Tourism s to Tourism s. Economy

Transcription

1 Tourism s Contribution to the Australian Economy to Tourism s Contribution to the Australian Economy

2 Authors: Jai Kookana and Tien Duc Pham ISBN (PDF) (Word) Tourism Research Australia Department of Resources, Energy and Tourism GPO Box 1564 Canberra ACT 2601 ABN Web: Publication date: July 2013 This work is licensed under a Creative Commons Attribution 3.0 Australia licence. To the extent that copyright subsists in third party quotes and diagrams it remains with the original owner and permission may be required to reuse the material. This work should be attributed as Tourism s Contribution to the Australian Economy, to , Tourism Research Australia, Canberra. Enquiries regarding the licence and any use of work by Tourism Research Australia are welcome at tourism.research@ret.gov.au ii

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4 Contents Executive summary... v Introduction... 1 What has changed from the previous report?... 1 What is the direct economic contribution of tourism?... 1 What is the indirect economic contribution of tourism?... 1 What is the total economic contribution of tourism?... 2 Tourism s contribution to GDP and GVA... 4 Direct contributions... 4 Indirect contributions... 4 Total contributions... 5 Tourism s contribution to GVA by industry... 6 Indirect GVA in All other industries... 8 Growth in total tourism GVA, by industry... 9 Industry share of total tourism GVA Tourism s contribution to employment Tourism employment by industry Indirect employment in All other industries Tourism multipliers Tourism multipliers over time Conclusion References Appendix A: Methodology for calculating indirect contribution Appendix B: Input-output multipliers and tourism multipliers iv

5 Tables Table 1: Relationship between GVA and GDP... 4 Table 2: Tourism GVA by industry, Table 3: Industry share in total tourism GVA Table 4: Summary, tourism s direct and indirect contribution to the Australian economy Table 5: Direct and indirect employment by tourism industries, Table 6: Total (direct and indirect) employment in tourism Table 7: Tourism industry multipliers ( ) based on input-output tables Figures Figure ES1: Key economic indicators, vi Figure ES2: Output multiplier: Tourism versus other important industries... vii Figure 1: Direct and indirect share of tourism GVA and GDP... 5 Figure 2: Annual growth in total tourism GDP and Australian GDP... 6 Figure 3: Tourism indirect GVA in All other industries, Figure 4: Average annual growth in GVA, tourism and all industries, to Figure 5: Direct and indirect share of tourism employment Figure 6: Direct and indirect employment growth in the tourism industry, to Figure 7: Tourism employment in All other industries, Figure 8: Relationship between tourism product share and tourism output multiplier Figure 9: Flow-on effect of tourism consumption Figure 10: Presentation of results v

6 Executive summary This report presents a complete picture of the Australian tourism industry s contribution to the economy. TRA s estimates of tourism s indirect and total economic contribution presented in this report complement the latest estimates of tourism s direct contribution from the Australian Bureau of Statistics (ABS) Tourism Satellite Account (TSA) (ABS Cat. No ). Results are presented for the period to This report reflects revisions in the time series estimates published by the ABS and revisions in the domestic and international consumption time series published by TRA (see TRA 2013 for more information). Consequently, the estimates published in this report are not comparable to the previously published estimates. While Australia s tourism industry suffered a severe downturn during the global financial crisis (GFC) of , the industry showed its resilience by recovering quickly during the post-gfc period ( to ), when tourism Gross Domestic Product (GDP) increased by 3.9 per cent annually over this period (Figure ES1). In the long term, total tourism GDP rose at an average annual rate of 4.6 per cent between and Tourism s contribution to Australian GDP was $87.3 billion, or 5.9 per cent share of the Australian economy. v

