Data from the Treasury shows that the coronavirus-induced restrictions on international travel have boosted the Australian economy.
According to the Treasury, domestic tourism grew the economy by $7.5 billion over the December quarter, the equivalent of around 1.5% of GDP, as Australians holidayed at home and spent their money locally.
This led to an upbeat assessment from Treasurer Josh Frydenberg:
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“While there are some sectors in the economy that continue to do it tough, it is important to note that Australians typically spend more overseas than foreign tourists spend in Australia”…
“As a result, the cost of international border restrictions on tourism exports was offset by Australians not travelling overseas and instead spending domestically across the economy. Treasury advised that this is estimated to have increased GDP by $7.5 billion in the December quarter.”
For all intents and purposes domestic tourism should be booming. Australian households are awash with cash:
Moreover, Aussies have traditionally spent more travelling overseas than foreigners have spent holidaying in Australia. Thus, with the international border closed and Australians barred from travelling overseas, they should instead be spending this money locally.
However, theory is different to reality. I am currently working part time as I holiday in the Gold Coast. The Easter school holidays are traditionally one of the busiest periods of the year, yet it is unusually quiet here.
Recent data from Deloitte confirmed that the tourism industry continues to struggle with “international and interstate travel down by 81% and 65%, respectively, in 2020”:
These declines correspond to 7.6 million fewer international arrivals, 45 million fewer domestic overnight trips and 84 fewer day trips in 2020 compared to 2019 levels. This results in a total combined loss of around $85 billion in visitor spend, including $40 billion loss in international and $45 billion loss in domestic spend.
The problem is that many Australians lack the confidence to book travel because of the risk of snap border closures and/or forced isolation anytime there is a whiff of virus in the community.
As such, a form of ‘sovereign risk’ has crept into the travel and tourism industry.
Much of the blame must fall upon the Morrison Government. Its abrogation of responsibility for quarantine to the states into unsuitable city hotels instead of regional facilities all but guarantees that Australia will experience continuous leakages of COVID-19 into the community, resulting in further snap border closures and more pain for travellers and tourism operators. It has also botched the vaccine rollout.
Josh Frydenberg’s latest spruik is a neat microcosm of the Morrison Government’s marketing spin: pretending that tourism is booming while it is actually failing, while doing nothing to address the underlying policy need.
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