Gov policies working; attracting foreign investment

[Palm]

Interesting article that discusses how the gov policies including the free education mandate are helping free up household income, keep inflation down and attract foreign investment.

Tuesday 04th June 2013

Free tuition eases costs

THE Government’s free tuition fee education subsidy has lowered education cost for households in 2012.

Minister for Treasury, Don Polye in a statement on the December 2012 quarter of the Consumer Price Index, said the Government’s free education policy is expected to relieve pressure on household budgets, hence increase their purchasing power.

He said price pressures on households were reduced significantly during the year as the burden on parents having to pay for schools fees was taken up by the National Government.

The decline in underlying inflation for that period was driven by the sharp reduction of eduction costs (more than 50%).

Overall, the impact of the strong Kina and Government’s free tuition fee education subsidy policy has considerably reduced inflation in the domestic economy during the December quarter.

In addition, considering the modest inflation outcomes of the past quarters, inflation in the PNG economy grew at 2.2 per cent in 2012.

This outcome is low when compared to the outcomes of the past five years when inflation grew at an average above 0.5 per cent.

Meanwhile, there are also other important developments in the PNG economy during the year that have had a positive impact on the inflation.

These included the strengthening of the PNG Kina against major trading partner’s currencies, and the introduction of the Government’s fee education subsidy policy.

It was understood that the appreciation of the Kina has coincided with the ramping up period of the PNG LNG construction phase, including increased exploration and development activity in the mining and petroleum sector.

All these have translated into increased foreign investment in country, and this is understood to have increased the demand, hence strength of the Kina.

“It is also worth noting that the greater impact of the strong Kina was realised in 2012 where import prices were at their lowest in through-the-year terms since June quarter 2006.

“Inflation will continue to be monitored to ensure there is price stability and economic growth is maintained,” Polye said.

[admin]

Education building human capital is very important here as resource based industries are very capital intensive, the risk is all to real that only few will benefit, that it will appreciate the currency (the dreaded 'Dutch disease,' I should know) which makes export industry more difficult to establish.

It's for a reason that the Asian miracle was based on land reform and education, mostly in resource poor countries. Indonesia a bit of an exception, but they have the benefit of having a rather large domestic market.