7 Figure ES1: Key economic indicators, Tourism s contribution to Australia s GDP $87.3 billion Growth in total tourism GDP and national GDP between and : or 5.9% of total GDP Total tourism GDP* 4.6% Direct GDP (a) - $41.0 billion Indirect GDP (b) - $46.2 billion National GDP* 6.8% *average annual growth Tourism s contribution to Australia s GVA $77.1 billion or 5.6% of total GVA Direct GVA - $37.6 billion Indirect GVA - $39.5 billion Tourism s contribution to Australia s employment 908,434 persons or 7.9% of total Australian employment Direct - 531,900 persons Indirect 376,534 persons As a labour intensive industry, tourism s direct employment share of 4.6% was higher than other important industries, such as: Mining 2.2% Electricity, gas, water and waste water services 1.3% Wholesale trade 3.6% Financial and insurance services 3.7% Tourism consumption expenditure 1 $91 billion Sources: (a) ABS Cat. No (b) TRA calculations 1 Tourism consumption consists of tourism expenditure (the amount paid by a visitor or on behalf of a visitor for and during his/her trip and stay at the destination) plus imputed consumption by resident and non-resident visitors on tourism-related products, including those sold at prices that are non-economically significant. vi

8 Output multiplier Tourism s results from another important economic measure, output multipliers, further highlight the positive outlook for the industry. Tourism s total output multiplier was valued at (Figure ES2). This means that for every dollar that tourism earns directly in the Australian economy, it generates an additional 90 cents to other parts of the economy. At 1.9, tourism s total multiplier is larger than other important industries such as Mining (1.6), Retail trade (1.7) and Education and training (1.4). Figure ES2: Output multiplier (a) : Tourism versus other important industries Tourism Retail trade Mining Healthcare and social assistance Finance and insurance services Education and training Sources: (a) TRA calculations using ABS input-output tables (ABS Cat. No ) 2 Tourism multiplier value measures the increase in the production of intermediate inputs in the economy (indirect contribution) resulting from a unit increase in consumption of tourism goods and services by the visitors. A high value of this multiplier indicates that a higher indirect value is created in the economy. vii

9 Introduction This report is the fifth in the series that measures the broader indirect and total value of tourism s contribution to the Australian economy. It provides estimates for the total flow-on of output contribution from tourism consumption between and These estimates complement the Australian Bureau of Statistics (ABS) direct contribution estimates from the edition of the Tourism Satellite Accounts (TSA), released in April Together, the estimates present a picture of the full value of tourism to the Australian economy. What has changed from the previous report? This report reflects revisions in the time series estimates resulting from a new benchmark in respect of the Supply-Use (S-U) tables by the ABS. Revisions to the domestic and international consumption time series following recent adjustments to Tourism Research Australia s (TRA) National and International Visitor Surveys have also been incorporated. In addition, TRA s estimates of the indirect/flow-on contribution uses the latest available ( ) input-output (I-O) tables from the ABS. Consequently, the revised estimates in this publication are not comparable to those published previously. What is the direct economic contribution of tourism? The direct economic contribution of tourism to the Australian economy, as represented by the ABS TSA 3, occurs where a direct physical or economic relationship exists between the visitor and producer of the good or service. This is the opposite to the indirect relationship via the retail sector between tourists and suppliers of goods and services. The direct contribution of Australia s tourism industry primarily refers to the immediate effect of expenditure made by visitors. For example, an increase in the number of visitors staying overnight in hotels directly affects sales in the hotel sector. The direct effects are the sales and associated changes in payments for: wages and salaries net taxes supplies and services. What is the indirect economic contribution of tourism? The introduction of direct and indirect definitions in Australia s TSA framework has overlapped with similar terminology (not the concept) that has been historically used in input-output modelling. The I-O modelling concept on the other hand captures the flow-on effect generated by the tourism consumption demand (visitor spending plus imputations presented in the national TSA) on other industries in the supply chain. In this report the TSA direct concept will remain the same for the flow-on effects for easy comparison. Using the direct tourism contribution alone will under-estimate the total contribution of tourism to the economy. In order to account for tourism s contribution correctly, the 3 The Tourism Satellite Account (TSA) estimates the value of tourism within the national accounting framework. A satellite account allows an expansion of the national account for selected areas of interest while maintaining the concept and structures of the core National Accounts methodology. 1

