The battle against inflation must be won if we are to see sufficient economic growth that can help us generate employment and achieve prosperity. The national conference organised by the Partit Laburista helped to focus attention on this issue and has hopefully dealt a blow to the fatalistic attitude that not much can be done to curb inflation.

The biggest problem with persistent inflation above the levels reached in other euro zone countries is that it makes Malta unattractive in the eyes of potential investors. Direct foreign investment will only flow to those countries in the euro zone where inflation is tamed and the government shows a true commitment to do what it takes to control excessive price instability. This is why one cannot expect unreasonably high inflation to just dissolve in the coming months to give place to economic growth.

The recently published report by the IMF in fact spells out the need for urgent action on this front. Hopeful expectations that the problem will solve itself will not get us anywhere. The IMF report states: “The causes of inflation have to be rapidly tackled. The competition authority needs to adopt a more proactive stance, expeditiously addressing any monopolistic behaviour in the wholesale and retail markets, while the regulated segments of the markets should be liberalised.”

The persistent high inflation in food products is a more serious cause for concern. Basic good products like vegetables and fruit are a necessity for healthy living whether one is well off or living on the poverty line. We need to improve the delivery system of these products to ensure that the difference between what farmers are paid for their products and what the consumers pay for the same products is not completely out of proportion.

Equally important is that the government ensures that it does not aggravate higher inflation itself by charging monopolistic prices for the goods and services it provides. The prices for energy and fuel products is a particular example where we recently experienced no correlation between the falling prices of crude oil and its by-products and the price paid by the ultimate consumer. Similarly, the massive increases in certain fees charged by the government for its services are ill-timed and damaging the country’s chances of controlling inflation.

It is therefore encouraging that now we have wide political consensus for the setting up of an effective agency to monitor prices. This agency needs to carry out market research to determine whether anyone is abusing his position of dominance in the market to charge abnormally high prices and realise large profit margins.

Today we have a number of private monopolies that need to be monitored closely, including the bottled gas providers as well as the airport management company. We also have a number of banks and communications companies that enjoy strong dominant positions in the market. They all need to put the consumers’ interest first in their pricing policies.

Consumer education is equally important. Families need to know what is available in the market and this is usually taken care of by the various suppliers who advertise their ware on different media. But it is equally important to give consumers unbiased information on where they can get the best deal.

The new consumer protection agency can disseminate information via a user friendly website and through the media so that consumers will know who is offering the best deals for the provision of goods and services they require. This is especially important in the case of food products, which is a major item of expenditure for workers’ and middle class families.

We need to stimulate economic growth that is above average in euro zone countries if we are to reach the levels achieved by the more developed nations in the EU. To achieve this we need to encourage new investment that will create jobs. But at present inflation is stifling our efforts to attract such investment. This is why fighting inflation should be kept clearly on our radar screens. For this reason the proposals put forward by the Labour leader at the national conference on the subject of inflation, and how to curb it, need serious consideration.

One does not expect all to endorse the proposals put forward, but the main purpose is to stoke discussion so as to formulate solutions to a problem which cannot be allowed to remain unchecked.

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Dr Mangion is the Labour Party’s spokesperson

for Finance