Sharp rises in tax revenue are expected to fuel another set of record figures when the Government publishes Exchequer returns for the first six months of the year tomorrow.
The unprecedented buoyancy in the State's finances will allow the Government to further reduce the national debt but will underscore the fears of institutions ranging from the Central Bank to the Economic and Social Research Institute (ESRI) that the economy is overheating.
It will also set the scene for further debate over the content of the next Budget with the Government facing rising pressure to deliver additional spending to compensate for spiralling inflation.
Figures for the first five months of the year showed a surplus of income over expenditure of almost £1.69 billion (€2.1 billion), exceeding the official budgetary forecast for the entire year.
That was driven by a 15.7 per cent jump in tax receipts and continued buoyancy under this heading will boost the latest figures.
The effects of very strong employment growth in the economy, as well as accelerating wage inflation, has more than compensated for the effects of tax cuts which came into effect in April. Strong house prices are also feeding into the figures with stamp duties and capital taxes both likely to show strong growth.
Income from VAT is also likely to rise significantly with retail sales figures released on Friday showing a record increase in April. They were up 21.6 per cent in terms of value and some 17.2 per cent in volume terms compared to the same month last year.
This will add weight to the social partners' and particularly IBEC's demands that VAT should be cut in the next Budget, even if such a move is balanced by increased charges for services such as roads or water as suggested by the ESRI.
Forecasters are now predicting a £2.5 billion plus surplus at the end of the year. At the time of the release of the official Exchequer return for the first three months, the Minister for Finance Mr McCreevy revised his estimate for an overall surplus this year of £2.1 billion from £1.6 billion on Budget Day.
The figures are also expected to show that capital spending under the National Development Plan has not yet begun to a significant degree as many projects have yet to get off the ground.
Analysts will be watching how day to day spending is rising. Returns to the end of May showed departmental spending was still below Budget forecasts. However, this usually picks up towards the end of the year when departments move to exhaust their budgets before December 31 deadlines.
The record retail sales figures released last week point to an economy which is continuing to accelerate and is growing at double-digit pace. Sales may calm a little through the summer months but overall the economy is still accelerating.
Car sales for the first months of the year contributed strongly to the growth as consumers rushed to buy 00 registered cars but that factor should slow as the year progresses.
Competition in most of the main retail sectors seems to be keeping inflation under control but the same does not apply to non-traded sectors.
