Comments

Hi Richard, my novice view on this issue of brain drain. Because Australia's minimum wage is much higher than most of the Pacific Island countries, the wage gap between those without a university or college going to the Labour Mobility Scheme is more likely to be higher relative to educated ones back home, exerting pressure on the educated population to migrate out of their countries, which also raises the possibility and fear of brain drains, especially in small island countries outside of PNG. Less educated people participating in labour mobility schemes are more likely to make more money in Australia than degree holders struggling back in the countries. Given the carrots, there should be some sticks to penalise such a huge wage gap. People are after money, so put reasonable sticks around money, and more carrots can have non-monetary forms such as skill development, etc.

Hi, I am Joao Freitas. I’ve been in Australia since 2019 till now and I am really interested. However I am bridging visa A holder.

For Papua new Guinea, police clearance certificates normally take a while. Hopefully the eight months grace period can be enough.

Hi Natasha, A really interesting article. I am trying to establish firm figures on the growth of PALM workers in Australia. You wrote for 2023: PNG received only 1,459 visas. What was your source? I have tried to get trend data from the Department of Employment and Workplace Relations in Australia and PALM in Port Moresby without much success. I don't doubt your data. I would like to provide a data source for the figure. Thanks, Richard

The age restriction 18-45 is already a barrier to those who have just turned 46 and are currently on the PALM scheme in Australia for one or two years now and will be there for 4 years. Will they be given an opportunity to apply as I am sure this visa will be of very high interest to them as well. Can there be special considerations for under 50 ? (Solomon Islands case).

What happens in the event the quota for country A is met, but the applicants fail to meet the post-selection process such as English language test, failure to secure a job, or character and health checks? Will there be a second (or third) rounds of random selection process to fill the quota? The post selection requirements, which seem easy to many, are actually difficult for a region where English is not the first language, have huge rural populations - most without formal IDs, and police and health clearance/checks combined which cost half of minimum wage (in PNG’s case).

Thank you for your comments, Paul. Definitely if the GDP deflator is only 2.4%, then GDP per capita growth in the Plan is positive, even given its high population growth target. This is not something analysts could have been expected to guess. It definitely should have been made explicit within the Plan. Indeed, that is one of our main points – that much greater clarity is needed around the Plan’s economic assumptions. But we also need to look at non-resource GDP, which we say in the blog should be the focus and which the <a href="https://www.thenational.com.pg/inflation-easing-treasurer/" rel="nofollow ugc">government has repeatedly said</a> is a much better indicator of living standards than total GDP. Since GDP per capita growth seemed to be negative in the Plan, we assumed the same for non-resource GDP especially given the three big resource projects. However, if GDP per capita growth is positive, we need to double-check what is being projected for non-resource GDP. Using Table 3.2, which you drew our attention to, annual average nominal non-resource GDP growth in the Plan between 2022 and 2027 is 7.5%. The Treasury deflator for this variable is 4.8% in the 2023 budget, so real non-resource GDP growth is 2.7%. So with the Plan’s population growth target of 4.8%, non-resource GDP per capita growth is negative. We are back with the conclusion that the Plan is projecting negative living standards. Yes, 4.8% is high as a population growth target, but it is the target in the Plan and we are assessing what it in the Plan. And even with a lower population growth, 2.7% real non-resource GDP growth could well translate into negative per capita GDP growth. The Plan is more pessimistic than Treasury regarding non-resource GDP, with the former giving nominal average growth over the 2022-2027 period of 7.5% for this variable and the latter 9.8% (2023 budget). This is odd, and too pessimistic. In fact, for the approximately 50% of GDP that excludes resources, agriculture, forestry, fishing and manufacturing the Plan is projecting negative real growth. It is not clear why as one would expect a construction boom with three new projects. Your additional insights have certainly been helpful and we have a better understanding of the Plan’s projections now. Now said, these new findings do support the original conclusions which is that the Plan is projecting declining living standards and that, more broadly, the economic analysis underpinning the Plan is weak. The numbers should have been scrutinised before and not only after the Plan was published. And, to repeat the other main point made in our blog, the idea in the Plan that aggregate imports should fall makes no sense.

To provide an opportunity for PNG to showcase a positive destination.

