Niue's remoteness, as well as cultural and linguistic differences between its Polynesian inhabitants and those of the rest of the Cook Islands, have caused it to be separately administered. The population of the island continues to drop (from a peak of 5,200 in 1966 to about 2,100 in 2004), with substantial emigration to New Zealand, 2,400 km to the southwest.
European involvement in Niue began in 1774 with Captain James Cook's sighting (landing was refused) of what he named "Savage Island".
The 1911 Encyclopedia Britannica wrote, "The. natives are keen traders, and though uncouth in manners when compared with their nearest neighbours, the Tongans and Samoans, are friendly to Europeans. Their hostility to Captain Cook in 1774, which earned from him the name of Savage for the island, was due to their fear of foreign disease, a fear that has since been justified. The population (4079 in 1901) is slightly decreasing. The natives are all Christians, and the majority have learned to read and write, and to speak a little English, under the tuition of the London Missionary Society. They wear European clothes. The island became a British protectorate on the 20th of April 1900, and was made a dependency of New Zealand in October 1900, the native government, of an elected " king " and a council of headmen, being maintained. In 1900 there were thirteen Europeans on the island. The exports are copra, fungus and straw hats, which the women plait very cleverly."
Briefly a protectorate, the UK's involvement was passed on in 1901 when New Zealand annexed the island. Independence in the form of self-government was granted by the New Zealand parliament in the 1974 constitution. Niue is fully responsible for internal affairs. New Zealand retains responsibility for external affairs and defense; however, these responsibilities confer no rights of control and are only exercised at the request of the Government of Niue.
The economy suffers from the typical Pacific island problems of geographic isolation, few resources, and a small population. Government expenditures regularly exceed revenues, and the shortfall is made up by critically needed grants from New Zealand that are used to pay wages to public employees. Niue has cut government expenditures by reducing the public service by almost half. The agricultural sector consists mainly of subsistence gardening, although some cash crops are grown for export. Industry consists primarily of small factories to process passion fruit, lime oil, honey, and coconut cream. The sale of postage stamps to foreign collectors is an important source of revenue.
The island in recent years has suffered a serious loss of population because of migration of Niueans to New Zealand. Efforts to increase GDP include the promotion of tourism and a financial services industry, although former Premier Lakatani announced in February 2002 that Niue will shut down the offshore banking industry. Economic aid from New Zealand in 2002 was about $2.6 million.
In January of 2004, Niue was hit by the fierce tropical storm Cyclone Heta which killed two people and did extensive damage to the entire island. While in the process of rebuilding, Niue has been dependent on foreign aid.
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