The Economic and Social Research Institute (ESRI) does not mince its words in its latest quarterly economic commentary. One of the report's authors, Danny McCoy states: "This is the Irish economy in a downturn."
The ESRI warns that next year unemployment could rise to 5.7 per cent. It says the economy is growing below its potential and the prospects for employment growth this year and next have diminished considerably.
Last Friday, the jobless figures for June showed the highest rise in 16 years in the numbers unemployed, a jump of 7.5 per cent on the May figures. By next year, more than 200,000 people are expected to be out of work. Our inflation rate is also predicted to remain the highest within the euro zone for the foreseeable future.
The ESRI quickly identifies problems caused by the lack of competition in some sectors of the economy and the strong rise in the euro in recent months. It says that rapid price growth in the non-internationally traded sectors has been a significant contributor to the increasing domestic cost base in recent years.
The report stresses that progress in regulatory reform in these sheltered sectors must be given renewed emphasis to meet the competitive challenges a stronger currency has brought. The case for stepping up competition policy and regulatory reform in these sheltered sectors has never been more compelling, it says. These sectors include most services such as transport, insurance, banking and distribution. In fact anything which affects the price of getting products to market.
In a special article accompanying the report, Prof Edward Shinnick of UCC says some reform has taken place in telecommunications, airlines, taxis, and the electricity sectors. However, he says, many more areas such as airports, bus and rail transport, pharmacies, retail and legal services have yet to be subjected to competition.
Last March a report into eight professions by economic consultants, Indecon, found removing restrictions to competition in the legal and medical fields could lead to price reductions of up to 30 per cent.
The Competition Authority commissioned the report which forms part of a three-year process due to end next year. By then, the authority hopes to have issued separate reports and recommendations regarding each profession. Its chairman Dr John Fingleton points out that the effect of any change could take time to work through the system.
The ESRI's Mr McCoy acknowledged that the Competition Authority had been moving "with great pace" but said it would be more "desirable" for the body to pursue simultaneous reform in a number of sheltered sectors rather than pursuing them sequentially. He argued that the authority should be also given more resources.
Given the ESRI's latest findings, there is a very real case for speeding up the investigations into the professions and strengthening the Competition Authority through increased staffing and powers. If this does not work, then perhaps the Government should look to other ways of speeding up deregulation, even direct intervention.