Transcript
GEOFF BERTRAM: Officially, judging a country to be a high income economy is done on the basis of the Gross National Income, which actually measures the income that the people who are living in the economy are actually able to get. But most economies, especially the small ones, produce figures for Gross Domestic Product which is easier to measure. But Gross Domestic Product is not necessarily a good measure of the actual income being received by people in the economy. And in the Cook Islands case that's especially true because there's a very large tourist sector. A lot of the revenues from that tourist sector actually accrue outside the Cook Islands, particularly in New Zealand and Australia. And so it's likely that the actual Gross National Income of the Cook Islands' economy is quite a lot less than its Gross Domestic Product. But we don't know how much less because the national accounts are not comprehensive enough to give us that number.
DOMINIC GODFREY: I'm not quite following you here. In terms of Gross Domestic Product, is that not the measure of the total output, the market value of the goods and services of a nation within its borders?
GB: That's correct, Gross Domestic Product measures the amount of goods and services actually produced per a period of time in the economy.
DG: Versus the GNI which to my understanding is the GDP plus the income gained from other nations for those goods and services?
GB: That's correct. Or minus the income that's paid to other nations!
DG: Ah!
GB: And economies with a lot of outside investment, which is the case in the Cook Islands, the returns on that outside investment and indeed from other services provided from outside the economy flow out on the balance of payments. And so the income level is actually below the level of Gross Domestic Product, but we don't know how much below because we don't have a really accurate measure.
DG: So the Cook Islands has bought this extra time to crunch the data on this, to get some really robust new data…
GB: Yep.
DG: How achievable is this in this time frame?
GB: I don't see any problem in getting at least a credible set of numbers together. The OECD has given them an 18 month deferral of the graduation decision to produce numbers showing whether or not they have in fact crossed the high income threshold. I think within that timeframe it should be possible to at least have a good enough answer for the OECD to decide whether graduation goes ahead or not.
DG: As an economist, with your experience with developing small island states' economies in the Pacific, what is your feeling on this in terms of what this data will show us towards the end of 2018?
GB: My guess, from what I've seen of the number, is that the Gross National Income will turn out to be below the graduating threshold. I think that will only buy them another three or four or five years before graduation finally bites because so long as the income continues to grow they will eventually cross the threshold on whatever measure you use. So really it's a matter of timing rather than avoiding graduation altogether.