– Ray Spurr

There is little doubt that the strength of the dollar is hurting the Australian tourism industry. As with other trade exposed industries, Australia’s tourism industry will face increasingly tough times in a high Australian dollar world.

The Tourism and Transport Forum has reported that the number of Australians heading overseas outstripped international visitors in the past year. This is the biggest deficit in tourism data history, with 7.4 million trips out of the country and only 5.9 million trips inbound.

A time lag between planning a trip, and arrival, means the full effect on international tourists coming to Australia still isn’t showing up in the statistics. For international tourists coming to Australia full awareness of the extent to which Down Under has become a more expensive destination is likely to filter through only gradually – and having filtered through, these perceptions will take time to dispel when eventually the dollar turns down again.

The Aussie dollar has been at a high of 110 US cents, although it has dropped a little from there. It is also at a 28 year high against Sterling. Against a broad basket of currencies the Aussie Dollar is the best-performing major currency in the past year. The strong dollar is encouraging many locals to leave the country. There is a deficit of 1.5 million people and that is the largest gap ever between the number of Aussies going overseas compared to people from overseas coming to our country.

We can expect to see a further decline in visitor numbers as the impact of the more expensive Australian dollar on our price competitiveness, relative to competing destinations, becomes more widely appreciated. In the meantime tourism incomes will suffer a further cut as those visitors who have set a limit on their holiday budget in advance of their arrival in Australia spend less on tours, wine, food, and souvenirs during their stay.

It is not just tourists from overseas who are staying away from Australia – so are home-grown tourists. Just as important as the loss of income from inbound visitors, however, is the effect of the rising dollar for those leaving the country. As Australians recognise how much further their dollars now go, more of them are choosing to take their holidays overseas. They fund that travel by reducing their spending on consumer goods within Australia or by not paying down their mortgage, and very often by switching from taking a holiday in Australia. The loss is likely to fall most heavily on longer-haul Australian destinations like Far North Queensland, the Gold Coast and the Northern Territory, which compete most directly with holidays abroad.

Ray Spurr is a senior research fellow at the Australian School of Business.