ADB sees Pacific hope in increased tourist numbers

Updated November 9, 2009 18:02:07

The Asian Development Bank says a sharp increase in the number Australian tourists visiting the Pacific has raised hopes that the region's vital tourist industry is recovering from the global financial crisis. The Bank's latest Economic Monitor - its quarterly review of 14 Pacific Island economies - says Australian tourist numbers during July and August increased by just over 16 percent on the same period in 2008. Jemima Garrett asked Milo Lucich, one of the author's of the Monitor, why we are seeing such a large increase in Australian tourists.

Presenter: Jemima Garrett
Speaker: Asian Development Bank economist, Milo Lucich

LUCICH: Essentially it reflects a strong Australian domestic economy. We have seen an acceleration in Australian tourism to the Pacific in recent months as a result of the resilience of the Australian economy. In addition, we've also seen for the first time this year recovery in New Zealand tourism to the Pacific as economic conditions in that country have also improved.

GARRETT: To what extent is the pick up in the tourism industry protecting Pacific countries from the worst of the global economic crisis?

LUCICH: It's been quite important for some countries, such as Vanuatu, which has managed to enjoy quite strong growth this year, inspite of the economic crisis. Even in Fiji, which has seen a sharp decline in tourism earlier this year as a result of the ongoing political situation, they have seen a pick up in recent months, which has helped support economic activity in that country.

GARRETT: Unemployment is still growing in both Australia and New Zealand. Do you expect the increase in the number of Australian and New Zealand tourists to be sustained?

LUCICH: Our indications are that the strong economic conditions in Australia can support this level of tourism, in addition to the strong economic conditions in Australia, we've also seen some diversion of tourism from long haul to shorter haul trips in the Pacific.

GARRETT: Samoa's tourism industry has obviously been badly affected by the tsunami, but you say that despite that, Samoa is coping with the disaster better than was expected, why?

LUCICH: Basically Samoa has benefited from surprisingly strong support from Samoans living overseas and also from the international community. reconstruction and rehabilitation efforts may actually see a slight positive economic growth in Samoa over the coming year.

GARRETT: Overall, it's good news that the tourism industry is holding up against the global financial crisis, but the Asian Development Bank is still warning against complacency by Pacific Governments, why is that?

LUCICH: Although we're starting to see a recovery in growth in these economies, growth in many of these countries is still likely to remain muted over 2010 and possibly into 2011. As a result, there is no room for complacency by governments and they have to maintain their economic reform programs and take appropriate fiscal action where necessary.

GARRETT: Remittances are still in a bit of a hole in the Pacific. How long do you expect it to be before we see a turnaround in remittance income?

LUCICH: Remittances have fallen as a result of increased unemployment in countries like the United States, New Zealand and to a lesser extent, Australia. That will take some time to flow through as unemployment is a lagging indicator of economic growth.

GARRETT: You've identified higher oil prices as an emerging risk to the Pacific. What impact do you expect that to have?

LUCICH: Over the next year, as economic growth increases, the increase in world oil prices will affect the Pacific economies in two ways. Firstly, through higher inflation and in some countries may also put foreign reserves under increased pressure. This was the pattern we saw last year, when there was a very large spike in oil prices.

GARRETT: The Asian Development Bank is calling for concerted government action to speed up the economic recovery in the Pacific. What do you want governments to do?

LUCICH: Governments have to maintain their economic reform program, they have to promote private sector development, they have to look to promote export activity, they have to support economic activity through appropriate fiscal policies where appropriate and this can also include the use of external grants and loans.