“Mr Speaker we are quite familiar with the strategies that we have put in place and let us say that when we took government in 2002, the idea and the strategy was to get back to surplus quickly and credit to the good honourable treasurer then. He ran a very tight ship. And as a result we produced so many surplus budgets. We had surpluses for many many years Mr Speaker. But at the expense of what? We had a surplus budget at the expense of cutting services everywhere. We eventually shut down departments that were not function
ing. We had provinces that were not operating. We had districts that had never seen their government. Yes we were having surplus budgets. Internationally we were looking good. The budget figures were excellent. But the reality on the ground was absent.” – Prime Minister Peter O’Neill
2016 SUPPLEMENTARY BUDGET SPEECH by Hon. Peter O’Neill, PM
AUGUST 26 2016
These are processes that have been ongoing for 40 years since our independence. The government does not go and consult the opposition about budgets, unlike what the good opposition leader is trying to say. Budgets are key important policy documents for governments and as a result of that Mr Speaker it certainly does have a bit of secrecy about it because you don’t want to argue about the economic position of the country on gossip columns and the press on a daily basis. Mr Speaker it does not give confidence to anyone. What it states basically is that what you present to parliament must be taken seriously and that the business community and the investors and all the other stakeholders will have confidence. Mr Speaker coming to this parliament in 2002 under the Somare government, we inherited an economy that was in fact projected to be in surplus by the previous government. We inherited a government that was having a minus K800 million deficit. The strategy at that time was to try and return to a surplus budget as quickly as possible. So the good honourable treasurer, Mr Bart Philemon and Mr Speaker let me say that in the last 15 years there has only been four treasurers in our country. Fortunately three of us are still in this parliament and our good treasurer is the longest serving treasurer among all of us. Myself and the opposition leader are the shortest serving treasurers in between, so Mr Speaker we are quite familiar with the strategies that we have put in place and let us say that when we took government in 2002, the idea and the strategy was to get back to surplus quickly and credit to the good honourable treasurer then. He ran a very tight ship. And as a result we produced so many surplus budgets. We had surpluses for many many years Mr Speaker. But at the expense of what? We had a surplus budget at the expense of cutting services everywhere. We eventually shut down departments that were not functioning. We had provinces that were not operating. We had districts that had never seen their government. Yes we were having surplus budgets. Internationally we were looking good. The budget figures were excellent. But the reality on the ground was absent. That is the fact Mr Speaker. Mr Speaker so as a result of that when we came into government in 2012, we changed the strategy. And that was to get into a deliberate deficit budget. And the good treasurer then was the current opposition leader. When we introduced the budget, we that projected a deficit of 6 per cent, 6 per cent at that time in 2012. We came under when we had the final year outcomes, Mr Speaker we came under almost 5.9 percent. In 2013 we came under 5. 2014, 2015 we came under 4. We ended up with 3.9 percent.
This year this budget and these supplementary adjustments are trying to make sure that we continue that decline all the way down but in a structured manner Mr Speaker. So the outcome that we are projecting for 2016 is under 3 percent deficit for our economy. And next year in 2017, we hope to bring the budget deficit down to 2 percent and eventually we’ll get down to a balanced budget.
Mr Speaker we are doing it in a structured manner and avoid cutting services. Our key policies and our key promises to our people remain same. We have not cut free education, we have not cut free health care, we have not cut the support that we are going to give to the churches and all our partners. We are continuing to invest in capital works and infrastructure throughout the country. We’re still maintaining good support for the judiciary and in the law and order sector Mr Speaker.
We are supporting the districts through the DSIP without any cut. Through the PSIP, all those key programs across the country Mr Speaker it is being maintained and are producing results today. Four years of steady results with a declining deficit budget that is coming down, we need to continue to stay focused. We need to stay on track Mr Speaker. I guarantee you that we will get down to a balanced budget. And this will give confidence to even our international partners who now understand. It is a strategy that the Opposition leader himself was party to. However, all of a sudden there is fear about debt about budget deficits Mr Speaker.
Mr Speaker, even United States of America, the most powerful nation in the world, Japan is 3rd most biggest economy in the world, Australia, Britain, and most of the countries around the world are in deficit budgets Mr Speaker even though they have advanced infrastructure, better roads, better hospitals, better schools, unlike us; they are running a deficit budget because they need to stimulate their economy. Mr Speaker, if we do not invest in infrastructure after the LNG construction has lapsed, we will see more people on the unemployment line than what the member for Goroka is saying today. The construction investments that we have made in the construction industry throughout the country are keeping people employed. It is keeping as a means of functioning Mr Speaker. Yes there are tough times there. There are some businesses who are struggling. And that is admitted Mr Speaker, but Mr Speaker the global challenges are not new to us, we don’t have to have a political grand standing. It’s not a contest of who is the brightest and who is the smartest. Mr Speaker it is about making our country work and putting food on the table for our people. And that is the priority of this government Mr Speaker.
Mr Speaker, let me say that the growth projections that the treasurer is now saying just close to global growth projections that has been stated by IMF and the World Bank, Mr Speaker that is extra conservatives that the treasurer has made. I know that we will finish higher than that at the end of the year Mr Speaker. We will finish higher than that. Last year Mr Speaker it was projected to be around 6 percent or so, we finished at 9.9. These are independently verified figures of the economic growth for the country. So Mr Speaker, you can see that our economy is transforming since 2011-12. Our GDP for the entire country has doubled. We must continue to maintain prudent management of our economy and offcourse that is not an evil thing Mr Speaker. Many successful countries, many successful companies go into debt to grow their businesses, grow their economies and likewise we must follow. The strategy for Lae MP Bart Philemon used was that all the surpluses that we made in 2002 onwards were diverted into paying back all the debts, which looked very good. The debt levels were coming down but we were not investing in infrastructure. Lae city was in potholes, Port Moresby city was breaking down; even all our provinces were not functioning as expected. That is a fact. I know that now there’s a little bit of improvement in many of these services within the provinces.
