News Archives - Pat Carroll PCCO - Chartered Accountants & Tax Advisors

Ireland ranks eight of 29 economies for inclusiveness

Ireland has ranked eight out of the 29 advanced economies for inclusiveness, according to a report from the World Economic Forum (WEF).

However the economic inclusion rate in Ireland has deteriorated.

The report, which took into account the last five years, found that the 29 advanced economies included in the study have on average flatlined in terms of inclusion, which is measured by median household income, poverty, and wealth and income inequality.

This is despite boosting their growth and development score by over 3pc.

The report has found that while advanced economies grew GDP by 5.3pc on average between 2012-2016, inclusion grew by only 0.01pc.

Norway was the world’s most inclusive economy, followed by Iceland and Luxembourg.

Australia was the only non-European economy in the top ten advanced economies for inclusiveness.

The picture for emerging economies is also worrying, the report found, with upper middle income economies growing by 7pc in 2012-2016, however inclusion in these economies grew by only 4.6pc, and actually saw a 2.1pc decrease in inter-generational equity.

Lithuania was the most inclusive emerging economy, followed by Hungary and Azerbaijan.

The four indicators that make up the index’s growth and development pillar are Gross Domestic Product (GDP) per capita; labour productivity; employment; and healthy life expectancy.

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Second Brexit debate might sound different if held above the hum of European recovery

Following what could be termed by many as a lost decade in a debt-laden eurozone, the medicine administered by the European Central Bank (ECB) has dragged the eurozone back from the brink, and ensured a smooth shifting through the economic gears.

From a fresh position of strength, we expect growth in the eurozone to hit 2.5pc in 2018, a post-crisis high.

However, with European inflation being the perennial laggard, the first rise in ECB interest rates may arrive a touch sooner than current market pricing implies, but not until Q2 2019 at the earliest.

Meanwhile, a gradually deteriorating UK economic picture could possibly turn public sentiment to such an extent that one wouldn’t rule out a national desire for a volte face on Brexit, a U-turn, or ‘EU-turn’, of sorts.

The economic performance choreographed by ECB president Mario Draghi and his colleagues should allow a gradual shift to monetary policy ‘normalisation’ later this year.

The ‘business as usual’ model follows a familiar playbook with the US Federal Reserve moving first, while other major central banks watch, wait and eventually follow.

With that ‘normalisation’ in mind, and with the US Fed planning to run down its QE holdings more rapidly over 2018, one question is what impact this will have on US equities?

With global interest rates still at close to all-time lows, we feel that equity markets, and US markets in particular, will continue to attract investment.

It could have been very different, though, for the eurozone and the grand European project, and only 12 months ago an infinitely less attractive scenario could well have been played out.

As 2017 dawned, the shock Brexit and Trump anti-establishment victories were not just fresh, but raw in collective memories, at a time when some very crucial European elections rapidly approached.

The Netherlands, France and Germany were due to go to the polls.

The pertinent question on everyone’s lips was: “Could a hard-fought, renewed European [financially at least] stability be torn asunder by a rising populist right?”

Unfortunately, the cold, hard answer to that question was ‘yes’.

Thankfully, these key elections and a barrage of other key global plebiscites are out the way and, as such, geopolitics, while still crucial, should be lower down the ladder of key risk events, adding to the theme of normalisation.

A while off yet, but the November 2018 US mid-terms may be important; the Republicans maintaining control of the House and Senate is far from guaranteed.

If they suffer losses, questions will be asked about what remains of President Donald Trump’s agenda.

Moving closer to home, political challenges are likely to continue to dominate throughout 2018 in the UK, where the Brexit negotiating task remains positively gargantuan.

If the recent past is anything go by, news-flow here may be ‘lumpy’ at best, with both violent lurches in progress and setbacks in talks before a likely sign-off on a transition arrangement and, ultimately, a final trade deal is concluded.

In light of this uncertainty, investors may spend more time in 2018 considering the possible implications of a future administration that is led by Jeremy Corbyn.

