Economy in holding pattern

Saturday January 30, 2016 Written by Published in Economy

The verdict is out on the global economic outlook for 2016.

The world economy is in a holding pattern, where positive and negative forces will offset each other for a while. For example; Island A in the Cook Islands expects a boost in fishing exports this year, but Island B will have lower visitor numbers and hence less visitor spending. So export revenue in Island A offsets the slowdown in visitor spending in Island B. Holding.

Last year was a great year, with celebrations and more family and visitors arriving and private and public spending to look after events and celebration costs.

Government in the first six months of the 2016/17 financial year has committed to a few housekeeping matters that expect to improve public sector and governance spending. Reviewing the subsidy on the Los Angeles and Sydney flights, upgrading back office operations in MFEM, finalising our tourism strategy, reviewing what health and education have been using their budget for, and finalising a few other operational procedures to make work for our public service transparent and safe are on the budget policy cards.

Our growth this financial year has been revised (from 0.7%) and is expected to grow by 4 per cent as policy planners become confident with signals coming through. Good tourism numbers and gains made implementing capital projects that slipped in this financial year expect to lead the pickup.

But while the macro-economic (national level) signals look steady; the micro-economic (at the community, business level) angle remains to be understood a bit more. The announcement of infrastructure water and sanitation works for example, signals contracts for suppliers of goods and services. Managing the processes to ensure equitable and efficient contracts are awarded requires informed and experienced management. Government track record in this area is still young.

Small blessings are packaged in the tax cuts that are on the horizon, as well as more support to the elderly and vulnerable. Partner arrangements with community agencies to further access important social services is also welcomed.

The feeling coming out of the Government Budget Policy Statement (BPS FY 16/17) echoes the global statements that things are in a holding pattern.

On the global front, refugees are looking for safe places, oil prices are diving, the US presidential elections are hotting up, China’s growth figures toned down, and the economy of Tasman neighbours, Australia and New Zealand set for slower growth. This all heralds interesting times ahead. For example, there is a quiet expectancy if shipping BAFs (Bunker Adjustment Factor, an instrument used to buffer oil price changes) will drop, high freight rates will at last come down. 

As the nation’s budget bids get scrutinised next month, the disclaimer inherent in BPS 16/17, instructs national managers to live within baselines and to make sure actions align with the National Goals prioritised for 2016/17.

What are these goals? Looking after our vulnerable, expanding economic opportunities including opportunities for our land and ocean resources, water security and sanitation management, transport and energy for all, lifelong learning opportunities, and governance that fosters a peaceful and happy society.

The party is over, 2016 is panning out to be an abrupt and interesting year.

Kia Mau!

TEXT IN BOX: Development Economist Vaine Wichman has worked extensively throughout the Cook Islands. She began writing these columns at the request of women and men asking her to explain the working of their economy. Views in this column are Vaine’s.

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