Speaking in the Seanad on 9 November 1999 on a recent NESC report on the Irish economy, "Opportunities, Challenges and Capacities for Choice", I said:

I would like to sound a note of caution, something of which we hear too little these days. Not so long ago I used to argue that being pessimistic all the time inhibited our economic recovery but now I find myself almost in the opposite corner and counselling against the type of confidence which would perhaps be better described as "cockiness" - almost a belief that nothing can go wrong.

I am old enough to remember the economic mistakes we, as a nation, made in the 1960s.We were also confident in the early 1960s. I remember that time very well and the economy was expanding.

We had just begun to attract the multinationals.

We were profiting from the new free trade agreement with Britain.

Emigration had almost disappeared and, indeed, it was reversed as Irish people came back from England and further afield for the first time to take advantage of the all the opportunities opening up in Ireland in the 1960s.

Inflation, as a problem, had not been heard of - it did not exist.

Unemployment  was a mere 50,000 or so or probably even lower than that in reality.

Conditions were as promising and people were as confident as they are now yet, despite all we had going for us, we blew it.

Make no mistake about it, we were the ones who blew it.

People who have set out to rewrite history do so in a way which suits them and often trace the cause of inflation back to the oil shocks of 1973 and what happened after that. The truth is that we had well and truly cooked our goose a long time before those oil shocks.

We started the 1960s in fine form but by the end of that decade we were in trouble and the cause of that trouble was entirely home grown. 

We blew it by trying to take more out of the economy than we put in. We created our own home grown inflationary spiral by a series of competitive wage rounds in which one public sector group chased another.

It was almost like a cat trying to catch its tail and the private sector was sucked into this. When people saw those in the public sector doing so well, they wanted more as well. While this sorry dance led to more public debt and higher taxes in the public sector, it led to businesses closing and to thousands of jobs being lost in the private sector.

It was a classic economic tragedy - exactly what we saw happen in other places. I am not saying the 1960s economic situation is being rerun now but my point is that we were on the top of the wave before and we blew it by our own efforts.

Let none of us think we, or the economy, are invincible - I heard that recently.

It is very tempting to draw comparisons with what we did wrong in the 1960s.

Once again this monster of spending on public pay is threatening to devour us. Not only is the growth in public sector pay unsustainable, it is spilling over into the private sector and is made worse by the emerging skills shortage.

We are in danger of coming up against an economic brick wall - a place where one could go out of business by pricing oneself out of the market. If we topple over the brink into uncompetitiveness we not only kill off existing jobs and businesses, but we also put off new investors from coming here.

I am frightened by how narrow the difference can be between getting it right and getting it wrong.

There is only a whisker between doom and boom, as anyone who saw what happened in the 1960s will remember. That danger does not seem to be appreciated by those who are either too young to remember or too blind to see the realities of history.

People say we must have a new partnership agreement to safeguard the economy. Merely having a new agreement is not enough if that agreement allows the kind of mushrooming public sector pay we have seen in the last couple of years. An agreement is worthwhile only if it works, not if it is just a paper fig leaf.

In all the successful social partnerships we have had since 1987, the various Governments have been the weakest link in the chain. Those Governments, of various political hues, have been leaders in rhetoric but failures in negotiation. Government weaknesses have always been the soft rotten core of the social partnership process.

The Government now has a further responsibility that I do not see it acting upon with sufficient energy or urgency. That responsibility relates to the problem of house prices. To talk of low inflation is nonsense when house prices have doubled in the last four years and are still rising. This, more than any other single element, is putting unbearable pressure on people across the workforce. House prices are like the oil shocks of the 1990s and they will be every bit as devastating if we do not cope adequately with them.

Only the Government can grasp this nettle effectively and to do so it must act immediately. If it does not act, nothing else it does will have much meaning. The Government must crusade for action on both public and private housing. I recognise that it is making an effort but it must do more, because this could turn out to be the Achilles heel which damages our opportunity of holding onto the successful economy we have.

We are talking about a new national plan full of great ideas and projects that need to be addressed. Apart from that, we have problems of disadvantage that will destroy the entire fabric of our society if we do not deal with them. We are doing something about it, but I am not sure that nettle has been grasped strongly enough. Education is referred to in the report and we are making an effort in this area, but 16 per cent of students who start school do not finish and 16 per cent is far too high a figure. I congratulate the Government on the efforts being made in this area, but we must do more.

However first things first. We must get the core economy right and to do this we must take control of public sector pay and house prices. If we fail in either area we are in for a rerun of what happened in the 1960s when our confidence was reduced to ashes.

Let us make sure we do not let that happen again.