The Tánaiste and Minister for Finance, Brian Cowen, has said that wages must be more closely linked to productivity to keep the economy competitive.
Addressing the Insurance Institute of Ireland Industry Leaders' Summit in Dublin today, Mr Cowen said that 'it is essential that public expectations adapt to the emerging, more sustainable growth in available resources.'
He said the Government will continue to be prudent with spending, but that it will prioritise investment in the National Development Plan.
Mr Cowen said that infrastructure, education, science and innovation have been targeted as areas that are key to Ireland's future prosperity.
The Finance Minister also sounded a word of caution about service sector inflation. He said because this type of inflation is largely driven by internal factors, it is important we ensure that wages in this area only rise in line with productivity so as not to harm our international competitiveness.
On the issue of benchmarking, the Tánaiste insisted that the average increases of 8.9% agreed in the first process can not be repeated in the Benchmarking Body's recommendations due towards the end of this year.
However, he said that the drop in averages could be offset by adding greater value to the public service pension package.
