THE Institute of National Affairs has warned of a “dampener” on the level of consumer and some capital imports from Australia if the dollar continues its strong run against the kina.
INA director Paul Barker said inflation had come down from “moving up severely” last year with the high fuel prices, global food shortages, high rates of domestic credit and high Government expenditure, to manageable levels at the end of last year and early this year.
He said this followed the strengthening of the kina against the Aussie dollar, although retailers were suspected of a bit of profiteering and not promptly passing lower prices on to consumers, together with the sharp drop in oil prices and the recovery of global agricultural output.
But Mr Barker said the drop was much lower than anticipated partly because of the huge amounts of Government expenditure from the trust funds, the weakening again of the kina against the Aussie currency, and the continued high levels of credit available over recent years.
Rising fuel price this year, after its strong fall late last year, shortages related to the expected LNG project, including skills, high-cost housing were also pushing up some costs, he said.
Mr Barker also noted that some wages and accommodation had also pushed inflation up.
Considerable capital equipment imports from Australia and elsewhere were occurring from industries like new mining projects, he said.