10 consumptions of TSA direct and TSA indirect tourism output are combined to calculate the flow-on effects using the I-O multipliers. The flow-on or indirect effects are the changes in supply that result from spending of the tourism industry s receipts on goods and services from other industries. For example: A visitor purchases a meal from a hotel: the hotel purchases vegetables and meat from a food supplier the food supplier purchases these from a farming company the farming company purchases labour and transport to deliver the produce to market. TRA estimates the economic impact of these indirect effects in order to complement the direct effects that are reported in the national TSA, and to provide a more complete picture of the economic contribution of tourism. (Refer to Appendices A and B for detail on the I-O methodology used in deriving the indirect contribution of tourism on output and employment.) What is the total economic contribution of tourism? The total contribution of tourism to Australia s economy is simply the combination of direct contributions (as published in the ABS TSA) and indirect contributions (TRA estimates). In this report, the total contribution is presented over a fifteen year period; to TRA s estimates of indirect Gross Value Added (GVA), Gross Domestic Product (GDP) and employment have added significant value to the ABS TSA. By providing a more complete picture of the role tourism plays in the economy, policy makers have the means to effectively gauge the value of tourism, and to use this to inform their decision making. Interestingly, Australia and New Zealand are the only countries that produce a full set of indirect estimates for tourism GVA, GDP and employment. New Zealand s (NZ) TSA (2012) reported that in the year ended March 2012: Tourism s total contribution 4 was 8.6 per cent to NZ GDP; NZ$6.2 billion (or 3.3 per cent) directly and NZ$9.7 billion (or 5.2 per cent) indirectly. Tourism employed a full-time equivalent of 186,900 employees (or 9.6 per cent of total employment in New Zealand). Of the total employment, around 119,800 were employed directly and 67,100 indirectly. However, international governing bodies are recognising the importance of a TSA. The United Nations World Tourism Organization (UNWTO) (2010) reported that, A total of 60 countries have been identified by early 2010 as having already produced or are currently developing a TSA exercise. 4 Statistics New Zealand (2012), when emphasising the importance of estimating the full impact of tourism, states that, Direct value added does not measure the full impact of tourism on the New Zealand economy because it is limited to those businesses that have a direct relationship with tourists. Additional value added comes from tourism through the production of the intermediate inputs used in the production of goods and services sold to tourists, although there is no direct relationship between the producer of the intermediate inputs and the tourist. This additional value added is known as indirect value added. 2

11 Estimates in this report are provided in nominal terms unless stated otherwise, with results presented in combination with the direct contribution reported in ABS TSA ( ). The analysis provides total contribution estimates for tourism GDP, GVA (by industry) and employment. 3

12 Tourism s contribution to GDP, GVA GVA and GDP are primary measures for economic performance of an industry or the whole economy. At the industry level, GVA is part of the output measure, accounting for the sum of an industry s output less the costs of intermediate inputs used in the production (of that good or service). The remainder is the value-added from the industry. Thus, GVA is always smaller than total output and reflects more accurately the contribution of an industry to the whole economy, as this amount is not distorted by the output of other industries. GDP is built upon the GVA measure. GVA and GDP are presented in simple formulas below and illustrated in Table 1. GVA GDP Compensation of employees + gross operating surplus + other taxes on production GVA + net taxes on products (taxes less subsidies) Table 1: Relationship between GVA and GDP Direct contribution ($ billion) Output (basic prices) 90.9 GVA 37.6 Net taxes on products 3.4 GDP 41.0 Source: ABS Cat. No Direct contributions According to the latest TSA (2013): Tourism consumption (at basic prices) 5 was $90.9 billion in , representing an annual increase of 6.0 per cent. The direct GDP contribution of Australia s tourism industry in was $41.0 billion, representing an annual increase of 5.3 per cent. Tourism GVA, or net income generated by the industry, amounted to $37.6 billion, also representing an annual increase of 5.3 per cent. Indirect contributions In , Australia s tourism industry indirectly contributed a further $46.2 billion of GDP and $39.5 billion of GVA (Figure 1 and Table 2). The indirect GDP and GVA contribution by the tourism industry accounted for 3.1 per cent and 2.9 per cent of national GDP and GVA respectively. 5 This is the price received by the producers after deducting margins, net commodity taxes and imports from the price the tourists actually paid on the market to obtain goods and services. Thus, value of consumption measured at the basic prices equals the value of output produced. 4

