful in all of Europe for the last number of years and that must be borne in mind."
Ms Harney said cuts in personal taxation were a key element of the anti-inflationary strategy which was being pursued by the Government.
"The wide-ranging reductions in personal taxation conceded in Budget 2000 will be of significant benefit to all taxpayers. Those tax reductions helped to secure the new partnership deal which paves the way for continued stability and prosperity over the next three years."
She questioned the ESRI assertion that immigration would be bad for the Irish economy. She said we should recognise that there were serious labour shortages in the Irish economy and these would have to be addressed if we were to sustain economic growth.
"Immigration can play an important role in solving our labour market problems. It is essential that we have a structured immigration policy based on our real labour market needs."
In his comments on the report, Mr Ahern referred specifically to the issue of Irish emigrants returning home rather than the broader issue, referred to in the report, of skilled immigrants coming to Ireland to work. A spokesman said this was because it was returning emigrants who were chiefly putting pressure on the housing market, rather than non-national migrant workers, many of whom were in the State temporarily.
"If we have vacancies in companies and we need to fill those jobs, we will be trying to get more of the unemployed working. Bringing people back is just part of it," the Taoiseach said.