Decisions made in the Budget will result in a 1.3% decline in disposable incomes for many households, the Economic and Social Research Institute has said.
It added that middle and higher-income households "were negatively affected by the freezing of income tax credits and bands", as well as the withdrawal of temporary cost-of-living supports.
In a new forecast, the ESRI said that the economy was growing robustly but said it expected employment would grow at a slightly slower pace with unemployment rising slightly from 4.8% this year to 5.2% in 2026.
It said the domestic economy will grow by 2.1% next year compared to 4% in 2025. However it said there was not an underlying slowdown, rather there had been a large increase in investment in 2025 which would not be repeated next year.
It said Gross Domestic Product, a measure of the economy which includes the contribution from multinationals, would grow by 13.1% this year and 5.7% next year.
It said this was due to a surge in exports this year before the Trump administration's introduction of tariffs which has now begun to taper off.
The ESRI has left its forecast for house completions this year unchanged at 35,000 homes and said it expects 36,000 will be built in 2026.
But ESRI economist Conor O’Toole said that more than 50,000 homes per annum would be needed to meet demand.
The organisation has also examined the potential impact of AI the Irish economy.
Mr O’Toole said the risks for Ireland were larger than they were for other countries due to the presence of large multinationals here.
He said companies which have made significant AI investments could use "labour replacing technologies" which could impact employment.
He added that in the event of a "bubble" in AI investment bursting, retrenchment by technology companies could affect employment here and corporation tax paid by multinationals.
On climate, the ESRI said there was a "decoupling" between activities and emissions in the industry sector, but there was "limited evidence" of it occurring in the transport sector.
Regarding the public finances, the organisation repeated its concern about "increasing over-reliance on potentially volatile corporate tax revenues".
It also said there had been a "loosening" of the fiscal position which was "at odds with the current state of the business cycle".