13 Total contributions Combining tourism s direct and indirect components, a total of $87.3 billion was contributed to national GDP in , up $5.5 billion (or 6.8 per cent) year-on-year. Figure 1: Direct (a) and indirect (b) share of tourism GVA and GDP Per cent GVA Direct Indirect GDP Sources: (a) ABS Cat. No , (b) TRA s estimates Collectively, tourism s direct and indirect contributions amounted to around 5.6 per cent of total GVA. Tourism s direct measure contributed around 2.7 per cent, while another 2.9 per cent is estimated to be tourism s indirect contribution. When compared to when tourism s total contribution to Australia s GDP peaked at 8.3 per cent this represents a decline of 2.7 percentage points. However, the Sydney Olympic Games and the introduction of the Goods and Services Tax (GST) were influencing factors during this period. Total tourism GDP has more year-to-year fluctuations than Australian GDP. In , total tourism GDP increased by around 6.8 per cent on the previous year and reflected a solid recovery after the severe downturn associated with the global financial crisis in Over the longer period between and , total tourism GDP has risen at an average annual rate of 4.6 per cent, while Australian GDP has increased at a stronger rate, averaging 6.8 per cent annually over the same period (refer Figure 2). 5

14 Annual change (per cent) Figure 2: Annual growth in total tourism GDP and Australian GDP Sydney Olympics Total Tourism GDP Australian GDP SARS GFC Source: TRA s estimates using total GDP from ABS Cat. No , direct contribution estimates from ABS Cat. No , , and indirect estimates by TRA Tourism s contribution to GVA by industry Tourism comprises many supplying industries. Each industry s contribution to tourism varies depending upon how closely they are related to tourism. Some of the industries interact heavily with visitors, such as Cafés, hotels and restaurants. Other industries work in the supply line to the tourism industry such as Manufacturing, Agriculture, Forestry and fishing and the Wholesale trade industries, which interact with tourism more indirectly. Tourism s indirect contribution to GVA is larger than its direct contribution. In , of the total GVA ($77.1 billion) contribution of the tourism industry, 49 per cent was contributed directly and 51 per cent indirectly. Tourism has a GVA multiple of , based on the ratio of tourism indirect value added and direct value added. A multiple value greater than one indicates the industry s indirect contribution to tourism is larger than its direct contribution. In , tourism generated $39.5 billion worth of GVA indirectly to the Australian economy, in addition to its direct contribution of $37.6 billion. The Ownership of dwellings, Accommodation and food services, Retail trade, Arts and recreation, Education and training and Air, water and other transport services industries had direct contact with visitors, therefore had a larger direct contribution. These industries also generated some indirect value added. For example, most of the services provided by a restaurant are by direct contact, but the services of a baker or wholesaler providing the raw material such as bread, flour, rice, meat etc is considered indirect. 6 GVA multiple is the ratio of indirect GVA to direct GVA and is not a multiplier. Indirect GVA for tourism is calculated using the ratio of Industry GVA to Gross Output from input-output tables and multiplying this ratio to the indirect output relating to tourism in an industry. 6

15 The following four industries 7 collectively contributed more than three quarters of total direct GVA in (Table 3): Accommodation and food services $12.9 billion, or 34 per cent of total GVA Air, water and other transport services $6.1 billion, or 16.2 per cent of total GVA Retail trade $5.2 billion, or 13.7 per cent of total GVA Education and training $2.4 billion, or 6.4 per cent of total GVA. A large part of the total flow-on effect of visitor consumption was felt in other industries represented by All other industries, where more than 90 per cent of total GVA contribution was indirect. 7 Excluding ownership of dwellings industry 7

