By DALE LUMA
THE Kina depreciated by 2.9 per cent against the US dollar (USD) in 2020 while the Australian dollar (AUD) appreciated by 16 per cent, says Bank South Pacific (BSP) chief executive officer Robin Fleming.
Fleming told The National that this meant that the cost of goods imported in USD had increased by the depreciated margin while the AUD imports was much higher.
“During the course of 2020, the Kina depreciated by 2.9 per cent against the USD, therefore, the cost of goods increase associated with the exchange rate for USD denominated imports would have been around 2.9 per cent,” he said.
“For Australian dollar imports, this may have been somewhat higher as the Australian dollar appreciated by 16 per cent against the Kina from last June, predominantly due to movements in the USD and AUD cross rates.
“In respect to inflation, the most recent publication from the Bank of PNG (BPNG) released in January was that its September 2020 monthly economic review suggests overall inflation is still low.
“BPNG’s September 2020 monetary policy has inflation around 3.3 per cent and the Department of Treasury 2021 budget papers indicated inflation for 2020 around four per cent.”
The BPNG Sept 2020 monthly economic review showed that inflation annual headline retail price index (RPI) to Sept 2020 increased by 0.5 per cent.
This was driven by price increases in alcoholic beverages, tobacco and betel nut, food and non-alcoholic beverages, household equipment and miscellaneous’ expenditure groups.
The BPNG statement said the annual headline inflation, as measured by the consumer price index, trended downwards from 4.8 per cent in December 2018 to 3.1 per cent in March 2020.
It was attributed to stable or low price increases in seasonal produce, high competition, low imported inflation and lower pass-through from the slow pace of depreciation of the kina exchange rate.
BPNG governor Loi Bakani recently told The National that import prices for goods were well below 25 per cent.
It was in response to comments by some in the business community that inflation in the cost of goods imported (25 per cent to 30 per cent) was affecting businesses, especially small-to-medium enterprises.
By DALE LUMA