The Economic and Social Research Institute says strong economic growth means there is no need for significant tax cuts in Budget 2017.
It also says spending on social housing can be justified on the grounds that it improves the productive capacity of the economy and improves competitiveness by reducing overall housing cost pressures.
The ESRI does not believe in "Leprechaun economics", preferring its own method of calculating the size of the economy, not the official version.
Using its own method leads it to believe the economy is now operating at full potential, meaning it has finally overcome the financial crisis of 2008.
It thinks the economy will grow by 4.3% this year and 3.8% next year, which is strong growth, but a bit weaker than previously thought.
This is mainly because of an expected sharp decline in British growth next year following the Brexit vote.
As a result it recommends a neutral Budget next month - one that neither stimulates nor contracts the economy.
Strong growth in consumer spending and employment back above two million suggests no tax cuts are needed.
Spending on social housing can help the competitive position of the economy by damping down the rapid growth in housing costs, particularly in the rental sector.
ESRI research professor Kieran McQuinn has said there would be some negative implications as a result of Brexit but that in general the institute continued to see a strong outlook.
Speaking on RTÉ's Morning Ireland, he said that the CSO figures recording a 26% growth in the economy did present an exaggerated figure of what is going on but were in line with Eurostat requirements.
Professor McQuinn said that income tax and USC is a strong and stable source of revenue for the Government and it was important to keep such a source.
On the issue of housing, he said the ESRI has recommended the Government fast tracks the site tax. This would, he said, encourage developers to build on land that they owned and therefore speed up housing supply.
Budget spend to rise to €57.5bn
Minister for Public Expenditure and Reform Pascal Donohoe has told the Oireachtas Budget Advisory Committee that spending will rise from €56bn in 2016 to over €57.5bn for Budget 2017.
The minister said there "are numerous competing demands for resources across the public service where genuine need exists for additional resource allocation".
He added that "It is a challenging climate in which to formulate a budget and difficult decisions will have to be made in the coming days."
Fianna Fáil expenditure spokesperson Dara Calleary asked if the minister anticipates an increase in fiscal space come Budget day and if the September exchequer returns give the Government more leeway on 11 October.
Mr Donohoe said he cannot give the deputy a guide in relation to the September figures as they are still being collated by the Department of Finance. He said that he does not expect any significant change in fiscal space.
Mr Calleary asked the minister how he is going to ensure the expenditure plans for departments are prepared in a realistic manner as supplementary budgets are no longer allowed in 2017.
Mr Donohoe said the health allocation was changed earlier in the year when the health estimate was increased by €500m and the justice estimate was increased by €40m.
He pointed to other risks that need to be managed such as preparing the local road networks and capital expenditure in the Department of Education.