16 Table 2: Tourism GVA by industry, Industry Direct value added (a) Indirect value added (b) Indirect value added multiple (M) Total value added= direct value added* (1+M) $ million Ratio $ million Accommodation and food services 12, ,426 Rail transport Road transport and motor vehicle hire and lease Air, water and other transport Travel agency and tour operator services 1,759 3, ,864 6,079 2, ,534 1,815 2, ,597 Arts and recreation services 1, ,749 Retail trade 5,161 1, ,427 Education and training 2, ,682 Ownership of dwellings 3, ,218 All other industries 2,181 28, ,938 Total tourism industry 37,621 39, ,107 Sources: (a) ABS Cat. No , and (b) TRA s estimates Indirect GVA in All other industries All other industries are a grouping of industries that by nature or activity are not considered tourism-related, but are nonetheless affected by rises and falls in tourism. For example, increasing visitor numbers to cafés and restaurants increases demand for flour from grain processing industries; this in turn increases grain production by the agricultural industry. Disaggregation of the $28.8 billion of indirect tourism GVA in All other industries in is presented in Figure 3. More than half (52 per cent) of total tourism GVA in this category occurred in three industries: Manufacturing - $5.8 billion Professional, scientific and technical services - $4.7 billion Finance and insurance services - $4.5 billion. Additionally, one-third of total tourism GVA was contributed by: Agriculture, forestry and fishing - $2.6 billion Information and telecommunication services - $2.5 billion Wholesale trade - $2.3 billion Mining - $2.0 billion. 8

17 Figure 3: Tourism indirect GVA in All other industries, Indirect GVA ($ million) 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 Manufacturing Professional, scientific and technical services Finance and insurance Agriculture, forestry and fishing Information and telecommunication services Wholesale trade Mining Construction Electricity, gas, water and waste water Other services Public administration and safety Health care and social assistance Source: TRA s estimates Growth in total tourism GVA, by industry Total tourism industry GVA grew at an average annual rate of 4.2 per cent between and , compared to 6.9 per cent average annual growth in the whole economy (Figure 4). In Australia, two industries (Mining and Professional, scientific and technical services) grew at double digit rates (12.9 and 10.0 per cent, respectively) between and Together, these industries constituted 17.4 per cent of total GVA in Australia. Among tourism industries, only the Education and training industry achieved an average annual GVA growth of 8.8 per cent. However, this industry represented only a minor share (3.5 per cent) of total tourism GVA in A little more than one-third (36 per cent) of tourism s total GVA was shared among two main industries in : Accommodation and food services per cent Transport, postal and warehousing per cent. These industries achieved average annual tourism GVA growth of 5.6 per cent and 4.6 per cent, respectively. These rates were much lower than the growth rates achieved by these industries at total GVA levels. Growth in total GVA for Accommodation and food services and Transport, postal and warehousing was 6.3 per cent each, indicating that the non-tourism component showed much stronger growth than the tourism component of each industry. 9

18 Average annual growth rate (per cent) Figure 4: Average annual growth in GVA, tourism and all industries, to Industry Gross Value Added (tourism and non tourism) Industry Gross Value Added (total tourism) Agriculture, forestry and fishing Mining Manufacturing Electricity, gas, water and waste services Construction Wholesale trade Retail trade Accommodation and food services Transport, postal and warehousing Information media and telecommunications Financial and insurance services Rental, hiring and real estate services Professional, scientific and technical services Administrative and support services Public administration and safety Education and training Health care and social assistance Arts and recreation services Other services Ownership of dwellings Total Gross Value Added Sources: Derived by TRA using total GVA and direct contribution estimates from ABS Cat. No , , and indirect estimates by TRA Industry share of total tourism GVA Over the period to , industry share in total tourism GVA varied. This depended on changes in visitor types and numbers, and the price and quantity of tourism products and services demanded (Table 4). For example: The share of the Accommodation and food services industry has increased 2.9 percentage points (from 14.5 per cent in to 17.4 per cent in ); largely due to an increase in visitor numbers. o Between and , inbound visitor nights increased 5.1 per cent annually (Tourism Forecasting Committee 2013, Issue 1). The Education and training industry increased its share of tourism GVA from 1.9 per cent in to 3.5 per cent in , due to an increase in short-term student visitors to Australia in recent years. o Short-term visitor arrivals for education 8 to Australia rose at an average annual rate of 7.2 per cent between and The share of total tourism GVA in all other industries remained more or less unchanged during this period. 8 Compiled from Overseas Arrivals and Departures publication (ABS Cat. No ) March 2013 database 10

