Analysing the Australian economy through a travel-oriented lens can be a bit like looking at the world through a magnifying glass.
That’s because Australia is a big-ticket export for tourism operators.
Australia’s exports of goods and services to overseas destinations make up around 30% of its GDP.
It’s no surprise then that Australia’s biggest export is tourism.
The most popular destinations for Australians to visit are:China, Japan, Hong Kong, the US, Singapore, Taiwan and Malaysia.
In fact, it is this kind of global travel which is the reason why the Reserve Bank is now calling for Australia to “reduce the number of overseas holidays in the coming years”.
We need to focus on growing tourism to stimulate the economy, says Ben Williams, economist at the Institute of Public Affairs.
We’re exporting our economy and our economy’s exports.
“The problem is that our export economy has been in decline for a long time.
And the only thing that is driving this decline is that we’re exporting less than we import,” he said.
So how can we keep the tourism industry going and help stimulate the Australian manufacturing sector?
We could cut the number, says Mr Williams.
There are three reasons tourism is key to Australia’s economy: increasing international trade, reducing domestic prices and increasing domestic employment.
With the tourism sector in decline and the economy suffering from the negative effects of climate change, the Reserve’s warning of “the most significant impact of the global financial crisis in a generation” makes sense.
What will happen if the tourism market falters?
The Reserve Bank thinks there will be a significant impact on Australia’s tourism industry if the number and size of overseas holidaymakers is cut.
According to Mr Williams, the “biggest impact” will come if the Government takes action to reduce the number or size of holidaymakers from overseas.
If this happens, the tourism economy could lose its main export.
But there are a few other ways the Government could address the tourism issue.
One of these is by promoting tourism as a key driver of jobs and economic growth.
Mr Williams says Australia’s “big three” industries, the manufacturing sector, tourism and the services sector have all seen job growth in recent years.
He also thinks that the Government’s policy of reducing overseas holiday numbers could boost tourism in the short-term by encouraging Australians to stay longer in foreign destinations.
Another approach is to boost tourism through education.
Australian universities could also be given a boost by increasing their number of international students.
These students will then spend more time studying abroad, and in return will be able to benefit from lower prices for overseas travel.
How will tourism help the economy?
A major part of Australia’s success is the “mixed economy”, where foreign visitors, workers and companies are able to use their local skills, including tourism, to expand and create jobs locally.
This is because Australia’s international visitors make up less than 5% of the total number of tourists visiting Australia each year.
However, the main part of this “mixture” is made up of workers, who are often employed in the same sectors.
International visitors and workers are also a major contributor to the Australian labour force.
They account for between 12% and 17% of total employment.
In the long-term, the combined effects of the combination of tourism and employment will be positive for Australia’s GDP, says Ms Koehler.
She also thinks the Reserve is correct to call for more focus on international tourism.
She believes it is the most important export sector for the economy.
More importantly, it will increase the skills and incomes of Australians, especially in manufacturing and tourism.