Microeconomics Reforms in Australian Tourism Industry

Question: Discuss about the Microeconomics for Reforms in Australian Tourism Industry. Answer: Introduction The essay discusses on micro analysis about the tourism industry in Australia. The tourism industry in Australia is an important industry, which contributes significantly to the Australian GDP. Australian government gives priority to the sustainable tourism. This essay is based on articles discussed on reforms and present trends in this industry of Australia. The paper starts with the discussion on the nature of the tourism industry of Australia. The discussion proceeds towards the reforms initiative in this industry taken by Australian government. Changes in the contribution of tourism sector in the GDP are also discussed. There is a change in numbers of international visitors in Australia observed from 1990s to present. Different regions in Australia such as Tropical North Queensland have been experiencing a sharp decline in number of international visitors despite the growth of the economy. Number of visitors from Japan has been declined significantly. The reasons behind declining visitors are environment policies of the government. Numbers of reforms have been granted by the government to save environment and social infrastructure (Gssling, Scott and Hall 2013). As per the Australian Bureau of Statistics, total tourism spending was 3% of overall Australian GDP. Tourism industry has both forward and backward linkages, which leads the economy towards higher order of the growth path. The essay verifies the effect of policy reforms on the tourism industry and its effect on economic growth. Discussion Tourism industry in Australia is monopolistically competitive in nature. Large numbers of suppliers are engaged in the industry. Consumers are the principle elements of this industry. Consumers are classified as domestic and international visitors. Sellers of the tourism industry provide differentiated products to compete and get market leadership. Major products of this industry in Australia are entertainment, transport, food and drink, accommodation, sporting activities, package tours and others. International visitors in Australia have grown from 2.5 million during 1992 to 6.7 million in 2014. Tourism is an important source capital inflows and economic growth of the economy. Expansion of tourism sector helps to grow other allied sectors such as hotels, food and beverages and transportation. Domestic culture is also plays an important role to flourish the tourism industry. According to Ludlow (2016), Australian dollar and target market campaign has been playing an important role in the tourism industry. International tourism has started to grow in Australia from 1980. Resident departure rate was higher at that time also. After 1985, this gap started to decrease by increasing both domestic and international visitors in Australian tourism sector. Australian expenditure abroad was always greater than foreign expenditure in Australian tourism sector up to 1991-92 (abs.gov.au 2016). However, Australias share of international visitors has declined from 0.7% from 2000 to 0.6% in 2013, despite growth of this sector (pc.gov.au 2015). China is the highest contributors of international tourism in Australia. Competition has been growing among different countries to attract Chinese tourists. Therefore, maintaining market share has become difficult for Australian economy. Declining visitors from UK, US and Japan is the reason for falling market share Australia in the global tourism. Innovation is the reason for declining market share. Digital platforms for short term residential accommodation have been a regulatory issue to the government. In the view of Ludlow (2016), factors affecting the demand for tourism are demographic and social changes, country of origin, ecotourism, changing in digital technology, sustainability of tourism. Most of visits are seen in the capital cities of Australia rather than regional sector. Increase in income of the households are determining factor of the demand for tourism. As tourism is the leisure goods, increase in wage induces people to spend more on tourism. Therefore, economies prosperity of the domestic and international economy is a crucial factor for development of tourism industry in an economy. Favourable Australian dollar influences the foreign visitors. Government expenditure in tourism industry has increased after 2000 in order to raise revenue from this sector. Investment in the areas such as accommodation, tourism r elated infrastructure and transport infrastructure has increased significantly. Australian government has taken policies of destination marketing o promote Australian tourism sector in the international market. Hence, investment in advertising, travel magazine, websites and other programmes has increased. Government has intervened into the market to save this sector from rising competition. As opined by Gssling, Scott and Hall (2013), free rider problem may exist in the economy to take the advantage of destination marketing. Business organisations may take benefits from this policy using the country of origin image. This policy has worked positively for Australian economy. Australian tourism is a major export earner for this economy. This sector contributes significantly to the countrys GDP and employment. This sector employs nearly 5% of the total employment. Employment has grown from 477,500 from 580,200 in 2015-16 (tra.gov.au 2015). This sector has a positive spill over across the economy. Tourism sector in Australia has affected severely during global financial crisis. However, the economy has been able to recover the gap after 2009-10 with a decelerated growth rate. Main reasons of decelerated growth in this sector are falling commodity prices and oil prices in the international market, Chinas shift towards internal economy, slower growth of Chinese economy are the contributing factors. Above figure shows that contribution of tourism industry in the economy has moved with Australian GDP. Growth rate has fallen from 19% in 2001-02 to 3.5% during 2013-14. Ruhanen and Shakeela (2013) stated that climate change such as rising sea level, warmer temperature, storm pattern and other climatic risks have attributed to falling growth. It can be said from the analysis that further policy reform is required in Australian tourism in order to increase growth of this sector. Conclusion The analysis discussed on the policy reforms in tourism industry of Australia. The essay has shown that tourism industry has expanded from 1991-92 to 2000-01. However, growth rate has fallen from 2000-01 to 2007-08. During global financial crisis, public investment on tourism has decreased significantly. Low per capital income reduced the number of international visitors in this economy. Slow growth rate in China, international competition for tourism, adverse climatic conditions are the cause of decreasing growth of tourism sector in Australian economy. Government has several initiatives such as destination marketing and has increased investment. However, despite policy reforms, the growth rate has not raised much. There is further scope of policy reforms in this sector. References abs.gov.au 2016 Tourism: a statistical overview. Available from https://www.abs.gov.au/AUSSTATS/abs@.nsf/90a12181d877a6a6ca2568b5007b861c/10dd114ce3a2c35cca256fea00798473!OpenDocument Gssling, S., Scott, D. and Hall, C.M., 2013. Challenges of tourism in a low?carbon economy.Wiley Interdisciplinary Reviews: Climate Change,4(6), pp.525-538. [ retrived from https://www.researchgate.net/profile/Daniel_Scott9/publication/236018257_Challenges_of_tourism_in_a_low-carbon_economy/links/57628c9c08ae5df6d5b1b2a5.pdf] Ludlow, M. 2016. Tourism wave continues. [online] Financial Review. Available at: https://www.afr.com/business/tourism/australia-remains-tourism-magnet-for-international-travellers-20160825-gr0yp9 [Accessed 2 Jan. 2017]. pc.gov.au 2015. Australias International Tourism Industry. Available from: https://www.pc.gov.au/research/completed/international-tourism/international-tourism.pdf Ruhanen, L. and Shakeela, A., 2013. Responding to climate change: Australian tourism industry perspectives on current challenges and future directions.Asia Pacific Journal of Tourism Research,18(1-2), pp.35-51.[retrived from https://www98.griffith.edu.au/dspace/bitstream/handle/10072/54121/80018_1.pdf?sequence=1] tra.gov.au 2015.Tourism satellite account. Available from: https://www.tra.gov.au/documents/Tourism_Satellite_Account_2015-16.pdf