19 Table 3: Industry share in total tourism GVA (%) Tourism industries 1997/ / / / / / 03 Agriculture, forestry and fishing Mining Manufacturing Electricity, gas, water and waste services 2003/ / Construction Wholesale trade Retail trade Accommodation and food services Transport, postal and warehousing Information media and telecommunications Financial and insurance services Rental, hiring and real estate services (c) Professional, scientific and technical services Administrative and support services Public administration and safety Education and training Health care and social assistance Arts and recreation services Other services / / / / / / / 12 11

20 Total tourism GVA (direct (a) and indirect (b) ) Sources: (a) ABS Cat. No , and (b) TRA s estimates, (c) Renting, hiring and real estate services also includes Ownership of dwellings 12

21 Per cent Tourism s contribution to employment TRA estimates that tourism directly and indirectly employed an estimated 908,434 persons in (or 7.9 per cent of total employment in Australia), comprising: 531,900 persons (or 4.6 per cent of the Australian workforce) employed directly; one percentage point lower when compared to ,534 persons (or 3.3 per cent) employed indirectly. Fifty nine per cent of total tourism employment was provided directly and the rest (41 per cent) indirectly (Figure 3 and Table 2). Tourism s share of total employment (7.9 per cent) was higher than tourism s share of industry GVA (5.6 per cent), because tourism is more labour intensive than many other industries 9. In , total tourism employment rose around 25,120 (2.8 per cent), with increased employment of 1,600 (0.3 per cent) in directly tourism-related industries and 23,520 (6.7 per cent) in industries related indirectly to tourism. Total tourism employment increased at an average annual rate of 2.8 per cent between and ; faster than the growth in direct tourism employment of 1.8 per cent over the same period. Figure 5: Direct and indirect share of tourism employment Direct Indirect Employment Sources: (a) ABS Cat. No , (b) TRA s estimates 9 A business is labour intensive if labour accounts for the largest proportion of all inputs to the business outputs. 13

22 Table 4: Summary, tourism s direct and indirect contribution to the Australian economy 1997/ / / / / / / / / / / / / / / 12 Direct contribution (a) Tourism GDP ($m) 18,496 20,067 20,892 24,844 25,518 26,966 27,173 28,260 29,898 32,454 35,100 35,757 37,955 38,936 41,018 Share of national (%) Tourism GVA ($m) 18,791 20,358 21,191 22,724 23,332 24,678 24,859 25,837 27,389 29,594 32,035 32,704 34,821 35,711 37,621 Share of national (%) Tourism employment ( 000) Share of national (%) Indirect contribution (b) Tourism GDP ($m) 28,098 30,253 31,604 34,170 33,887 34,988 34,738 35,146 36,840 40,092 41,520 40,894 42,819 42,787 46,232 Share of national (%) Tourism GVA ($m) 24,304 26,366 27,192 29,261 29,186 30,181 29,998 30,437 31,804 34,629 36,122 35,518 36,801 37,110 39,486 Share of national (%) Tourism employment ( 000) Share of national (%) Total contribution Tourism GDP ($m) 46,594 50,320 52,496 59,014 59,405 61,954 61,911 63,406 66,738 72,546 76,620 76,651 80,774 81,723 87,250 Share of national (%) Tourism GVA ($m) 43,095 46,724 48,383 51,985 52,518 54,859 54,857 56,274 59,193 64,223 68,157 68,222 71,622 72,821 77,107 Share of national (%) Tourism employment ( 000) Share of national (%) Sources: (a) ABS Cat. No.5249; (b) TRA calculations 14

