Although 2024 will be another tough year for consumers financially as the cost-of-living crisis lingers on, there are some reasons to be optimistic.
Lower energy prices
Towards the end of last year we saw all the main energy suppliers reduce their gas and electricity prices by around 10% to 20% on average.
And then at the start of January we saw a second round of price cuts of a similar magnitude that will come into effect over the coming days and weeks.
And the good news is that, given falling wholesale prices, it’s likely we’ll see a THIRD round of cuts in the second half of this year of around another 10% to 15%.
When all three price cuts are taken into account, gas and electricity costs for households should soon be around 30% to 40% lower than they were at the height of the energy crisis.
Lower mortgage rates
It’s almost a certainty that the European Central Bank (ECB) will start cutting interest rates in a few months’ time. Probably from June.
By the end of the year, the ECB may have cut rates by up to one percentage point or more.
This will be good news for those on trackers who’ll benefit almost immediately from any rate cuts.
For those on variable rates, your rate may not fall by much, if at all this year, given how little of the ECB rate hikes that were passed on in the first place.
But it does look like we’ll be talking more about mortgage rate cuts, as opposed to mortgage rate hikes, over the coming months.
Falling general inflation
Falling energy costs and lower borrowing costs are likely to feed through into a fall in general inflation.
After several years of muted price growth, inflation in Ireland rocketed to 7.8% in 2022 and 6.3% in 2023 - well above the 2% rate of price growth that's considered manageable.
This year, inflation is likely to come in much lower at around 2.5% to 3.5%. Of course that still means that prices are going up - just at a slower pace. But given projected wage growth for this year of a similar level, it means workers shouldn't see an overall reduction in their standard of living this year.
Lower public transport fares
Before we talk about this piece of good news, it has to be highlighted that public transport for those in more rural areas is severely lacking and in some places almost non-existent.
But for those with access to good public transport, and particularly those within the greater Dublin region, the cost of travelling by bus, rail and Luas looks set to fall this year.
The €2 90-minute fare in Dublin, which allows passengers free transfer between Dublin Bus, Luas and most DART, commuter rail and Go-Ahead Ireland services is to remain in place.
And the cap or maximum amount that you can be charged for travel with your Leap card each week will fall from €32 to €24.
A new Dublin City Zone and a Dublin Commuter Zone are to be introduced. The Dublin City Zone is to extend approximately 23km from the city, and broadly equates to the existing 90-minute fare zone.
The Dublin Commuter Zone will extend to approximately 50km from Dublin city centre and will include towns such as Drogheda, Navan, Trim, Enfield, Clane, Prosperous, Newbridge, Kildare, Greystones and Wicklow, making travel from these areas cheaper. Someone travelling from Drogheda to Connolly who would have paid €11.45 previously will now pay €6.
And a new ‘all-modes’ ticket for unlimited travel across bus, Dart, commuter rail and Luas will be introduced for the Dublin City Zone
The ticket is to cost €96 a month or €960 a year, which is a saving of 38% compared to the existing price of €155 a month and €1,550 a year. And even more savings can be made by customers availing of the product via Taxsaver.
Less tax
This year should also see most of us pay a bit less tax, which you may already have noticed if you’ve got your January payslip.
The rate at which workers start paying the top 40% rate of income tax has increased by €2,000 to €42,000.
In other words you can now earn an extra €2,000 that’s taxed at 20% instead of 40%.
This measure alone will save workers earning €40,000 or more up to €400 a year. And anyone earning over €42,000 a year will benefit by the full amount.
The Employee Tax Credit (formerly known as the PAYE tax credit) and the Personal Tax Credit have also both increased by €100 each i.e. €200 in total.
Tax credits might sound complicated but they simply reduce the amount of tax that you pay by the value of the credit. So this measure will save most workers another €200 a year.
And the mid 4.5% rate of USC has been reduced to 4% and the band has been widened.
Someone on the average full-time wage of around €45,000 will pay around €750 less in tax this year. While a higher income earner on around €70,000 will pay almost €900 less in tax.
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