Prolonged tightening of monetary policy in neighbouring Australia and New Zealand will have a huge impact in the Pacific, including Fiji.

This was revealed in a Pacific Economic Update report by the World Bank.

These are measures that these two trading partners will use to address increasing inflation.

World Bank Country Economist Reshika Singh says Pacific Islanders working in Australia and New Zealand will be impacted, altering their spending power.

“Now their takeaway pay is less so they will be sending less money back home. So basically that’s the simple transmission channel. Less income there less income comes home. That’s the impact on remittances.”

Singh says Fiji, Tonga, and Samoa will be hit the hardest, as remittances have been a lifeline for a number of vulnerable households.

“In terms of tourism like I mentioned Samoa, Vanuatu and Fiji. In these three countries, more than 70 percent of tourists on average come from Australia and New Zealand. So again the household income is less so the demand for tourism in these three countries will fall.”

World Bank Economist Mehwish Ashraf said the global economic recovery is still fragile, creating challenges for the recovering Pacific economies.

“The overall part of remittances that are going to slow down if the slow down continues in the key trading partners or key receiving countries which are Australia and New Zealand in the case of Pacific Island Countries.”

The World Bank maintains that, combined with monetary policy tightening, inflation in most major economies has begun to moderate, but it remains elevated compared to pre-pandemic levels.