PNG may abandon kina in favor of Australian dollar

Port Moresby (Papua New Guinea Post-Courier/PINA Nius Online) – Papua New Guinea Prime Minister Sir Mekere Morauta has spoken openly about the possibility of PNG abandoning the kina and adopting the Australian dollar.

He said that while it was a complex issue that touched on PNG’s sovereignty, it required national consensus and expert advice before any decision was made.

But the conditions and advantages already existed for the two countries using one currency, Sir Mekere said in Parliament.

In the face of a weak kina, which is falling to low levels against major international currencies, suggestions have been made for PNG to join a regional currency, especially with Australia.

Kokopo MP Sir Rabbie Namaliu, a former prime minister, raised the issue in Parliament yesterday in a series of questions to Sir Mekere.

Sir Rabie’s questions were based on a proposal last week by Professor Ron Duncan of the Australian National University at a seminar in Port Moresby for PNG to consider adopting the Australian dollar as its currency for trade and business, and for the proposed common currency between Australia and New Zealand and the South Pacific region.

Professor Duncan had said currency and inflation risks, and high interest rates, would be reduced by adopting the Australian dollar.

Sir Mekere was asked if he would seriously consider such a proposal, particularly in view of increasing moves for “currency regionalization” such as the euro and the latest move by some countries such as Argentina and Ecuador to adopt the United States dollar.

The prime minister said in response that common currency regimes were increasingly being adopted by countries around the world. Common currencies integrate countries economically, but politically they are still sovereign, he said.

Adopting the currency of a well-managed economy had advantages, he said.

Certainly, Australia is a very well managed economy and there are advantages for us to be there. It is a question of how much of our sovereignty we want to give up,” he said.

What is important first is that the owner of the currency must agree, in this case Australia. “There are advantages for Australia as well in adopting PNG in terms of using Australian currency.

One important consideration which must exist prior to such a consideration by the two governments is that there must exist a very high degree of economic integration, otherwise economic inter-dependence, that the two countries are very close and important trading partners. “In this case we are, so that condition is there.

Sir Mekere said if PNG favored the idea, it should convince Australia that there are advantages for it as well.

Australia will want to make sure that the currency is not in jeopardy by PNG adopting economic policies which have a risk, he said.

We will have to convince Australia that we are capable of managing our economy well because if we don’t they would ensure that very considerable constraints are imposed, and regular intervention, regular analysis on their part.

Another effect is that we will probably have a common pool of reserves, so the proceeds from our exports will have to go to a common pool with Australia.

Regionally, he said, there existed links between Australia and New Zealand with Pacific countries to consider a single regional currency.

On the whole, yes, Pacific countries are very closely related in trade to Australia and New Zealand and Australia and New Zealand are also closely interwoven in international trading network,” he said.