Tonga's inflation rate slows down [1]
Friday, April 7, 2006 - 19:09. Updated on Monday, September 29, 2014 - 10:09.
Announcing a 5.3% inflation rate for February 2006, Tonga's Ministry of Finance on April 5 concluded that while the cost of living is still increasing, it was good news compared to the double digit inflation figures of February last year.
"The rate of the increase is decreasing," said government statistician 'Ata'ata Finau this week.
But when shoppers translate the 5.3% into real life, goods and services are still very expensive and the cost of living in general is continues to rise.
On top of all that, decisions by the Tonga Development Bank at the end of March, to increase its interest rates on business and personal loans by 0.5%, back-dated to February 17, and the Westpac Bank of Tonga on April 3, to increase its interest rate on loans by 1%, were seen as definite moves to curb a rising inflation rate.
'Ata'ata, however, did not think that a rise in interest rates on loans would necessarily have an impact on the price of goods and services. He said that professional people and business people increased the price of their goods and services, "not because of an increase in interest rates, but when they think they can make a profit."
'Ata'ata agreed that the cost of living was increasing, but not as rapidly as last year. He said that fundamental to the decrease in the rate of inflation was the abolition of the 5% Sales Tax and the 15% Port and Service Tax, which had been replaced by the introduction of the 15% Consumption Tax last year.
"It has certainly slowed down the rate of inflation," said 'Ata'ata.
He gave an example that if a certain product was $10 before February 2005, then after February 2005 when the inflation was 11.6% the price of this particular product would be $10 + 11.6%. Twelve months later in February 2006 the same product under the current inflation rate of 5.3% would bear the price tag of $10 +11.6% + 5.3%.
"The prices of goods are still expensive, but the rate of inflation has dropped."