Would a Corbyn-led government be the catalyst for an EU-turn?

It is hard to counter the view that Brexit was put to the UK electorate in the worst possible fashion and at the worst possible time; with Europe emerging from its near decade of rolling financial crises, mass pan-European immigration issues resulting in a renewed nationalistic fervour, and some egregious misinformation on the part of the UK political classes.

With Europe now in a substantially safer place, and with the follies of Brexit laid bare, it’s fair to ask, would a fresh vote end differently?

As a novice optimist, that question certainly gives me pause for thought.

Justin Doyle is a treasury dealer at Investec, with offices in Dublin and Cork.

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Explainer: Income limits, maximum prices and interest rates; all you need to know about the new council mortgage scheme

Today the Government will unveil plans to enable local authority’s to provide mortgages to first-time buyers, but just who is entitled to apply and how much will be available?

Who is entitled to apply for the local authority mortgages?
First-time buyers that have had two insufficient offers or refusals for a mortgage from two lending institutions can apply for the loan.

In addition, to qualify, an individual’s annual gross income cannot exceed €50,000, or in the case of a joint application €75,000.

What is the maximum loan a person can get under the scheme?
First-time buyers can get a loan worth up to €288,000.

What is the benefit of this loan over a bank loan?
While the loan will be subject to the same lending rule as banks, the benefit of this loan is that it will be charged at a fixed interest rate of 2.25pc for 30 years, this is likely to save homebuyers up to €10,000 over the lifetime of a mortgage.

Currently banks are offering first-time buyers interest rates in excess of 3pc.

Will there be a limit on the price of a home one can buy or build?
Yes, in the Greater Dublin Area, Cork and Galway, the maximum market value of a home will be €320,000.

In the rest of the country, it will be €250,000.

Can I use the loan to build a house?
Yes, the Government loan can be used to buy both for new and second-hand properties, or to build your own home.

When and where can a person apply?
The scheme will be available for applications from February 1 and people can see if they they qualify for the loan through the website which is live.

How much money has the Government set aside for this?
The Government has set aside €200m for the scheme in 2018.

What’s this about the Government building on State land?
The Minister for Housing, Eoghan Murphy, will also today announce an affordable purchase scheme that will see affordable homes built initially on State land.

Under the scheme, the State will retain an equity in all discounted homes sold. For example, a house that costs €250,000 may be made available to purchase at €200,000.

The equity share can be paid off, interest free, by the purchaser at a later date. Or if the owner wants to sell early, the State can take that portion back at the time of sale.

Just what is the affordable rental scheme?
Also set to be unveiled today is an affordable rental scheme.

This scheme will see rent charged based on the cost of building the property, together with ongoing management and maintenance charges, but with a minimal profit margin included.

Has this been done before?
Yes, currently a pilot project on this initiative is under way in Dún Laoghaire-Rathdown County Council, in conjunction with the Housing Agency and an approved housing body, using publicly owned land.

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Rise in interest rates could now be ‘beneficial’, says Fiscal Council chief

The European Central Bank’s tapering of its quantitative easing programme will not have a huge impact on the Irish economy, Fiscal Advisory Council chief Seamus Coffey has said.

Despite the concerns of the Department of Finance and the Economic and Social Research Institute (ESRI), Mr Coffey said a rise in interest rates could actually be “beneficial” in relation to house prices.

The ECB announced in October it was going to cut its massive bond-buying programme to €30bn a month from €60bn, as of January.

But it extended the scheme’s lifespan by a further nine months, signalling to investors that despite strong growth, work must continue as inflation remains low.

Last summer, the Government warned that an end to QE could push up Ireland’s borrowing costs given the scale of our public debt.

“On Irish growth I don’t think it will have a huge impact. We’re still not seeing interest rates and predictions of interest rates rise yet,” Mr Coffey said, in an interview with the Irish Independent.

