Research Note 18 1999-2000

The Economic Significance of Tourism

Tony Kryger
Statistics Group
30 November 1999

Tourism in Australia today is big business. Its economic significance can easily be assessed in terms of:

• the contribution it makes, both directly and indirectly, to the total value of goods and services produced in the economy
• the export dollars it earns through the sale of goods and services to overseas visitors, and
• the jobs it creates.

The purpose of this Research Note is to measure the economic significance of tourism by referring to work undertaken by the Bureau of Tourism Research (BTR) and published in Tourism's Economic Contribution 1996-97. While the latest estimates of tourism's economic contribution are the third such estimates produced by the Bureau, changes to the methodology and source data mean that comparisons with earlier periods are not possible. Consequently, this Research Note refers mostly to the latest findings of the BTR.

Tourism-Not An Industry

Tourism is not an industry in the sense that it is not identified in the Australian and New Zealand Standard Industry Classification. Rather, tourism is an activity that takes place in a number of industry sectors, most particularly accommodation, cafes and restaurants; retail trade; transport; and personal services. For this reason, a measure of the economic contribution of tourism cannot be found in the Australian National Accounts as it can be for other industries.

To measure the economic significance of tourism, the BTR has developed a methodology that relies on data from a range of sources including the BTR visitor surveys, projections of the Monash Model¹ database, the ABS Input-Output tables and other ABS data.

Contribution to Gross Domestic Product (GDP)

In 1996-97, total tourism expenditure in Australia was valued at $59.4 billion, of which about three-quarters came from domestic tourism and the balance from overseas sources.

To meet $59.4 billion in expenditure, the 'tourism industry' produced $52.6 billion worth of output-the difference being tourism expenditure on imports and net commodity taxes. It is estimated that to produce $52.6 billion worth of output, the 'tourism industry' value adds about $24.2 billion (the value of tourism output less the cost of materials used to produce that output). Since the value added (or GDP²) of all industries in 1996-97 was $453.0 billion, 5.4 per cent of GDP is therefore directly accounted for by the 'tourism industry'. This means that tourism is larger than the mining industry (4.1 per cent of GDP), significantly larger than agriculture, forestry and fishing (3.5 per cent of GDP), and roughly equivalent in size to industries such as wholesale trade, transport and storage and education.

If tourism was ranked alongside other industries on the basis of its contribution to GDP then it would occupy 'about' 10^th place (see Table 1). Tourism's ranking is approximate because if tourism was recorded directly in the National Accounts there would be a consequent reduction (not shown in Table 1) in the contribution to GDP of other industry divisions, most notably accommodation, cafes and restaurants; and transport and storage.

As well as tourism's direct contribution to GDP, the tourism industry also makes an indirect contribution through the flow-on effect that changes in its output have on other industries' output and hence output in general. In 1996-97 these indirect effects were estimated at 3.6 per cent of GDP.

Export Earnings

International tourism makes a significant contribution to Australia's export earnings, and therefore to the credit side of the balance of payments, from the sale of goods and services to overseas visitors. International tourism is also important in that it broadens Australia's export base, thereby reducing our dependence on traditional commodity exports in the rural and mining industries.

In 1997-98, international tourism generated $16.4 billion in export earnings. This is considerably more than the $10.8 billion that Australia earned (for example) from its mineral exports. Overall, tourism accounted for 14.4 per cent of Australia's total export earnings in 1997-98, and 64.1 per cent of service exports. These figures are somewhat down on the previous year (15.7 per cent and 67.6 per cent respectively), due largely to the effect of the Asian financial crisis on inbound tourism.

It should be noted that Australia is also a net beneficiary from international tourism. That is, after deducting the $11.6 billion that Australians spent on overseas travel in 1997-98, Australia had a surplus from international tourism of $4.8 billion.

Employment

In 1996-97, tourism expenditure in Australia was responsible for the employment of close to a million persons, or 11.5 per cent of total employment. This total is comprised of 670 800 persons employed directly in the 'tourism industry' and a further 291 000 persons employed indirectly, i.e. in those industries that either supply goods and services to the 'tourism industry' or which receive a flow-on benefit from tourism output.

Of those persons employed directly in the 'tourism industry', around 34 per cent are employed on a part-time basis, compared with the Australia-wide average of 25 per cent, and reflects the importance of part-time employment in this sector. The major tourism employer industries are restaurants, hotels and clubs, retail trade, air transport and personal services.

Domestic tourism expenditure generates the most jobs, 500 100 compared with 171 100 jobs created by international tourism expenditure in 1996-97. The BTR has estimated that tourism expenditure of around $88 000 equates to the employment of one person.

Conclusions

The problem of defining the 'tourism industry' and therefore of accurately measuring its economic significance is being addressed by the Australian Bureau of Statistics through the development of a set of Tourism Satellite Accounts. At this stage the ABS anticipates that the Accounts will be a 'one-off' attempt at measuring the economic contribution of tourism. The Accounts are due for release in September 2000 and will relate to the period 1997-98.

1. A general equilibrium model of the Australian economy developed at Monash University. Its primary focus is on the microeconomy.
2. Gross domestic product figures shown in this Note are measured at basic prices, i.e. the value of output less any tax payable, and plus any subsidy receivable.

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