If the Government doubted the issue worried the public, today’s Sunday Independent/Ireland Thinks opinion poll makes it clear: the cost of living is set to hit households hard, with experts predicting a historic income shock . The government must act, and act quickly, to address these concerns and, more importantly, to address the underlying causes of inflation.
It may be convenient for some to blame the war in Ukraine for the hit in our pockets en route and, for many, already here. No doubt war fueled the problem, but inflation was a growing concern before Vladimir Putin sent his tanks to Ukraine.
The government must urgently adopt a comprehensive anti-inflation strategy to reduce the cost of living, which could include the introduction of income tax cuts, increases in pensions and social protection .
However, wage increases and welfare increases alone are not necessarily a solution to inflation. Many companies will simply fund pay raises by increasing what they charge customers for goods and services, effectively offsetting the gains.
There must therefore also be measures to reduce the cost of services that are influenced by the government, such as childcare, as well as to strengthen competition laws and consumer protection laws, and to tackle housing and rent costs.
These and other problems contributed to inflationary pressure before the war and even before the Covid-19 pandemic — which misrepresented supply chain issues, also a major source of the problem.
There are broader issues under government control that also need to be addressed with greater urgency, such as accelerating the transition from fossil fuel-heated buildings and industries to well-insulated homes and businesses and more. hot water powered by electricity and hydrogen.
As today’s opinion poll also indicates, there is a risk that the public will seek to blame the arrival of Ukrainian refugees as the cost of living continues to rise. That would be as unfortunate as it is wrong.
Putin’s war has greatly exacerbated an already obvious problem, in terms of energy and food price inflation. The Ukrainian people are their victims, in far more tragic ways than the admittedly difficult realities that beset the people here. The urgency of responding to the inflation crisis does not lie exclusively with the government. Central banks around the world made monetary policy decisions printing trillions in various currencies to help pay for the global financial crisis and then Covid.
A strong case has been made for central banks to rein in quantitative easing at an appropriate pace now, rather than raising interest rates right now.
ESRI recently said significant inflation will be a feature of life for up to two years. When Covid ended, other experts predicted the crisis would only be evident for about six months. It is now clear that the longer term scenario is more certain.
In the face of a protracted crisis, it is also clear that the underlying causes must be addressed. Short-term measures such as a deduction from electricity bills for all households and reductions in diesel and petrol taxes will not prevent the worst of what is yet to come. There’s no time to lose. Immediate action is required.