The Government will have €2.7bn to spend on Budget Day, according to the country’s leading think-tank.
In its Quarterly Economic Commentary, the Economic and Social Research Institute (ESRI) predicted that next year would see increased spending by consumers reaping the rewards of their SSIA saving schemes.
And experts also said a strong jobs market and healthy increases in wages would boost consumption.
The ESRI estimate around 11% extra revenue, or €5bn, will be available to Minister for Finance Brian Cowen in 2007, compared to 2006.
However economists suggested 8.5% more expenditure will be needed to fund services, including welfare services, next year.
The ESRI said this amounts to €3.3bn and is €6m higher than the budgeted figure.
The group’s leading economists said consumption would grow strongly in 2007, at a rate of 7.4%.
They claimed this is due to a combination of maturing SSIAs, strong employment growth of 3.5% and nominal wage growth of 5.5%.
The think-tank said strong growth is likely to produce increases in VAT and excise revenues of more than 10% in 2007 and its forecast for strong growth in employment led them to estimate a possible increase in excess of 6% in income taxes.