. their advise on technical matters and have assisted us on the technical specification, security and design requirements for our new banknotes which has enabled the bank to make informed decisions in designed layout, printing, distribution, withdrawal and eventual destruction. in the case of polymer banknotes, they are actually recycled into pot plants, wheel barrows, car bumpers / fenders. with these few remarks, ladies and gentlemen, it gives me great pleasure to introduce the new series k20 banknote in commemoration of the 34th anniversary of bank of papua new guinea, and to join the family of banknotes depicting the parliament theme. the new k20 becomes legal tender on monday, 5 november 2007 and they will be used side by side with the existing k20 notes until they are phased out over time. thank you and god bless.

. you will all agree that once it was realized that inflation is on the rise during 2007 and 2008, the bank of papua new guinea took steps to contain it and it declined to 5. 7 % in 2009. the next question i want to answer is what if economic growth accelerates and inflation rate rise to two digit levels, as was the case in china and india prior to the last depression in world economic activity. some of you might be asking was it a recession or a depression. if we go by the standard definition of two quarters negative growth that defines a recession, and any period of negative growths longer than that defines a depression, then to the best of my judgment the world is just coming out of a depression. my response is that we should accept the fact that the economic environment will be different and inflationary pressures will be substantial. at higher levels of economic growth, we should accept a higher range of inflation rates. we will have to live with a high inflation environment. but the policy challenge is not to allow the rate of inflation to spiral out of control and become entrenched in double digit figures. we should do all we can to keep it within ranges of single digit mark. but at an average annual economic growth rate of around 9. 0 % and above, the range of price stability has to be redefined. in a country like papua new guinea, in which domestic supplies in all areas are very scarce and those available are in very short supply ; just look at professional, skilled and semi skilled labor, housing, building materials, manufactured goods, etc … the high annual economic growth rates will exhaust domestic supplies and exert inflationary pressures to unprecedented levels. in such a case the questions the governor will face are : do we dampen demand by implementing a very tight monetary policy of high interest rates ; or set a higher range of inflation rates for price stability. based on the experience of other countries, in such a case, my intention is to define price stability at inflation rates around the 8. 0 % mark. but i will be quiet reluctant to have a double digit level of inflation, for the main reason that i want to be sure inflation is not going out of control. even this higher mark is achievable only if the government and the central bank will cooperate and coordinate all their activities, to ensure that fiscal operations are not imposing any further pressures on the scarce domestic resources and monetary policy management does not become difficult and expensive as experienced in 2008 and 2009.