Fiji’s fixed exchange rate system, where the Fiji Dollar (FJD) is pegged to a weighted basket of four currencies, places it at an advantage, as recession bells ring.

ANZ’s Pacific Insight, dated October 21, said since everything in the basket but the USD had declined in value over 2022, the F JD also declined in value.

This kept the depreciation in the AUD/FJD and NZD/FJD much less than the depreciation in AUD/USD and NZD/USD.

“This somewhat preserves the international competitiveness of Fiji and the Pacific islands as a holiday destination,” international economist, Kishti Sen wrote in the ANZ’s Pacific Insight.

“We don’t anticipate the currency will drive up the market share of more expensive destinations,” he said.

The AUD was expected to appreciate to USD0.66 by the end of the year, before moderating to USD0.64 by the middle of 2023.

According to Mr Sen, this would be a win for the Pacific islands.

Remittances

Private remittances – money received from friends and family abroad- were a significant and generally stable source of disposable income for many Pacific households.

Data from household income and expenditure surveys show that money received from abroad makes up 15 per cent to 25 per cent of total household disposable income on average.

In aggregate, Tonga received TOP498m (46.6 per cent of GDP) in remittances last year, Samoa received WST662m (30.2 per cent) and Fiji FJD842m (9.5 per cent of GDP).

For the rest, remittances accounted for less than 10 per cent of GDP.

Permanent migrants have traditionally provided the most remittances.

These have been augmented by contract workers, such as seafarers from Kiribati, security personnel and hospitality employees from Fiji, care workers from the Solomon Islands and rugby players from Tonga, Samoa and Fiji.

Jobs in Australia and New Zealand under the Pacific labour scheme, to fill labour shortages in rural and regional areas, provided a fill to inward remittances, particularly for Vanuatu, Fiji, Samoa and Tonga.

It supports consumption of the Melanesian and Polynesian cultures, which have a strong sense of mutual support and with low unemployment in source markets.

Money will continue to come from friends and relatives, putting a floor under consumer demand and the economic recovery.

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