A firm hand needed on the tiller

 AT a time of steady economic growth and the promise of even greater expansion spurred by multi-billion kina resource projects, it can become easy to overlook the essential nuts and bolts that keep the economy humming.

With the promise of big money coming in, it can become easy to overspend, borrow heavily against future revenue or loosen fiscal and monetary policies too much.

That is why we welcome Treasurer Don Polye’s pledge to maintain macroeconomic stability through sound fiscal and monetary policies.

Political stability must go hand in hand with good macro- and micro-economic policies to attract and sustain economic growth.

PNG’s own immediate past is a solid example of just how this can be done, along with a pinch of good luck to do with a period of good world prices for a good number of PNG’s export commodities.

The seven years of solid economic growth between 2002 and 2008 can be attributed to the fact that the Somare government served an unprecedented five-year term and then moved on to a second term following the 2007 elections.

More especially, the economy’s surge from a debt ridden one with a full-blown macroeconomic crisis to one of stability and growth stemmed from corrective action taken by the Government and especially Treasury through policy interventions introduced in 2002.

Then treasurer, Bart Philemon, reined in government expenditure which had run riot during the 2002 national elections, putting in place a debt strategy to control burgeoning debt and a fiscal strategy to ensure there were no further excesses.

That laid the foundation for the growth that helped PNG withstand the shocks of the global financial crunch in 2008-09.

PNG rapidly decreased its stock of public debt from over 70% in 2001 to a projected 23.1% of GDP in 2011, a performance that earned it praise from global economic performance-rating groups such as Moody’s and Standard & Poor’s.

This is the kind of performance that the Government needs to support and sustain today.

Polye last year announced the third Medium Term Fiscal Strategy which extends through to 2017. 

It seeks to keep Government debt under control, while allowing for targeted increases in vital infrastructure, education and health among other priorities.

Polye is correct. Without macro-economic stability, there is no tax revenue to pay for vital government services, businesses can’t operate effectively and there won’t be new jobs to reduce unemployment. We endorse those comments.

It is easy to be over confident now, to borrow excessively today against future revenue and to spend too much.

It is far more important to do the basics right, to set the right fiscal and monetary policies, to set the common sense strategies to achieve steady growth on our terms and not be chasing after a runaway economy driven by excessive debt.

It makes sense to reduce corruption and improve Go­vernment’s service delivery. 

It makes sense to maintain price stability, to ensure that the non-mining export and import-competing sectors of our economy are still able to share in the growth and prosperity that is being created and to channel money from the resources sector to sustainable, long-term drivers of the economy such as agriculture, manufacturing and tourism.

Crime needs to be lowered while job opportunities are created across the entire economic sector.

Much of what needs to be done demands doing more of the same and sustaining it with economic policies, rather than trying to redesign the wheel or becoming too innovative.