Transcript
PAUL FLANAGAN: So I have certainly had my concerns about the economic statistics coming out of the PNG Treasury for a number of years but there's been some figures in developments recently which really is a very clear confirmation of this corruption of PNG's economic statistics. So it comes through in something called the measure of Gross Domestic Product. It's probably the most basic economic statistic. It tries to measure the size of a country's economy. It's probably the most basic thing that economics tries to do. And what we have is a case, and this is what really concerns me, we have a case where their own National Statistics Office reached out and sought support from the Australian Bureau of Statistics and the IMF to get some assistance. Things seemed to be going well, the numbers were being agreed from 2007 to 2014. But suddenly politics has intervened, the ABS has walked away, the IMF is still producing the numbers but all of the PNG Budget numbers are being based on numbers that the National Statistics Office doesn't agree with, the ABS doesn't agree with and the IMF doesn't agree with. So this makes a massive problem for PNG in actually knowing what's going on in the economy.
DON WISEMAN: Why would they do it? What's the advantage for them?
PF: The advantage is that it plays very well into the O'Neill/Abel government's economic narrative. So one of the concerns clearly with the PNG has been commentators at the ANU, UPNG, myself and others, talking about how PNG's economic performance hasn't been going very well, and linking this to economic mismanagement. So what the actual figures that we see from the IMF are indicating for example that there was a quite severe recession in PNG in 2015, which continued through to 2016. This doesn't produce the PNG government's economic narrative at all well, so they are using other numbers. They are using higher numbers and pretending that there wasn't a recession. They are also using these higher GDP numbers to deny the fact that they are breaking the law. There is a limit on the debt to GDP ratio [and] by having a higher GDP figure it lowers that ratio. So in fact they are well and truly above the 35 percent legislated limit for the debt to GDP ratio, but using these higher GDP numbers they are claiming they are not breaking the law. So this is the advantage to the PNG government of using these higher GDP numbers.
DW: Yes but if they have what appears to be a relatively rosy economy, there are all these demands for government funding and they can't meet them and we know that they are struggling to meet them right across the country, so it makes them look silly doesn't it?
PF: And beyond just silly in some ways, this is part of the characteristics of the 'Resource Curse' and the PNG economy is very much subject to this resource curse - this tendency to spend up and assume you are getting a lot more revenue, from a much healthier economy, than what is likely to come in, does indeed create those expenditure expectations you just mentioned. With high expenditure expectations and lower revenues it means your deficit, and therefore your public debt levels start increasing. That can go on for a while. Obviously the PNG government has now essentially exhausted its domestic capacity to raise debt, so it is now going out to international debts, and currently is being quite successful in getting a lot more money from those international debt markets at relatively high interest rates and certainly with huge risks for future currency depreciations. So PNG is on a very dangerous path indeed.
DW: These international organisations though, surely they are not relying on what are fake figures.
PF: Well I think it's quite clear from the International Monetary Fund for example that they are not relying on these figures. And this would be creating some concern for the O'Neill government, they wouldn't like the fact that this large international organisation, sort of the international economic umpire, the IMF, is coming out and saying 'Hey your figures are massively wrong. Like the figures by 2023 we have a difference of 34 percent between what the PNG government is saying is going to be the size of the economy and what the IMF is saying. So the question is then, when there is this disagreement about the facts, how do you translate that into policy influence to try and get the PNG government back to accept the economic facts and therefore also accept the economic policies that are required to meet those facts. But politically that's hard and the PNG government does want to do when it is facing a vote of no confidence.
DW: What is the prognosis for this economy then given these fake figures?
PF: Well I think it is a very mixed one, depending on the sector. There is a chance that the O'Neill/Abel government will sort of give away in some of the fiscal term negotiations with the big projects that are being considered. If those projects go ahead then they will come across as lifting GDP growth very significantly in the resource sector. So the resource sector has done very well for PNG since independence, but the big problem though is the non-resource sector is really suffering underneath the economic policies of the O'Neill/Abel government. Even since independence PNG hasn't tapped into its enormous potentials and the growth in per capita incomes have actually been negative for the vast majority of people. And unless there are better policies put in place for the non-resource areas of the economy, certainly measured in per capita terms, is looking most likely it will continue going backwards unfortunately.
