By Carla Wilshire
Chief Economist and CEO, Social Policy Group
I visited Lord Howe Island as a child. I remember the quiet strength of it, the gentle precision of life shaped by tides and cargo, and the sense that everything here moved to its own rhythm. I did not return, but I never forgot. In the years since, I have come to see Lord Howe not only as a national treasure, but as a case study in resilience under constraint.
Today, in my role as Chief Economist at the Social Policy Group, I examine economic systems under stress. My team has spent the past year mapping the impact of rising freight costs, technological labour shocks, and shifting consumption patterns across Australia’s regional economies. Of all the locations we studied, Lord Howe Island stood out, not because it is unstable, but because it is so finely balanced that small changes offshore are now having disproportionate effects onshore.
The first pressure is freight. Across New South Wales, regional air cargo costs have increased by more than 18 per cent in the past twelve months. The reasons are layered. Fuel costs have risen. Aircraft maintenance delays have stretched supply. Logistics firms have rationalised routes, deprioritising low-volume corridors. Lord Howe, with its limited flights and small cargo capacity, is now facing growing delivery uncertainty.
Sea freight, long relied upon for its relative cost stability, has also become more fragile. Shipping delays have lengthened, insurance costs have increased, and the service schedule has tightened. Port congestion, vessel ageing, and capacity reallocations have made freight feel less like an invisible system and more like a daily variable. It’s impact is on the value of local business’s like Thompsons Store or Joy’s shop, or small restaurants forced to close.
For local businesses, this is not theoretical. Small general stores on the Island, those that quietly anchor the everyday, are now managing higher costs, shorter lead times, and greater risk. Shelf availability has become more difficult to guarantee. Supplier relationships must be renegotiated with fewer options. Margins are shrinking. Inventory management is no longer simply a logistical exercise; it is a financial balancing act shaped by forces well beyond the lagoon.
The second pressure is structural change in the visitor economy. Tourism numbers to Lord Howe remain capped, and in peak seasons the Island remains at capacity. But the composition of those visitors is changing, and with it, the economic yield. Across Australia, the integration of artificial intelligence into professional sectors is displacing white-collar workers in financial services, law, human resources, and administration. Since late last year, over 8,000 jobs have been cut across just two major banks. These were high-income households who, in the past, booked regional travel confidently, spent freely, and returned regularly. That cohort is now pulling back.
Tourism Research Australia reports that forward bookings for regional destinations near Sydney have declined by nearly ten per cent year on year. On Lord Howe, the effects are already visible. The average stay length has dropped from 5.2 to 4.7 nights. Visitor spend, adjusted for inflation, is down by over six per cent. More guests are booking later, cancelling more frequently, and selecting lower service tiers. These patterns are not temporary. They reflect broader consumer caution that is likely to persist.
The freight and tourism pressures are not isolated. They interact. Operators cannot easily absorb freight cost increases because they cannot scale their businesses. Visitor numbers are fixed. Inventory storage is limited. Price pass-through is constrained by affordability ceilings. When a tourism economy is dependent on reliability and quality, and both come under strain, the risk is not of collapse but of steady erosion.
This erosion does not announce itself. It appears quietly, in simplified menus, deferred maintenance, reduced service frequency, and narrower operating hours. Businesses adapt. But each adaptation imposes a cost on the brand, the experience, and the economic confidence of the Island. The burden falls most heavily on small operators without deep capital reserves or pricing power. It is these people, shopkeepers, guesthouse managers, café owners, who are carrying the system through the transition. But the weight is increasing.
Lord Howe Island is often described as resilient. It is. But resilience must be structural, not just cultural. The same constraints that protect the Island also amplify its vulnerability. Limited freight access and fixed visitor caps create stability in one sense but remove flexibility in another. In a world where supply chains are fragmenting and middle-income travel is softening, this is a dangerous form of exposure.
What can be done? The first step is to recognise that freight is no longer background infrastructure. It is the economic foundation. It should be treated as such. The case for freight support, through subsidised routes, guaranteed access, or pooled logistics is not discretionary. It is essential. Without intervention, volatility will continue to displace viability.
The second is to model stress points more openly. If another air route is lost, what is the impact on food supply? If fuel prices rise by fifteen per cent, what happens to the cost of linen delivery or refrigeration equipment? If international visitor sentiment changes, can the domestic market absorb the shortfall? These are not alarmist questions. They are rational planning tools for an economy that depends on precision more than scale.
Finally, Lord Howe should be treated not just as a protected place but as a live case of bounded economic exposure. It offers lessons in how small economies function under global pressure. It is a signal, not of failure, but of what sustainability really requires.
The Island will endure. Of that I have no doubt. But endurance should not be confused with acceptance. There is still time to act, strategically, collectively, and without waiting for the pressures to become irreversible. Freight needs stabilisation. Tourism needs realism. And the people who hold the system together need to know they are not doing so alone.
When I was a child, I remember walking into the local store and seeing it as full of possibility. I did not know how much effort sat behind those shelves. I do now. And I know that in protecting the Island’s future, it is those hidden systems, the deliveries, the margins, the quiet adaptations, that deserve our full attention.