PNG ICCC explains the increase of prices on goods and services

 The cost of production is the main driving force behind the general price increase in goods and services in the country, an official says.

Independent Consumer and Competition Commission chief executive officer Paulus Ain said they were aware that many consumers were struggling to pay for basic household items as inflation had reduced the purchasing power of their income.

He blamed the general increase in the prices of goods and services on domestic and external factors.

“Domestic factors include costs of production and distortions in markets,” Ain said.

“Costs of production is behind the general price increases.

“Businesses pass their costs of production onto the final price of their products.

“The costs of production increases at every level down the supply chain as value is added onto the product.

“Eventually, these costs are recovered through the final price of goods and services.”

The cost of production increase because of the:

DETERIORATING transport infrastructures and lack of competition at some ports contribute to the high freight costs;

HIGH cost of land and real estate property rentals;

LAW and order problems and increased costs of security, including costs of insurance;

INCREASED cost of capital and investment financing, due to uncertainty and market risks;

POOR quality, unreliability and high cost of public utilities such as power, water and telecommunication services; and,

CONTINUOUS decline in the domestic currency, making imports more expensive.

Other indirect costs may come about as a result of:

CREATION of certain regulations that unintentionally hinder investments and imposes costs on businesses;

RECENT increase in fees and charges by many public agencies, which increases the costs to businesses and consumers; and,

INCREASED cost in providing electricity, water and sewerage, and other utilities.

The Independent Consumer and Competition Commission is recommending that the Government develop appropriate responses to build the relevant infrastructures, introduce workable policies and regulations that encourage investments, protect consumer interests, and address law and order problems.

“In less competitive or distorted markets where supply is limited and demand is relatively higher, businesses may take advantage over the consumers by raising their prices to unreasonable levels.”

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