The new Daft.ie rental index published today shows that the Irish property market is struggling under its own weight. Today’s figures are consistent with pretty much all other figures released about Ireland’s waning economy since the start of the year. Rental prices in Ireland are going down and they will continue to go down for the foreseeable future.
The reasons for this are obvious. People have less money to spend on rent; there are less people in the country, there is less money in the country and there are more and more properties coming onto the rental market. This is great for renters and in a way it is great for Ireland as the country tries to combat the serious cost of living which in turn affects the high cost of doing business in this country.
As thousands of students also finish for another summer it is likely that as they struggle to find summer work landlords too will struggle to find tenants.
One of the areas of change spoken about in the report is the area of the public sector. Public sector reform is, at this stage, a jaded conversation but clearly when top economists point to it as an area of serious concern then it is a sign that things need to happen here.
“The public pay bill has almost tripled since 2000 to reach almost €19bn (encompassing the recent pensions levy) in 2009. This increased cost base has led to a cost-push impact on prices across the economy and has not been matched by improvements in productivity. At a minimum, savings of c.€4bn need to be made to bring public pay/GNP back to 11%, in line with the 2003-2007 average.” – Joint Broker Research Report
In 9 years the public sector pay bill has tripled but equally as important is that productivity is nowhere near this and this fact is evident in almost every section of the public sector with health being the biggest of the black holes.
In order to get this economy turned around it will take at least 3-5 years but this is only if changes are put in place right now. The area of public sector pay has to be adjusted. It will cause pain to those who probably have never before experienced it but there will be little or no sympathy from the general public who have been shouldering 99% of the burden of this bust until now.
Unemployment at the end of March stands at 11% and counting. 369,100 people work in the public sector so there is room for optimisation in every department. There are other ways to reduce this number for the short term such as offering an incentivised career break for 3 years or so, offering early retirement to senior management, offering shorter working weeks etc.
The government have estimate that in 2009 they will need to borrow €23 billion to balance the books, a figure revised up from an €18 billion estimate only a few weeks before. The problem is serious.
Reducing the headcount will help to reduce the problem in the short term but more importantly put the country on the road to a speedier recovery. It is time that this government finally got it’s house in order. The same people have been there for long enough.
As the country braces itself for a sustained period of economic contraction it is obvious that there is a tough time ahead for the majority of Irish people.
It is somewhat unsurprising that the public sector unions are digging their heels in already. Dublin Bus and Bus Eireann have voted in favour of industrial action. Teachers are also being balloted for industrial action and over the next few weeks we are set to see much disruption to the areas of society where disruption resonates most.
Industrial action by a public sector with guaranteed pensions and guaranteed jobs will clearly win no fans.
Yesterday TUI president Don Ryan said “Our members are prepared to take their fair share of the burden”
This evening on Today FM general secretary of ASTI John White said that they were “willing to play their part in dealing with this recession”
It seems that everyone wants to do their part, as long as it is deciding others should suffer.
This chart from our site shows just how industrial action has declined over the years. 2007 being the year when the least ever amount of hours were lost to industrial action. I think that record is safe for a while:
The governments decision may receive a mixed reception from the public, shareholders of credit institutions and businesses but it must be seen as a brave and needed move by a government that has been less than decisive in their dealings to date.
The €10billion will be funded through the National Pensions Reserve Fund or otherwise. On September 30th 2008 the outturn of the National Pensions Reserve Fund was -17.3% since January 1st 2008. The monetary value of the fund stands at €18.7bilion.