“The ECB is likely to taper its purchases of assets but interest rates are likely to remain low. I don’t see the ECB’s tapering off having a significant impact on Ireland.

“In fact, you could argue that as the economy has grown so strongly, perhaps in relation to house prices and other asset prices, that a rise in interest rates would actually be beneficial, given our place in the economic cycle.”

Mr Coffey said any increase in interest rates that might come about from an ending to QE could dampen mortgage lending, signalling it could act as a drag on current house price growth.

“Previously, back in 2005/6/7 we had interest rates that we knew were too low for us,” he says. “There’s probably a risk at present that interest rates in the future could be too low. So maybe seeing interest rates rise now wouldn’t be the negative that some might perceive it to be.”

Meanwhile, the euro’s recent strength against the US dollar was “not helpful”, European Central Bank policymaker Ewald Nowotny said yesterday, when asked about the currency’s recent gains. Mr Nowotny added that the ECB had no exchange rate target so it would monitor the developments.

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Higher mortgage rates on the way but ‘increases will be gradual’

Borrowers have been warned that European interest rates are set to rise, but the increases will be gradual and it will be 2021 before they hit 1pc.

This is good news for those on trackers, and people borrowing to buy homes now.

European Central Bank rates are zero at the moment, but the ECB has been signalling that the days of super-low interest rates are coming to an end.

More than 300,000 borrowers with tracker mortgages benefit from the record low ECB rate as their mortgage rate can rise only when the ECB rate goes up.

Most trackers are pegged at around 1pc to 1.2pc above the ECB rate.

If ECB rates rise to 1pc, it would mean a typical tracker customer could see monthly repayments rise by €50 for every €100,000 borrowed over 30 years.

International ratings agency Moody’s said it expected European rates to increase gradually over the next few years, but it could be next year before rates began to rise.

Moody’s said in a report for investors: “While we believe the increases will be very gradual, the perception among consumers of the future direction of interest rates could in itself affect consumer confidence and spending.

“Higher borrowing costs are negative from a borrower’s perspective, but they must also be put into the context of a background of stronger economic growth and lower unemployment.”

ECB interest rates have remained at zero for longer than had been expected.

But since the start of this year, ECB president Mario Draghi has eased off on pumping money into the eurozone economy through purchasing bonds.

The ECB is also expected by the markets to soon indicate a date for this stimulus programme to come to an end.

This looks likely to clear the way for the ECB to increase its key short-term interest rates some time next year, analysts said.

Moody’s said low interest rates had persisted for a number of years in Europe and had been favourable for borrowers.

“We expect that the ECB will reduce monetary easing in the euro area very gradually over the next few years,” it said.

Rising ECB rates are likely to cause variable and fixed rates to rise. These rates in this country are a multiple of those in the rest of the eurozone.

The gradual rise in interest rates comes as there are fears that mortgage cashback offers could be banned in a move that would hit first-time buyers and switchers hard.

Banks have been accused of using cashback incentives to camouflage their exorbitant mortgage rates.

A Fianna Fáil bill that would ban the practice of banks offering cash incentives to first-time buyers and movers could be law by the summer.

Meanwhile, prices rose last month due to electricity suppliers and restaurants increasing their charges.

Average prices were 0.4pc higher in December compared with the same month in the previous year. This was despite a slight fall in prices in the month of December, according to the Central Statistics Office.

Prices fell during the month, driven by heavy discounting by retailers in the run-up to the Christmas period.

The annual rate of inflation rose due to higher housing and home energy prices.

Mark Whelan, of price comparison site, said six out of Ireland’s 10 energy suppliers increased prices in the last three months of 2017, adding between €20 and €40 to average annual bills.

The Public Sector Obligation (PSO) levy increased by 30pc in October too, adding an additional €25 to annual bills.

The hikes are set to continue in 2018 with the State’s largest electricity retailer, Electric Ireland, due to increase prices by 4pc on February 1.

