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19 July 2022

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Feeling the pinch of inflation

Saturday 4 June 2022 | Written by Caleb Fotheringham | Published in Economy, National

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Feeling the pinch of inflation
(File photo) Prime Minister Mark Brown says buying local rather than imported foods could help in the fight against inflation. Photo: Caleb Fotheringham/22050427

Everybody is feeling the pinch of inflation but what is it and what can be done.

At Punanga Nui market two Mamas are selling watermelon and baked goods on a slow Friday afternoon. Like everybody else in the country they’re starting to notice everything getting more expensive.

“It’s gone up, like the price in the shops, in the outlets. I don’t know where the people who run the price control and all that are, what is happening,” one Mama, who wished not to be named, asks.

Petrol, flour, sugar and corned beef are what the pair list as notable price increases. They call these items “the essentials”.

But they say they’re not planning to combat the cost of living by putting their prices up.

“For us it’s just affordable, we think about the others too, you know the fairness.

“We support the locals, so we will just leave it there.”

Inflation has become a global problem, supply chain issues triggered from the pandemic coupled with oil shortages from sanctions on Russia has driven up prices.

Inflation can be defined as the general increase in the prices of goods and services over time. It means that money is losing value – a dollar 20 years ago could buy you more than a dollar today.

In the Cook Islands inflation is measured through the consumers price index, which measures and compares the cost of a fixed number of goods and services, like food, petrol and clothing.

Economists largely agree that a small amount of inflation is positive, in New Zealand the Reserve Bank aims to keep inflation between 1 to 3 per cent.

At the end of this financial year, the Cook Islands will have an inflation rate of 4.3 per cent according to the Ministry of Finance and Economic Management (MFEM), which means prices will be 4.3 per cent more expensive compared to a year ago.

It’s the highest inflation rate the country has seen since the Global Financial Crisis in 2008 where it was 6.7 per cent.

In the 2022/23 financial year the inflation rate is predicted to be 3.9 per cent

An inflation report by MFEM says inflation is generally caused by the amount of money in circulation, and the availability of goods or services consumers need or want to buy.

“Extreme shortages of supply and extreme spikes in demand can also send the prices of a particular good service skyrocketing, which can affect inflation,” says the report which then compared the current situation to the war in Ukraine.

The report says the Cook Islands is reliant on trade and vulnerable to global price fluctuations, especially for transport costs, building materials, fuel and packaged food.

“As a market at the ‘end of the line’ the Cook Islands is impacted by all of those external pressures, and there is little that can be done by Government.

“The prices that CITC and Prime Foods and the other shops pay for goods and to transport those goods to the Cook Islands have risen, and that means that prices here will go up too.”

Tina Iro from the charity, Works With Faith, helps the most vulnerable people in the Cook Islands.

Iro says people are becoming more financially challenged as the cost of living increases.

She recently had a local businessman give her boxes of nappies and nearly expired instant noodles to give away, which she did on Facebook. Iro says the goods were gone in minutes to people who were struggling.

She also works on annual Christmas Box’s and is thinking of raising extra funds for what she expects will be an end to a tough year.

“I think everyone is going to feel the pinch,” she says.

Iro says people’s lifestyle will need to change to adjust to prices increasing.

“Before the planes got here, we used to live off the land and we can still do that, there is no reason why we can’t go back to that.

“I think if we changed our ways a bit, there is no reason for starvation here.

“The fish is free, the chickens are free, the vegetation is free, and I know a lot of locals who do swaps, they swap a bunch of bananas for baked goods, things like that. I think we just need to think outside of the box and probably get back to basics.”

MFEM’s report also suggests a change in lifestyle to limit the effect of higher prices. The first step recommended for households was to reassess weekly budgets and try find cheaper substitutes.

“If the price of corned beef is rising fast, but the price of pork or chicken is not rising as fast, making a switch from corned beef to pork or chicken can provide some relief,” said the report.

“For example, while corned beef sells for over $20 per kilo, a carton of chicken works out to a little over $3 per kilo – and if a carton is too much chicken for our household we can share with family or friends.”

The report also suggested meal plans and avoiding impulse purchases.

The Ministry of Internal Affairs also put out a survey on Thursday which asks 10 questions relating to inflation.

According to Maru Mariri-Tepou from the Ministry’s labour and consumer services division, the poll focuses on the weekly expenses faced by a family in the Cook Islands.

“This covers the family’s basic needs such as housing (rent or mortgage), groceries, transportation, power and clothing.”

Mariri-Tepou says the survey informs national policies and activities aimed at raising awareness on consumer protection, verifying compliance with the legislation on consumer guarantees and fair trading and improving the services in that space.