Average wages are back to what they were in 2007

Ireland has gone to back to the future as living standards return to pre-crash levels for the first time, a leading think-tank has declared.

The Economic Social and Research Institute (ESRI) said average wages are back to what they were in 2007.

The economy is now growing twice as fast as our nearest European rival Spain and unemployment should plunge to 8% by the end of next year.

Kieran McQuinn, associate research professor at the ESRI, said people are also spending cash again as homes start to feel the effects of the recovery.

"It has taken us eight years to get there - but we are back at 2007 levels, in terms of income per capita and living standards," he said.

In its latest forecast, the think-tank which advises the Government on policy-making said the value of our economy will grow by a substantial 6% this year, and 4.5% next year.

Joblessness will continue to fall over the coming year, dropping to around 180,000 by the end of 2016, it predicts. There are currently 205,300 people out of work.

Although unemployment is coming down, there is still some way to go to reach boom-time levels, when just over 110,000 people were on the dole.

Spending is up across the board including big-ticket items like cars as well as day-to-day retail sales.

"Things are beginning to improve for most people," said Prof McQuinn.

"Households are beginning to feel the recovery, people are spending money for the first time in a long time."

And although the bounce-back is most obvious in Dublin, the economist said it should trickle down into other cities and then rural areas over the next year and a half.

But despite the upbeat assessment, the think tank has warned the government against any giveaway budget ahead of the general election.

The ESRI said Finance Minister Michael Noonan should neither try to boost the economy or contract it - but simply let it continue as it is on its own.

"Because the economy is growing so strongly we would say the government should leave it well alone," said Prof McQuinn.

"We don't want to see them stimulating it or restricting it and we don't want to see any tax breaks to boost housing supply.

"We need to learn the lessons of the past."