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Annual inflation 0.4pc higher due to charge increases

PRICES rose last month due to electricity suppliers and restaurants increasing their charges.

Average prices were 0.4pc higher in December compared with the same month in the previous year.

This was despite a slight fall in prices in the month of December, according to the Central Statistics Office.

The annual rate of inflation rose due to higher housing and home energy prices.

Four energy companies hiked their prices from the start of last month. These include Energia, Flogas, PrePayPower and Pinergy.

The price increases are set to put pressure on household budgets and came just ahead of the expensive Christmas period.

Broadband and TV providers Sky and Vodafone also had price increases kicking in from the start of the month.

The CSO figures also shows there were also hikes imposed by restaurants and hotels, while transport costs increased due to State owned providers increasing fares.

Overall prices remain muted due to the weakness of sterling compared with the euro.

However, rents continue to rise. There were 6pc more expensive than in the same month a year previously.

There were decreases in clothing and footwear, furnishings, household equipment and household maintenance, the CSO said.

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Wages to leap 15pc – but only if you’re in right type of job

The most highly sought professionals will pick up pay rises worth 15pc as the number of people at work pushes close to its pre-recession peak.

Research reveals employees’ prospects are finally back on track with jobs and pay on the up following years of instability.

There are now approximately 2.2 million people at work, close to the 2007 high, according to the Central Statistics Office.

The data was released as a survey showed that most professional workers can expect modest 3pc pay rises this year.

But those with in-demand skills – including chief security officers and cyber-security experts in IT, product counsel in the legal sphere and chief risk officers in banking – can command wage hikes between 10pc and 15pc.

Employment agency Morgan McKinley predicted strong job creation this year.

Its 2018 Irish Salary and Benefits Guide revealed that advance process engineering, autonomous drive technology and cyber-security are among the areas tipped to expand further this year.

Chief operations officer Karen O’Flaherty said last year was strong for job growth for professionals, as close to 40,000 posts were created. Ms O’Flaherty said the forecast for this year remained positive and the number of permanent jobs was predicted to rise.

The survey showed salaries for permanent staff in banking and stockbroking range from €50,000 to €75,000 for a wealth manager with up to three years’ experience.

With more than five years’ experience, their wages soar to up to €150,000. Traders with more than five years can also expect to earn up to €150,000.

Branch managers in retail banks earn up to €90,000 in Dublin, Cork, Galway and Limerick, but not more than €70,000 in Waterford.

Employment was up 2.2pc, or 48,100 to 2.21 million, in 2017 to the end of September. The peak was just under the 2.24 million recorded in the final months of 2007.

That compares with a low of 1.875 million in 2012.

The unemployment rate remained at 6.7pc over the quarter, while the number of people out of work for a year or more is now about 40pc of total unemployment. That is the lowest since the end of 2009.

The CSO has revised how it publishes the labour force data to take account of the 2016 Census and other methodological changes. As a result, there are both more people employed and unemployed than initially thought.

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Google to tighten net traffic grip with Irish subsea cable

Google is seeking to increase its control on internet traffic with plans for three new subsea cables, one of which will stop off in Ireland.

The web giant has the world’s largest physical network, accounting for up to 25pc of worldwide internet traffic.

According to Google vice-president Ben Treynor Sloss, it has spent $30bn (€24.5bn) on cables and data centres in recent years. “These new investments expand our existing cloud network,” said Mr Treynor Sloss. “The Google network has over 100 points of presence and over 7,500 edge-caching nodes. This investment means faster and more reliable connectivity for all our users.”

The 6,000km Irish cable will connect the east coast of the US with a further connection to Denmark in the east. It is planned, Google says, to give the company more bandwidth across the Atlantic ocean.

“To increase capacity and resiliency in our North Atlantic systems, we’re working with Facebook, Aqua Comms and Bulk Infrastructure to build a direct submarine cable system connecting the US to Denmark and Ireland,” said Mr Treynor Sloss. “This cable is expected to come online by the end of 2019. The marine route survey, during which the supplier determines the specific route the cable will take, is already under way.”

