Consumer price index (CPI) inflation has not been a problem for Fiji for nearly two years. However, minimum wages will increase from $2.68 per hour to $4.00 per hour by 1 January 2023, a 49 per cent increase in weekly wages. This will see some upward pressure on workers higher up the pay scale.
As wages pressure comes through, unit labour costs - wage increases adjusted for productivity increases - will rise too, pushing underlying inflation higher. This means Fiji needs to improve labour productivity, particularly in capital deepening (upgrading its capital stock relative to workforce) and using the existing stock of capital and labour more efficiently. Nonetheless, new wage negotiations under different pay-setting methods (such as enterprise bargaining or individual contracts) will remain a delicate balancing act to maintain real wages, business competitiveness and sustained jobs growth.
Higher pass-through of upstream price pressures, including unit labour costs, is likely to push CPI inflation towards 5 per cent by the end of 2022.
On the demand side of the equation, retail sales are making a comeback following a pandemic-induced downturn. Retail turnover, supported by inbound demand, higher employment, government transfer payments and remittances, is on the rise again. ANZ card transaction data show three-month expenditure to January 2022 at 60 per cent of 2020 level.