Firms must be fair and pass on the benefits to consumers. However, the latest (2009) depreciation of the kina against the key currenciesUS and Australian dollars may give them an excuse not to reduce prices of goods and services or delay further any downward adjustment to domestic prices.
Coinciding with the declining commodity prices in 2008 was an increase in total government spending in excess of total revenue. Experience of the 1990s show that when there is excessive Government spending there can be downward pressure on the exchange rate and high inflation. And monetary policy is burdened with the task of restoring macroeconomic stability.