Trade unions may seek to renegotiate the new national pay agreement if the inflation rate continues to rise, Ictu general secretary David Begg has warned.
Responding to the latest inflation figures, which show the cost of living rising at 4.9 per cent, the fastest rate in four years, Mr Begg said he expected inflation to "tail off" later in the year.
"However, if it goes up to 6 per cent and stays there, then we're in a bit of difficulty. We're back in the autumn to negotiate the next phase of the agreement and if there is a shortfall in workers' incomes, we'll have to renegotiate."
Mr Begg said the Towards 2016 agreement provided for annual pay increases of 4.6 per cent over its lifetime. This was marginally ahead of last year's inflation rate of 4 per cent, "but not as much as we thought when we concluded the agreement".
Impact general secretary Peter McLoone also expressed disappointment that higher than expected inflation was eroding the gains agreed in the pay deal, but said he was confident that inflation would level out.
Both union leaders said the anti-inflation group convened under the agreement would seek to find ways of limiting price rises in the worst affected sectors. Mr Begg said that while there was little that could be done about mortgage rate increases, he would be pressing for cost-saving changes in fuel billing.
Employers' groups and the Opposition rounded on the Government over the figures. Fine Gael claimed Ireland had become "a graveyard for consumers", while Labour said the rise was an indictment of the Government's management of the economy.
Higher mortgage costs and a Budget increase in the price of cigarettes largely accounted for December's 4.9 per cent rise in the rate of inflation, according to the Central Statistics Office (CSO). This is a rise of 0.3 per cent on the previous month and the highest rate since March 2003.
The figures for this month, to be published in February, are expected to show a further rise. Electricity, transport and bread prices have all increased since the start of the new year.
Overall, annual inflation last year was 4 per cent, compared to 2.5 per cent in 2005. This is the highest rate recorded since 2002. The biggest contributors were mortgage costs, which grew 31.5 per cent thanks to five interest rate rises during 2006, and an 8.2 per cent growth in energy costs.
The CSO figures also show that while goods inflation is relatively modest at 1.2 per cent, the cost of services grew by 6.2 per cent. The latest figures appear to show that the abolition last year of the Groceries' Order has helped stem inflation in the food sector. Items previously covered by the order showed an increase of just 0.1 per cent last year, while grocery items which were never covered rose by 2.4 per cent.
Economist Dermot O'Leary of Goodbody Stockbrokers pointed out that while external factors played a major part in driving up prices, domestic price pressures were also increasing. Rising hotel prices could affect Ireland's tourism growth, he warned.
Employers' group Ibec claimed the Government was responsible for much of the inflation through excessive increases in gas and electricity prices and higher than average price rises in health and education. Isme, the small business group, warned jobs would be lost if the cost of living was not brought under control. "Inflation is spiralling out of control and if allowed to continue will do untold damage to the small business sector in terms of investment and jobs," said Isme chief executive Mark Fielding.
