Prospects in PNG and possible shifts

The Bank of Papua New Guinea it its "monetary policy statement" for March 2012 projected the economy of PNG to grow by 7.8 percent in 2012. Headline inflation was focused at 9 percent, implying a nominal GDP growth of a whooping 16.9 percent. The predicted growth stems from spin-off benefits of the LNG construction. Apparently, most sectors of the economy are benefiting from the current LNG construction, with Government pumping in a lot of project finance to the land-owners like never before. Domestic demand should increase, thretening price stability. Anecdotal evidence shows that, due to the recent billion dollar LNG project there has been a structural change in the composition of CPI weights. Inflation pass through from exchange rate developments tend to be played down by domestic demand push inflation. Price bubbles expereinced in the domestic real estate market and the recent newspaper report of a up-surge in demand for real estate in Australia by PNG nationals has been the cause of the wealth effect created by the spin-off benefits of the LNG project.

There seem to be a shift in investment and service orientated business. Traditionally Australia used to be the major market for PNG, however, due to a lot of strict regulations by Australia on PNG business and individuals, recently, the shift is eminent. During a recent flight to Singapore, direct from Port Moresby, a lot of PNGeans are using that route to travel to other parts of Asia, Europe and even America's. Traditional travel routes through Australia is slowly weaning out, as Australian immigration rules have become to stringent.

The spill over effect of the LNG project and the double digit growth of PNG should have an impact in Australia. The real estate industry does seem to have picked up quiet a bit, however, the future looks bleam for Australia on the business side of things. Because of the stringent visa regulations, a lot of attention now for PNG nationals and businesses is either Asia or the other Pacific Island countries.

Double digit growth figures are sure to increase the wealth of a lot of Papua New Guineans and their spending and investment habits should increase in the near future and this should give rise to more offshore investments and surely, Australia will miss out on it.