Can Chinese tourists save Australia?

Advertisement
ScreenHunter_3713 Aug. 12 08.23

By Leith van Onselen

Alan Kohler yesterday published an interesting piece in The Australian on the boom in Chinese tourism to Australia, which he claims is becoming a major export industry that will help to offset the unwinding of the mining boom:

IT’S becoming clear that one of the industries that will replace the business of exporting minerals and energy to China, if such replacement turns out to be needed, will be the temporary importing of Chinese people.

In June about five Boeing 747 loads of seasonally adjusted Chinese tourists arrived in Australia every day. For the year to June, the total was 769,000 — a record number — and second only to New Zealanders.

More importantly, Chinese tourists stay the longest and spend by far the most: $5.1 billion in the year to March, according to Tourism Australia data, or $7343 each — double what the Kiwis spend…

An analyst with investment firm CLSA… says the number of Chinese tourists is expected to double by 2020, and… Australia should get a rising share of that rising tourism.

So make that a dozen jumbo jet loads of Chinese tourists, every day…

It truly is one of Australia’s fastest-growing, and most significant, industries.

An examination of the ABS’ Short-term visitor arrivals and departures numbers does reveal strong growth in tourism from China. Over the past four years, the annual number of arrivals from China has almost doubled from 385,600 to 769,200. Moreover, China’s share of total tourist arrivals has risen from 6.9% to 11.9% over the same period (see next chart).

Advertisement
ScreenHunter_3714 Aug. 12 08.41

So yes, there is clearly a growing export industry here which Australia can hopefully continue to tap into.

That said, whether this budding tourism boom will be anywhere near big enough to offset the unwinding of the mining investment and commodity price booms looks doubtful.

Advertisement

As shown below, Australia’s tourism trade figures are not exactly flattering, with Australia running a $1 billion deficit in the year to June 2014, despite the boom in Chinese tourist arrivals:

ScreenHunter_3716 Aug. 12 09.12

The elevated Australian Dollar has played a significant role in Australia’s tourism trade deficit, and a significant devaluation of the Australian dollar back to its post-float average – which is some 14% below current levels – would go a long way to boosting tourist arrivals exports, reducing departures, and improving Australia’s tourism trade balance (see next chart).

Advertisement
ScreenHunter_3626 Aug. 06 10.37

However, given its relatively small size, the gains from Chinese tourism, while important, are likely to be dwarfed by the decline in income and jobs arising from the unwinding of the once-in-a-century mining boom.

[email protected]

Advertisement

www.twitter.com/Leithvo

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.