On this page:

• Summary
• Economy and GDP
• Trade with Australia

Summary

Nickel was discovered in New Caledonia shortly after the French annexed the territory in 1853. The first mining operations began in the 1870s and rapidly expanded as the global demand for nickel grew. There are now three metallurgy companies in the local nickel sector that provide over a quarter of jobs for New Caledonians. Société Le Nickel, one of the three nickel mining companies, is the country’s largest private employer.

In the 1980-90s, it was believed the nickel mines would fund New Caledonia’s independence, enabling the country to sustain itself without financial assistance from France. However, none of the three smelters have turned a profit for some time due to the volatility of the London metal exchange which has been in freefall for nearly 10 years. High electricity prices required to mine the nickel, transport, and labour costs are also contributing factors to the industry’s decline. The question of who should own the mines and the revenue has also been a contentious issue with the indigenous Kanak population claiming they have been disadvantaged.

Given its wide use in advanced alloys and defence applications, New Caledonia’s nickel resource is potentially an important strategic asset to France and the EU, providing it can be made commercially viable. The cost of transporting the ore to Europe, a lack of local processing capabilities, and political disruption has bought the industry to a stand-still.

This comes at a time when China is in control of approximately 80% of the world’s Nickel production and processing. As well as nickel, China also controls approximately 70% of all lithium and germanium production required to produce batteries. With Indonesian and Philippine nickel mines saturating the market and able to meet a large portion of Chinese demand, the price of nickel on the world exchange has reached crisis levels. This has left New Caledonia’s economy in a precarious position.

New Caledonia’s insular, patronage-driven economy is heavily protectionist. The all-consuming preoccupation with the question of independence (See: Hot Topic) is distracting the local government from futureproofing the economy. After nickel, it relies heavily on tourism, exports of vanilla and honey to France, and jasmine and sandalwood to China and Japan. Amongst the population there is also a large divide between wealthy and poor which has contributed to an ethnic divide. Many of New Caledonia’s urban dwellers are of French origin while the indigenous Kanaks live mostly in outer urban and rural areas. The price of goods is markedly more expensive in the country and there are limited indigenous employment and higher education opportunities.

Following the COVID-19 pandemic, New Caledonia’s government debt ballooned to 210% of GDP. On 30 June 2023, New Caledonia’s Finance Minister Yannick Slamet announced the government had six working days of cash remaining and needed a bailout. In September 2023, France announced budget support providing 37 million Euros to the Government of New Caledonia to avoid the territory from defaulting on pension and welfare payments.

In June 2023, New Caledonia adopted a draft law for a ten-year ban of deep-sea mineral resource exploration and exploitation within the territory’s Exclusive Economic Zone. While this was an admiral act of environmental conservation, it further limits options for New Caledonia’s economy.

Economy and GDP

Nickel mining constitutes approximately 86% of exports and 20% of GDP. Roughly 15% of the world’s Nickel is from the small island group. Financial transfers from France are also an important source of income accounting for another 20% of local GDP. This covers expenditure on defence, domestic security, primary and secondary education, and public services as well as the salaries, social security contributions, and pensions of state employees. Tourism is an important sector with eco-tourism and the cruise industry gaining momentum since the COVID pandemic ended. Major imports include refined petroleum, coal, cars, and packaged medicaments.

Trade with Australia

France, Australia, and New Zealand are important for New Caledonia’s tourism sector. Australia is the second closest country geographically with flights from the east coast taking 2-3 hours. Approximately 80% of the nearly 323,000 cruise ship passengers who visited New Caledonia in 2023 were from Australia. New Caledonians also visited Australia in numbers, particularly the Gold Coast, which has a sister city relationship with Noumea. Tourism is buffering the economic impact of the faltering nickel sector, which makes the recent civil unrest even more damaging. In May 2024, the International Airport was closed for over one month due to violent protests and looting.

AUSTRADE Commissioner for the Pacific and Timor-Leste, Tim Houghton, visited New Caledonia in April 2024, his first international visit in the role. Australia is an important trading partner making up $595M of Imports and $27M in Exports. By far the most sought-after Australian product was coal briquettes which made up $221M (63%) worth of imports in 2022.

Currently Australia does not have a free trade agreement with New Caledonia. Trade tariffs are a limiting factor for pursuing more extensive bilateral trade.

For further information on New Caledonia’s economy, see the resources below:

Video

1. New Caledonia unrest: What impact on the economy?

Articles

1. Country Economic and Trade Data – Power BI Report Server (dfat.gov.au)
2. France sets end March deadline for New Caledonia nickel deal | Reuters
3. Nickel and Dimed: The Green Metal Gamble in New Caledonia (harvard.edu)
4. How Vanuatu’s COVID-19 policies can catapult economic recovery through the private sector in 2022 – Devpolicy Blog from the Development Policy Centre
5. Aussies flock to New Caledonia in record levels in 2023 (karryon.com.au)
6. A swimming ban in an island paradise has impacted local tourism. But are shark nets and culling the answer? – ABC News
7. Indonesia harnesses Chinese capital and innovation to dominate world nickel production | The Strategist (aspistrategist.org.au)
8. Demanding the Future: Navigating the Pacific's Youth Bulge (lowyinstitute.org)