THE lower value of the kina is expected to support PNG’s competitiveness but the decrease is also likely to increase inflationary pressure in the economy.
As a result there would be high imports costs which would be passed through to higher consumer prices, according to secretary for the Department of Treasury Simon Tosali.
He said a number of factors were driving the kina against the Australian dollar.
Firstly, the kina had increased in value significantly against Aussie unit late last year, by 42.8% between January and December.
It is now unwinding this movement associated with the global financial crisis late last year and the strengthening of the Australian currency this year.
Mr Tosali said in this 2010 Budget explanatory speech, unlike other advanced economies, Australia did not experience a recession and emerged from the global downturn relatively quickly.