“BOTTOM line — comparing 2024 to 2019 is not like for like,” said ANZ’s International Pacific economist, Dr Kishti Sen.

We were having an email exchange about airport departure tax before last Friday’s budget, with rumblings that the Government would follow through on its intention to take departure tax back to $200, where it was before COVID.

“The government is well within its rights to look for revenue to fund its expenditures and deliver on its core services but can a few extra dollars on departure tax really shift the dial on revenue? Probably not,” Dr Sen wrote back.

“So I would like to see it remain where it is so Fiji can remain in the fight for the tourism dollar.

“We want to increase the number of tourists coming into the country and get them to spend more money in-country.”

Tourism was the white knight of Fiji’s economy post-COVID and its unexpected unprecedented performance pushed the country’s Gross Domestic Product up by 20 per cent in 2022 and eight per cent in 2023.

With growth forecast officially revised downwards to 2.8 per cent for 2024 (a return to pre-COVID level), and even at that very low rate, still driven by tourism, and Fiji already perceived as an expensive destination compared to its competitors according to tourism experts, who would dare touch departure tax?

At $140, it was already breathtakingly high.

“We see our problem as supply (for rooms), not demand,” Minister of Finance Professor Biman Prasad told this newspaper.

After last Friday’s announcement, hopes that Government wouldn’t touch departure tax were dashed.

“We’re increasing it in phases. August 1, we’re increasing it from $140 to $170 and next year, August 1, we’re taking it back to $200. So it’s not something that was not there. It was a COVID measure to bring it down.”

But could the immediate post-COVID boom and the still strong visitor arrivals data be giving us a false sense of security that we’re oblivious to what’s going on in Australia and New Zealand, our two major source markets, when taking this tax back to $200?

Consider this: “for a family of four (Mum, Dad and two kids), Fiji’s typical tourist cohort, they will soon have to put together $800 in departure tax, before they think about booking an airline ticket and reserving their hotel accommodation let alone pocket money,” Dr Sen pointed out.

“It all adds up and putting Fiji out of reach for many visitors who love Fiji especially in the current environment of ongoing cost of living pressures.

“Further, just because the tax was $200 in 2019 does not mean it should get back there.

“Fiji was ranked as an expensive holiday destination in 2019 and many put it down to the $200 tax on departures’.

“Also, cash rate in 2019 was 0.75 per cent. Today it is 4.35 per cent.

“Mortgage holders and renters in Australia are squeezed. More of their disposable income is chewed up in higher mortgage repayments and rent. Less for discretionary spend like overseas holiday. Ditto NZ.

“Bottom line — comparing 2024 to 2019 is not like for like. As I mentioned earlier, Fiji was already an expensive destination in 2019,” Dr Sen said.

According to a report released last month on Fiji’s tourism market which he co-authored, visitor arrivals from Australia, Fiji’s biggest market, had hit record levels immediately post-COVID but is now trending downwards again.

Australians that travel to Fiji comprised around five per cent of Australia’s total annual travellers, according to the report.

Immediately post-COVID, it almost hit 15 per cent. Now weakening, Fiji must do all it can to hold it at, at least 7 percent according to Dr Sen.

“The two key drivers of Fiji’s overseas visitor arrivals are income growth in source markets and Fiji’s competitive position — prices relative to competitors,” Dr Sen said.

“Right now, household disposable income, which represents the spending power of consumers, is squeezed.

“More of consumers’ gross income in key markets is taken up in interest payments for mortgages and personal debt. The standard variable home loan rate in Australia has shot up to 8.8 per cent from 4.5 per cent two years ago.

“In New Zealand, the housing floating rate is 8.6 per cent, up from 4.9 per cent a couple of years ago. Interest rates on personal debt have also gone up in line with the hike in policy (cash) rates.

“A third of Australians are mortgage holders so their disposable income growth has slowed or gone backwards.

“Another third of the Australian population are renters and they also feel the pain of higher interest rates.

“Almost all landlords would pass on their higher debt servicing costs to tenants. Hence, the rise in interest rates globally is putting pressure on household disposable income, and in Australia’s case, 67 per cent of the population is impacted.”

Add to that the high price inflation that both the Aussies and Kiwis are grappling with.

“It is currently running at 3.6 per cent in Australia and is taking its time to return to the 2-3 per cent target band,” Dr Sen said.

“Most pundits think a rate cut is not on the cards for the Reserve Bank of Australia this year.

“In 2019, annual inflation averaged 1.6 per cent in Australia. In New Zealand, annual inflation is four per cent this year versus 1.7 per cent in 2019.

“Against this backdrop, perhaps the timing is not quite right now to be lifting the departure tax twice more in a short space of time.

“Soon, a family of four (mum, dad and two kids), Fiji’s core visitors, will have to cobble together $800 in departure tax before they book an airline ticket and accommodation.

“Food and leisure expenses get added on top. Suddenly you’re getting towards the pointy end of pricing which may deter potential tourists to look at other more competitive markets.

“Yes, departure tax was $200 in 2019 but the cost-of-living pressures are far greater today than they were in 2019.

“The interest rate dynamics are on thae tight side and high inflation environment makes it more challenging to afford an overseas leisure trip.

“Households are therefore looking at value for money proposition when it comes to an overseas holiday.

“Even if they do travel, the yields (tourism spending) are likely to be lower this year, now that the savings buffer built up during the pandemic has largely been drawn down.

“The cash savings ratio has returned to pre-pandemic levels in most markets. Further hikes in departure tax may just give some of our competitors a ‘free-hit’.”

Something for our policy makers to think about before budget debate begins next week.