Reports from the Central Bank, the ESRI and the Irish Fiscal Advisory Council this month all give similar messages. They recommend tighter fiscal policy and saving some of the corporation tax bonanza to cover future crises and challenges.Forecasts for living standards in Ireland in 2026 and 2027 are reasonably benign, despite economic difficulties elsewhere in the world. Provided the Strait of Hormuz reopens quickly, the economy will still grow by 3 per cent this year, well above the rate of our EU neighbours, albeit that this is a slowdown. However, the Gulf war will add to inflation this year and next. After inflation, household income will be slightly lower in 2026 than in 2025, with a recovery in 2027. While wage inflation will exceed prices this year by a small amount, those depending on welfare will be worse off this year, given that higher energy prices have a bigger impact on poorer households.About a 10th of the exceptional growth in Irish output and employment since 2013 has come from the IT sector. However, recent data suggest that this growth is faltering, reflecting not only lower IT employment than in 2024, but also lower wage rates in the sector this year. Given that the growth in our IT workforce in recent years has largely been people coming from outside Ireland, the slowdown in IT jobs is likely to reduce immigration over the coming year. The IT sector is the highest paid in the economy, and responsible for a disproportionate share of income-tax revenue. The small fall in the sector’s wage bill will, as a result, have a slight negative impact on tax revenue.This marginal reduction in IT employment is probably one of the first manifestations of AI influencing the economy. Many tech companies have implemented global job cuts to fund their heavy investment in AI. The effects of AI on productivity or on job substitution will be more difficult to identify, and could take longer to mature.Pharma is another vital multinational-dominated sector. Anticipating Trump tariffs, it had a real boom exporting to the US, especially early on last year. In 2026, it is likely to see more steady progress, but slower growth in employment. While consumption is expected to rise by around 2 per cent this year, this is less than the expected growth in the economy as a whole. A very rapid increase in investment will raise overall growth to 3 per cent. Some of this comes from a welcome increase in Government infrastructure investment, some from the gradual ramping up in house building, but a major element is the rise in spending on data centres and related infrastructure.[ We should halt data centre growth in Ireland unless they use 100% green energyOpens in new window ] The Department of Enterprise has recently highlighted the impact of data centre investment on construction output and employment. The Central Bank has noted a 170 per cent increase since 2023 in imports of equipment for data centres. These centres now account for 13 per cent of all Irish imports. Mirroring the Irish experience, a study by the Federal Reserve Board of Minneapolis shows that, over the same period, there was a 73 per cent increase in US imports of data centre equipment. While the price of this equipment has probably doubled over the same period, the boom in the construction of data centres is clearly an important element of continuing growth in both the US and the Irish economies.Under normal circumstances, a very big increase in the capital stock in an economy should portend a big increase in output. However, once operational, the employment in these centres is very low. Neither do more data centres translate into more IT employment here: our data centre capacity is increasing, but IT employment is falling back. In a separate study, the Central Bank envisages Irish growth falling from the heady experience of the last decade to a more staid pace, closer to 2 per cent a year out to 2050. While this would compare favourably with our EU neighbours, we will need to raise public spending to tackle the costs of an ageing population, and to address climate change. With growth becoming more sluggish, this extra spending can only come from higher taxes, with a sustainable revenue stream. That means the next budget should broaden the tax base. [ Number of people working past age 65 rises by almost a third in three yearsOpens in new window ]As the ESRI has shown, the very expensive April energy package was regressive – it gave money to the better off, and did not protect the vulnerable. This broad-brush package should not be renewed. The focus of any energy supports in the October budget should be on targeted assistance to those on low incomes with high energy bills, to restore their real incomes.