AN OVERWHELMING MAJORITY of consumers believe that the return of austerity is inevitable as a result of the pandemic, according to a new survey by KBC Bank.

Some 86% of those surveyed by the bank for its monthly Consumer Sentiment Index said they expect the Irish government to re-introduce cutbacks on public spending along with tax increases.

KBC chief economist Austin Hughes said, “A return to austerity could prompt Irish consumers to adopt a more cautious approach to spending as health-related restrictions are eased.

“This could translate into an economic ‘second wave’ that would leave the Irish economy on a weaker recovery trajectory than would otherwise be seen and result in a permanently lower path for employment.”

Aware of the prevailing public sentiment, Fianna Fáil and Fine Gael have been keen to play down the possibility of tax increases and spending cuts in the wake of the Covid-19 crisis.

But opposition parties and trade unions are sceptical and have piled on the pressure in recent weeks.

Speaking at the annual James Connolly commemoration in Arbour Hill Cemetery last weekend, Siptu deputy general secretary Ethel Buckley warned that “the knives of austerity are being sharpened again”.

Yesterday, Labour Party spokesperson on employment and social protection Ged Nash TD said, “Public investment and the deployment of resources to the productive economy and the maintenance and improvement of living standards is the key to growth, not retrenchment and austerity.”

Earlier in the month, Sinn Féin TD for Cavan-Monaghan Matt Carthy said, “The threat of austerity is at the heart of [FF-FG's] recent joint framework document.”

The Social Democrats went as far as to rule out further government formation talks with Fianna Fáil and Fine Gael.

In a letter to Taoiseach Leo Varadkar and Fianna Fáil leader Micheál Martin, Soc Dem party leaders Catherine Murphy and Róisín Shortall cited their concern about future “austerity”.

“We do not believe that we could find common ground in addressing the challenges ahead, in particular, due to our different fiscal approaches and our concerns that your approach will lead to an unequal recovery and a burden of austerity that will be detrimental to ordinary families and to cohesion within Irish society,” the letter said.

While the KBC survey did show that consumer sentiment had improved since April when the index hit record lows, the results were still in the lowest 5% of readings recorded in its 24-year history.

Two out of three consumers surveyed said they also expect unemployment to worsen over the coming 12 months.

The KBC Bank Consumer Sentiment Survey is conducted monthly, using a sample size of 1,000 Irish adults.