Understanding the Norfolk Island Economy: Retail Price Index and Inflation Insights

Slide Note

The Norfolk Island economy is showcasing positive indicators compared to Australia, with lower inflation and unemployment rates alongside higher economic growth. The Retail Price Index (RPI) methodology tracks the cost of goods and services over time for the average household. Consumer inflation is estimated based on RPI values, providing insights into price changes and inflation trends in various item groupings. Additionally, expenditure on transportation items such as petrol, vehicle servicing, and tyre repair are analyzed in detail. Overall, the economy is making significant strides in reducing cost of living pressures.

gstre Follow

Uploaded on Sep 24, 2024 | 0 Views

Download Presentation

Please find below an Image/Link to download the presentation.

The content on the website is provided AS IS for your information and personal use only. It may not be sold, licensed, or shared on other websites without obtaining consent from the author. Download presentation by click this link. If you encounter any issues during the download, it is possible that the publisher has removed the file from their server.

E N D

Presentation Transcript

NORFOLK ISLAND ECONOMY Part I : The Retail Price Index Chris Nobbs 4 July 2024

The Norfolk Island economy o Key economic metrics are stronger than Australia s: inflation and unemployment are lower and economic growth is higher o Strong economy has been underpinned by increased government spending and renewed tourism activity o NI has made big advances in the last year to reduce cost of living pressures, bringing inflation down rapidly during 2023. - DeltaPearl Partners, Feb 2024

Retail Price Index (RPI) o RPI tracks the cost of goods and services to the average household over time o basket of goods (prices and quantities) purchased by average household determined by detailed household expenditure survey o total cost of the basket of goods for average household in initial period given RPI value 100 o total cost same basket of goods in a later period can then be compared to cost in the initial period of 100, giving a later period RPI value

Consumer Inflation based on RPI o retail price index for base period one is RPI(1), and for later period two is RPI(2) o then consumer price inflation from period (1) to period (2) estimated as: ??? ? ???(?) ???(?) Inflation (%) = x 100 o Norfolk Island ave inflation NI (2017-22) = 3.8% p.a. DPP, 2022

Inflation: Treasure Island Economy Item breadfruit trousers price (1) $5.00 $20.00 price(2) $5.50 $23.00 basket 90% 10% Inflation breadfruit: [(5.5 5.0)/5.0]x100 = 10% Inflation trousers: [(23.0-20.00)/20.0]x100 =15% Inflation basket: (90 x 0.10) + (10 x 0.15) = 10.5% [Check: inflation v price level (PL-COL)]

Item Groupings for Price Changes - NI (1) Food & non-alcoholic beverages (2) Tobacco & alcohol (3) Clothing and footwear (4) Housing (5) Household contents & services (6) Health (7) Transportation (8) Communication (9) Recreation (10)Insurance services - DPP, 2022

Expenditure Group 7: Transportation Petrol Servicing of vehicle labour Vehicle repair labour Lubricating oil, Castrol XL Tubeless tyre, Dunlop 175/70R13 Battery, NS40Z Driver s licence Registration of motor car - DPP, 2022

Expenditure group 4: Housing and household utilities Rent Electricity - DPP, 2022

Some RPI Issues Outstanding Inflation underestimated? o RPI: overseas travel not included - health, education, family, holiday o RPI: land rates, dwelling alterations, not included o RPI needs fixing AND/OR use of other indices What of price level & cost-of-living (PL-COL)?

Some NI Merchant Prices (1) Cement. Metric tonne bag, mainland supplier: 2016 cost ~$190 plus freight of ~$350 2024 ~$275 ~$900 Increase 45% (5.9% pa) (20% pa) 157% Roofing iron. Per metric tonne: 2016 freight $250-350, stored dry below deck 2024 $1,000, plus store on deck addit. essential packing $1,000 m/t Increase 470% (59% pa)

Some NI Merchant Prices (2) Small truck. 2024 NI landed cost ~$34,000 add freight Syd NI $8,000 Freight as % vehicle 24% House insurance. O/occ dwelling, built 1980s, $500k value, $100k contents, $1k excess 2016 annual premium ~$1,500 2024 Increase 247% ~$5,200 (31% pa)

Some Price Level/Cost of Living Issues o PL-COL more important for NI than current RPI o freight costs central, not just another issue o issues unexposed in statistics and reports will continue to be ignored o NIRC & Cth policies derived with current statistics need review e.g. ability to raise revenue.

Australia Inflation v. NI Tourist Numbers 12 10 8 Number 6 4 2 0 -2 Year - quarterly Tourists ('000) Inflation (%)

References Govt of NI & ABS, 1983. A Guide to the Norfolk Island Retail Price Index. DPP, 2022. Measuring Inflation on Norfolk Island, to February 2022 Inflation Results. Report to NIRC, 22 April. DPP, 2024. Norfolk Island Annual Economic Update, Strategy and Outlook 2024. Report for NIRC, 12 February. Contact: nobbs298@gmail.com