Yet we tend to forget 4 or 5 years ago where we were. The fact is because we are investing in the right sectors and things are starting to look promising. We need to continue to maintain that level of activity.
Mr Speaker one other thing is that it is quite evident that when we set budgets, it is the educated professionals and experts working within treasury and the country who set this forecast for us. They make assumptions about commodity prices. For example, when we were experiencing 110 dollars per barrel for the oil prices in the budget figures, they estimated 70 or 80 dollars per barrel. They reduced it down to an acceptable level so our country could counter for any shocks on the drops of prices. And offcourse if the prices remained high, we were able to raise more revenue. But Mr Speaker when you have an economy that collapses from 110 dollars price down to 27 per barrel that’s a huge drop in anybody’s language. And obviously the revenue coming into the country gets affected. That is why our revenue for this year is down by almost 2 billion dollars, which we used to get from mining and petroleum taxes almost that accounts to about K2 billion a year for PNG. This year we will be lucky if we get K200 million. That is a huge drop. I know there are many fortune tellers around but you know nobody tells that what the global prices will do over time, or when the war will be declared in the Middle East somewhere, nobody knows. You and I have no control over that. We are price takers so we have to live within reality Mr Speaker. And the fact of the matter is Mr Speaker supplementary budgets are a necessary tool for us to adjust our budget. I know there has been calls, many experts, and so called experts who sit behind computers around the country and give their expert advise and critic on supplementary budgets or readjustments to 3 or 4 months after we have introduced it. The truth is that you have to allow the activity in the economy to continue so you have a reasonable assumption. You can’t change your budget everyday or when the price of oil drops. You have a long-term average that is why after the mid-year economic physical outcomes were produced by law, it was published publically by treasury in June. We are able to assess our economy’s tracking. There is no other way to assess how anyone can predict where the economy is going unless you have the figures to tell you how the economy is performing. After that the outcome we have been able to see it. I know the good member for Goroka has got a copy of it he can pass on one to the good opposition leader but you know these are public information that is available out there. Every international donor agency, every multilateral partner have access to it. Mr Speaker, based on that, the treasurer is able to frame the supplementary budget. And that is what we are discussing today. It is painful because we are cutting some basic service, basic expenditure items that are going to cut costs, limits of activities for some of our national departments. But we tried our very best Mr Speaker to maintain no cuts in the districts, no cuts to the provinces, no cuts to education, free education policy, free health policy, no cuts to the infrastructure and I know that the good opposition leader talks about cuts to the worst. Mr Speaker after discussions with the department of works, the management there, they are saying that these are some of the projects that are budgeted for this year but will not start yet until next year. Mr Speaker, ADB and offcourse all the other donor partners are working closely. Some of these ADB funded projects will continue. It’s not as if we are saying that the economy is not ferrying well so we shut down shop and go on holiday. The economy is still functioning, it’s still standing. Mr Speaker we have got mines that are now starting to produce well. Offcourse mining projects like Lihir and Porgera and because of physical terms that were given to them, we didn’t collect much in our revenue for many years. Only now they are starting to pay taxes. Mr Speaker, we will start seeing some increase in the revenue that we will get from companies like Ok Tedi who will start paying dividends because it is now operating very profitable. Finally, Mr Speaker there has been a lot of talk about inflation. Prices of goods are going up. Mr Speaker, again the international economy functions itself on US dollar as the primary currency. Over the last 2 years, the US dollar has been gaining strength against all currencies. We are not exempted from that. That means the real value of kina is continuously going down. And when it goes down, offcourse the import costs go up and as a result it is passed onto the consumers. That is why we are trying all our best to make sure that we buy Papua New Guinea made products only Mr Speaker. So that we can promote Papua New Guinea industries. We can promote agriculture in PNG. Mr Speaker these are areas that we want to focus on because our problem in the past is that we have not learnt from the mistakes made previously. That is that why we have not broadened our economy. We have been overly dependent on mining and petroleum Mr Speaker so as a result when the boom and bust cycle goes, we ride with that boom and bust cycle. Going up and down, up and down. So it is very important that we broaden the economic base. And I think the new reports that are coming out from National Statistical Office; the new GDP data that the Minister for Planning shows that these sectors are slowly starting to carry the economy.
It means that we are not overly dependent on the mining and petroleum sector and I think that when we continue to invest in these industries, we will do our best despite limited resources.
You know Mr Speaker, most important is free education. The school fee savings is what the parents will have in their pockets. It is savings them. That is an increase to their household income Mr Speaker. When you have funds going to the districts and the PSIP and DSIP, they are spending money in the districts. we also have K10 million in the districts, K10 or K15 million in the provinces. Mr Speaker, what are DSIPs and PSIPs employing?
They are employing local businesses or small to medium enterprises to carry out government work in the districts. Mr Speaker, so money has been translated into key sectors that are starting to produce results. We must continue to stay on the key policies we agreed to until the elections Mr Speaker.
Let the people judge us on the outcomes and I commend the treasurer for presenting an excellent supplementary budget.