Prime Minister Lawrence Gonzi said today that inflation in Malta, while higher than in the eurozone, was falling considerably faster than abroad.
Speaking in a radio interview conducted by Times journalist Matthew Xuereb, Dr Gonzi noted that inflation stood at 2.8 percent in Malta compared to 0.5 percent in the EU. However between May and June inflation here had dropped by 0.6 percent he said, and it was expected to continue to drop in the coming months.
Dr Gonzi said the government was working in line with its electoral promise to strengthen the institutions which monitored prices, and an organisation would be focused exclusively on alerting the government over irregular price movements.
The Prime Minister said there would not be a return to price fixing and price orders except in particular exceptional circumstances as in the case of medicines, where the government might even import some products itself.
What the country needed was a transparent and objective mechanism so that consumers could be satisfied that products were sold at a fair price with the importers also having a fair profit.
On COLA (the automatic cost of living wage adjustment) Dr Gonzi said that any changes would be sought with agreement between all the social partners.
It was still early in the year to say how much any cost of living increase should be, but what he was saying was that one needed to safeguard and improve competitiveness and create more jobs.
In this context, the UHM call made yesterday (at the PL conference on inflation) about putting jobs first and protecting jobs was right on the mark. So too were comments by economist Alfred Mifsud that Malta needed to discuss the future, including making the country more competitive, because that ultimately benefited everyone.
Dr Gonzi said the Labour conference was a good idea in itself but what he had seen of Dr Muscat's proposals did not suggest anything new, but tied in with what the government was doing, including liberalisation and promoting competitition, removing monopolies and reducing taxes where possible.
What had worried him in Dr Muscat's speech was the way he had sought to divorce wage increases from productivity. Malta's biggest challenge was to raise productivity and efficiency, Dr Gonzi said, and it was a strategic mistake to separate wages from productivity. The government wanted to raise salaries and that came with raising productivity.
Dr Gonzi said the government's target this year was not to impose new taxes or burdens but to narrow the deficit by reducing spending. There had been a number of spending one-offs which would not be repeated next year. For example, next year there would not be a repeat of the spending on the dockyard retirement schemes and losses. Spending on oil purchases would not be as high as last year.
Of course, there were other factors, such as the performance of tourism, currently running at 2007 levels. However he was not saying that should tourism perform badly, new taxes would be introduced.