CHART: The Falling Aussie Is Good For Local Travel Destinations

Getty/Jonathan Ferrey

The strength of the Aussie dollar against the US dollar over much of the past decade helped propel a surge in overseas holidays with departures growing 10% a year each year since 2003.

But with the Aussie now down near four year lows, UBS economists Scott Haslem and George Theranou say the fall is spreading growth throughout the domestic economy via more travel in Australia.

In a note to clients, Haslem and Theranou said: “September departures growth has already slowed sharply to a five-year low of 1% y/y, while arrivals have accelerated this year to around a decade high of 7% y/y, up from their nearly flat trend from 2005-2013.”

This is the fastest pace of net arrivals since the Sydney Olympics back in 2000.

That’s great news. Haslem and Theranou go further, noting that tourism will “make a solid boost to domestic growth over the next few years”.

This coupled with UBS’ forecast of a fall in the Aussie to 80 cents will “see ongoing switching of consumption back to the domestic economy – as the end of relatively cheap overseas holidays sees the trend of departures likely slow towards flat, while arrivals should hold their recent solid pick-up”.

Tourism represents a substantial 6% of the economy, directly and indirectly, and employs almost one million people (8% share).

UBS says tourism should grow by at least 5% a year and contribute a solid 0.25 percentage points to growth. And it’s plausible that tourism growth could reach 10% a year, adding an even stronger 0.5% percentage point to growth.”

That’s great news. Now the Aussie dollar just needs to fall a little further and help rebalance economic growth around the economy.

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