Tonga inflation

outlook not promising

THE National Reserve Bank of Tonga’s latest bulletin reports that inflation was a worrying development during the September 1990 quarter.

Previously, creeping consumer price

index (CPI) inflation had been of concern, but year-on-year changes in the CPI accelerated sharply during the

September quarter.

The central bank said that compared with a year earlier, inflation had risen from 4.9 per cent in December 1989 to 5.3 per cent in the March 1990 quarter, then jumped to 9.9 per cent and 13 per

cent respectively during the July and

August 1990. Most of the rapid price increase in August 1990 reflected the direct and indirect impacts of higher government duties on a wide range of imported consumer goods, according to the bulletin. The July figures also

reflected sharply higher labour charges

in the services sector, which the bank said could be attributed to a large increase in civil service pay rates.

The immediate outlook was not promising, the bank said. The recent strengthening of the Australian dollar (many of Tonga’s imports come from Australia) was unlikely to last and the

full effect of higher petroleum products

prices arising from the Gulf crisis had not worked its way into the CPI by the September quarter. The bank said its studies suggested direct costs of higher fuel prices could add about 0.4 per cent to CPI totals, but that indirect effect would range between one and 1.5 per cent. □