A new report on the economy says that only €500m worth of measures are required in the October Budget to meet next year's target of a deficit of less than 3% of GDP.

In its latest Economy Monitor, Investec Ireland said the Irish economy has continued to build on the progress made during 2013.

It noted that the domestic economy has been a particular driver, although exports remain an "integral" part of the overall growth story.

Investec said it was especially encouraged by the positive trends in the labour market in recent months, noting that the economy had added jobs for six quarters in a row.

The country's unemployment rate of 11.5% is back in line with the euro zone average for the first time since October 2008 and the positive trends are set to continue, the stockbrokers added.

The Monitor also noted eight successive months of retail sales growth with sales of big ticket items such as cars and furniture seeing a brisk start to the year. 

Consumer confidence has also reached a seven year high.

Investec said that the positive momentum in consumer spending is a key factor behind the outperformance of the public finances. Recent Exchequer Returns data show that year to date tax revenues are up over 6% year on year and 2.5% ahead of guidance, it added. 

"These dynamics are producing a strong tailwind as we head towards October’s Budget, which will represent the final act in a series of measures which began in July 2008 to restore the public finances to good order. Our view is that an incremental €500m of fiscal consolidation measures are required in order to meet next year’s target of a deficit of less than 3% of GDP while maintaining a buffer to guard against any adverse shocks," commented Investec's chief economist Philip O'Sullivan. 

Earlier this week Goodbody Stockbrokers said that no new austerity measures will be required in the budget for the Government to hit its deficit target of less than 3% of GDP. The stockbrokers said that the already announced introduction of water charges will bring in some €500m.

In its latest economic report, Investec predicts that GDP will rise for the second year this year, with further growth predicted for next year.