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The "Big Mac" index produced by The Economist magazine is one of the world's
most famous economic indicators, even though it has its origins in a
semi-humorous exercise which uses the relative prices of Big Macs around the
world to value exchange rates (see below for more). Some time ago a colleague,
Bob Gillett from Fiji, suggested something similar for the Pacific, and this
inspired me back in 2003 to collect prices from around the region for tinned
mackerel. So, what else could we call it but........the PacMack Index! And you
can certainly see some big differences, with the three French Territories coming
in at 4-5 times the level of the lowest price in the region (Samoa). I will be
updating it to use 2005 prices in the near future, so watch this spot for an
update.
And for those of you who are familiar with PPPs and realise that there are still
no official ones for the Pacific, some reassurance: SPC has started working with
the ABS and regional price specialists to develop "regional PPPs" that can link
through Fiji to other work being done internationally as part of the
International Comparison Project (ICP). We are hoping to have most if not all
results completed by late 2005-early 2006 - so we will NOT be using PacMack to
adjust the MDG poverty indicator!
It is well worth a visit to
http://www.economist.com/markets/Bigmac/Index.cfm to find out more,
including this description of the BIG MAC INDEX
Burgernomics is based on the theory of purchasing-power parity, the notion
that a dollar should buy the same amount in all countries. Thus in the long run,
the exchange rate between two countries should move towards the rate that
equalises the prices of an identical basket of goods and services in each
country. Our "basket" is a McDonald's Big Mac, which is produced in about 120
countries. The Big Mac PPP is the exchange rate that would mean hamburgers cost
the same in America as abroad. Comparing actual exchange rates with PPPs
indicates whether a currency is under- or overvalued.
Garth Parry
SPC Statistician
April 2005
national data