Yes, you're correct, Andrew. I think government should now be doing seperate budget allocation to the 3rd level government which is the LLGs. Because this level of government places a very important roles in the community its deling directly with the local people so I think is the best for the government to do seperate budget allocation directly to the LLGs.

This is an interesting and helpful article for situating Vanuatu's present journey in relation to that of our neighbours. Thanks Jon.

need reference to reply as soon as possible

MTDP IV does not imply a falling living standards in PNG. The title of the article is, unfortunately, misleading and inaccurate. Maybe the article should have been titled “Even with unrealistically high population projections, MTDP implies rising living standards”. On the first measure of living standards, there is now agreement on the nominal GDP growth rate being 8.8% per annum in the Plan. The Plan does use an unrealistically high population growth figure of 4.8% (more on this later). The price deflator in converting nominal GDP to real GDP from 2022 to 2027 is 2.5%. This is the official GDP price deflator used by the PNG Government over this period (see more on this below). This means that on the GDP forecasts, real per capita incomes are increasing by 1.5% per annum (8.8-4.8-2.5). This implies rising living standards. Using the second measure of GDP per capita growing by 4.3%, with the GDP deflator of 2.5%, there is real growth per capita of 1.8%. This also implies rising living standards. Using the third measure of GDP per capita in US dollars, the average GDP per capita growth rate is 2.0%. With a price deflator of 2.5%, this does mean a 0.5% fall in GDP per capita in US dollar terms. However, there is then the variable of the exchange rate. Since 2022, the US dollar to the Kina exchange rate has moved some 5%. By itself, this exchange rate movement averaged at 1% per year over five years once again moves the real GDP per capita growth rate in PNG into positive figures in Kina terms. MTDP IV of course has to build on other Government documents. In the economic section of the report, the Plan is clear that it builds on the Treasury forecasts of GDP. The Plan then increases these forecasts, largely because the Plan is based on the commencement of major resource projects (so a real measure of changes in GDP). Treasury does not include new resource projects based on standard international practice for budgeting of not including resource projects until the Final Investment Decision. However, for Planning documents, there is more latitude. As the plan is based on the Treasury GDP numbers, then the Treasury GDP figures, with their associated deflators, are the source of PNG’s official figures of taking into account “inflation” (as the NSO does not produce forward year estimates). When talking of inflation, the usual reference is to the Consumer Price Index, and the CPI does drive most price index estimates in the non-resource sector. Indeed, the overall deflator for non-resource GDP from 2022 to 2027 does average 5%. However, and I should have picked this up in my earlier comments, we are talking about overall nominal GDP, and this also needs to take account of price movements in the resource sector, especially movements in international commodity prices. The most relevant of these for the GDP figures underlying MTDP IV is the projected 28% fall in prices for the oil and gas sector, which in 2022 accounted for 23.7% of GDP. When building this “negative inflation” for the resource sector into the overall “inflation” for GDP – known as the GDP deflator – the GDP deflator index moves from 167.5 in 2022 to 188.7 in 2027. This is a 12.7% increase in prices for GDP as a whole over 5 years – generalised to the 2.5% annual price index referred to above (although the compound rate is lower at 2.4%). All of these figures on price indexes are available in the annual budget documents (2024 Budget, Volume 1, p151). This is a rather boring table setting out all these assumptions – and I have some sympathy for the authors of the Plan not going into so much detail, although fair point that some higher level price figures could have been included. On the population figure of 4.8%, this number is indeed included in the plan. The figure likely represents the massive uncertainty about PNG’s population estimates, and therefore growth rates from previous years. It was a shock last year to receive the UNFPA report, since adopted by the NSO, of a massive increase in estimated population in 2021 from the 9.1 million in the UPNG/ANU economic database to 11.8 million – nearly 30 per cent. There is now the issue of creating a time series, with annual growth changes, going back to not just the 2011 Census, but also the possibility that these population estimate errors may even go back to the times of Independence. However, the 4.8% figures is just unrealistic. Most commentators, consider the earlier NSO estimate of 3.1% was too high. The current highest population growth rate estimate for any country in the world is 3.7% (Niger) according to World Bank data. 4.8% would have PNG’s population growing at a much, much higher rate than any other country in the world. This is just not realistic, and the headline of an article analysing a 300 page plus plan should not rely so much on just one figure.