The Irish Fiscal Advisory Council has issued a 'flash' response to the Budget package which it describes as smaller than last year but "still exceptionally large".
The Council does, however, welcome the "major" announcement on the two new investment funds but says it would have favoured more money being set aside.
IFAC says that in its pre-Budget report, it had recommended the Government adjust its plans to stick to the National Spending Rule and that there was little justification for further temporary measures.
It says instead the Government has gone further and it’s "unclear exactly how far".
The council says "this is a serious cause for concern" and "repeats past mistakes of procyclical fiscal policy" and "makes Government plans less credible".
It says that many non-core expenditure items "look likely to persist".
IFAC describes the additional €300m in capital expenditure from windfall corporation tax receipts as part of core expenditure.
It calculates that core net spending will go up by 5.7% next year, higher than the National Spending Rule but "potentially much higher depending on how health spending is treated".
IFAC says that the "substantial overruns" in health this year "do not appear to be incorporated" which "raises questions about the Health allocation and budget projections".
It notes the spending rule is set to be broken out to 2026 which IFAC believes "severely undermines the path for Ireland’s public finances."
IFAC says this increased level of expenditure comes at a time of full employment.
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It believes the Budget is ‘"likely to add to inflation, leaving it higher for longer" and that some of the non-core measures could lead to "more persistent rates of high inflation."
It says the projected surpluses in the public finances rely on windfall corporation tax receipts.
The cumulative surpluses out to 2026 now add up to €46 billion and would fall to €2 billion without the windfall receipts.
In response to concerns by the IFAC, the Minister for Finance accepted that Budget measures would add to inflation, but said the benefits outweigh the risks.
Speaking on RTÉ's Prime Time programme, Michael McGrath said: "If you take the period from the beginning of last year to the end of next year ... we've combined surpluses of €25bn in that period that we are not spending.
"We are reducing the national debt, and of course there will be an impact on inflation when you go beyond certain budgetary parameters, but you have to weigh that against the benefit of that additional money for the people who get it.
"The additional measures, we estimate, will add between 0.25 and 0.50% [to inflation], but you have to balance that then against the value and the benefit of that additional money for the people who need it."
