Tourists do stand-up paddle board yoga. According to senior macroeconomist Tristan Metcalfe bringing back New Zealand visitors has been key to economic recovery and easing the impact of inflation. Photo: Ella Shepherd/22082310
Rising inflation will likely hit many Cook Islanders in the back pocket, but a top economic advisor says the island nation’s economy should soon experience a significant uptick.
Ministry of Finance and Economic Management (MFEM) senior macroeconomist Tristan Metcalfe spoke to an audience of about 90 people at the Edgewater Resort as part of Cook Islands Tourism’s Global Breakfast Update on Tuesday.
He said due to the
Covid-19 pandemic, the Cook Islands had experienced “one of the largest
economic contractions in the world”.
“We saw basically
a quarter of our economy wiped out, despite the fact the Government pitched in
with the wage subsidy and took on debt,” Metcalfe said.
expecting our recovery to occur faster than initially projected.”
Metcalfe said inflation
was nonetheless likely to peak early next year around 4.5 per cent.
“We know around
the Cook Islands, we’re seeing prices rise substantially, fuel is a big one. In
the previous five years, we had seen little to no inflation, so it’s been a bit
of a shock to the system,” he said.
“One of the
struggles is that we’re at the end of the supply chain. By the time it gets
over here, we’re paying for it twice over.”
Metcalfe said the
Government had little options to combat inflation.
“The prices are
set globally, and our impact on global prices is minimal,” he said.
Metcalfe said bringing
back New Zealand visitors was key, and “so far, they have been flooding back”.
“The average yield
from these visitors is much higher than before,” he said.
said the Government needed to maintain its level of capital investment.
“We need to keep
that work going until you guys in the private sector have the time to rebuild
your balance sheets and build on investment again,” he said.
“There will come a
time where the government will need to cut its cloth a little bit, but not just
yet, particularly with the risk of a labour shortage.
investment is going to be key in the next couple of years. For the last two
years, we appreciate the private sector has been running on empty, and that is
why the Government stepped in.”
Metcalfe said labour
shortages, and accessing airlines, were still a major issue.
However, he said
the recent partnership between Air Rarotonga and Air Tahiti Nui was a good
stepping stone for future tourism.
“That gives us a
starting point to get some more connectivity into the Northern Hemisphere,”
“Longer term, we
can start talking about diversification. Right now, very few businesses are in
a position to take risks. We know the cost of financing is extremely high.
We’ve been talking to the banks about this, but it’s going to take some time.”