The company is also planning other new subsea cables between the US and Chile and between Hong Kong and Guam.

“Simply put, it wouldn’t be possible to deliver products like Machine Learning Engine, Spanner, BigQuery and other Google Cloud Platform and G Suite services at the quality of service users expect without the Google network,” said Mr Treynor Sloss.

“Our cable systems provide the speed, capacity and reliability Google is known for worldwide, and at Google Cloud, our customers are able to make use of the same network infrastructure that powers Google’s own services.”

Google has two data centres in Ireland, but recently began looking at facilities in Denmark for the construction of a new data centre. Separately, Apple has still not indicated whether it will proceed with a proposed €850m data centre in Athenry.

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Eight simple steps to saving a lot of money on your car insurance

GOOD advice, they say, is best served, and observed, frequently. The surge in insurance premiums may have abated but that is no excuse for taking your eye off the ball and accepting what you’re quoted. There are still several ways to save a lot of money. Here are a few:

The obvious

Shop around like you’ve never done so before. Yes, it is an astoundingly obvious piece of advice but how many people settle for a nominal discount that could be dwarfed by checking with a few rivals? I am aware of a difference of €600 in one person’s case. That’s a great bit of work.

Kick loyalty

In this business loyalty can be a liability. Just because the staff are nice doesn’t mean that you pay heavily to support their good manners. If you have a claims-free history, consider switching insurers on a regular basis.

Try a broker

It doesn’t cost you anything since the insurer pays (well maybe you do pay, indirectly). See what they can trawl for you. Never settle for first quotes from anyone, even a broker. Put on the pressure.

Don’t over-estimate the value of your car

Check what it is worth on the market. The insurance company’s assessor will base his/her price assessment on the market and you will be compensated accordingly, so keep it tight.

Watch for the detail

Does your deal mean there is a large amount you have to pay out (excess) before you’re entitled to benefit from the insurance company stumping up the money? In other words, are you paying a lower premium but exposed to pay an initial lump out of your pocket? There is a tendency for larger excesses to apply today.

Early and often

Try to pay your insurance in one swoop, rather than instalments. The latter come to a higher (20pc) total. Even better, if you’re flush, take out two-year cover and avert the risk of an increase next year.


See if your insurer will discount if you use an app that monitors driving style etc. In other words, do they reward better driving?

Take female route

Online insurer Its4women focuses on women but it cannot refuse to cover men. Check it out.

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Debt leaves Ireland exposed – Moody’s

Gross government debt was around €8bn higher at the end of September than the same month last year.

The debt pile stood at €210.7bn. That compares with €202.4bn at the end of September 2016, according to the latest data from the Central Statistics Office (CSO) has said.

The debt-to-GDP ratio, however, is continuing to fall given the strong growth in the economy in GDP terms.

The ratio was 72.1pc at the end of September, compared with 75.1pc in the same month last year.

Yesterday, Moody’s lead analysts for Ireland, Kathrin Muehlbronner, told a conference in Dublin organised by the rating agency, that national debt remains high, leaving Ireland vulnerable in the event of a shock to growth or interest rates. A hard Brexit, and US tax changes are also risks, she said.

Net debt was €172.9bn in September, down almost €2bn from the same point in 2016 thanks largely to an increase in the value of the assets held by the Government.

Ireland has benefited more than peers from lower borrowing costs, as a result of quantitative easing but debt remains high, Moody’s noted.

The CSO said the Government recorded a deficit of €3.1bn for the first nine months of 2017, compared with €3.4bn for the same period in 2016.

Government revenue increased by €1.9bn in the first none months of 2017. Government spending increased by €1.6bn in the same period.

It comes just weeks after figures from the Department of Finance showed that the tax take for last year reached a record high of just over €50bn.

The State took in an extra €2.87bn in taxes last year compared with the previous year.

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