23 Tourism employment by industry Applying a strict definition for tourism employment is problematic as employees in tourism-related industries generally provide services to both visitors and non-visitors. To overcome this, the TSA provides estimates for tourism employment by applying tourism GVA ratios from the benchmark year to ABS Labour Force Survey estimates for tourism-related industries. By applying this method, the TSA reports that the tourism industry directly employed 531,900 persons in Tourism s total contribution to the Australian labour force is estimated at 908,360 persons for (with 376,534 persons indirectly linked to the tourism value chain, Table 5). While All other industries comprised a majority of indirect total tourism-related employment (91 per cent, or 246,100 persons), the following industries had a higher direct component: Accommodation and food services: 95 per cent (or 242,800 persons) of total tourism employment in the industry in Education and training: 90 per cent (or 36,600 persons) Arts and recreation: 91 per cent (or 35,300 persons) Retail trade: 79 per cent (or 101,000 persons). Six industries collectively accounted for 70 per cent of total tourism employment: Accommodation, cafés and restaurants - 255,600 (28 per cent of total) Retail trade - 127,400 employees (14.0 per cent of total) Air and water transport plus road and rail transport - 110,100 (12.1 per cent of total) Travel agency and tour operator services - 66,000 (7.3 per cent of total) Education and training - 40,700 (4.5 per cent of total) Arts and recreation services - 38,900 (4.3 per cent of total). The remaining 30 per cent (or 269,800) of total tourism employment was generated in All other industries. 15

24 Table 5: Direct and indirect employment by tourism industries, Direct employment (a) (a) Indirect employment (b) (b) Tourism indirect employment multiple (b)/(a) = (c) Total tourism employment = direct employment*(1+ E) 000 Ratio 000 Accommodation and food services Rail transport Road transport and motor vehicle hiring Air, water and other transport Travel agency and tour operator services Arts and recreation services Retail trade Education and training All other industries Total tourism employment Sources: (a) ABS Cat. No , and (b) TRA s estimates Growth in the contribution of main tourism industries to total tourism employment has been mixed (Figure 5 and Table 6). Total tourism employment added 291,800 persons (118,300 directly and 173,500 indirectly) to the Australian workforce between and , with the following industries also showing growth during this period: Accommodation and food services added around 56,800 persons (52,000 persons employed directly and 4,800 indirectly) Retail trade added 29,200 persons (19,100 persons employed directly and 10,100 persons indirectly) Travel agency and tour operator services added 21,300 persons (7,800 persons directly and 13,500 persons indirectly). During this period, employment in the tourism industry grew at an average annual rate of 2.8 per cent; higher than the 2.1 per cent for total employment in the economy. 16

25 Employed persons (000) Figure 6: Direct (a) and indirect (b) employment growth in the tourism industry, to , ( 000) Direct Indirect Total All other industries Education and training Retail trade Arts and recreation services Travel agency and tour operator services Air, water and other transport Road transport and motor vehicle hiring Rail transport Accommodation and food services Sources: (a) ABS Cat. No , and (b) TRA s estimates 17

26 Table 6: Total (direct (a) and indirect (b)) employment in tourism ( 000 persons) Accommodation and food services 1997 / / / / / / / / / / / / / / Rail transport / 12 Road transport and motor vehicle hiring Air, water and other transport Travel agency and tour operator services Arts and recreation services Retail trade Education and training All other industries Total Sources: (a) ABS Cat. No , and (b) TRA s estimates 18

27 Indirect employment in All other industries In , 246,100 persons were employed in All other industries. More than half (58 per cent) of total tourism-related indirect employment in this category occurred in Manufacturing (55,600 persons); Professional, scientific and technical services (52,300 persons); and Agriculture, forestry and fishing (34,400 persons). Around 22,700 persons were employed in Other services industries and 18,300 persons were employed in Wholesale industry. The Construction, Information and telecommunication services and Finance and insurance services industries employed around 16,500, 15,200 and 14,800 persons, respectively (Figure 6). Figure 7: Tourism employment in All other industries, Manufacturing Professional, scientific and technical services Agriculture, forestry and fishing Other services Wholesale trade Construction Finance and insurance Information and telecommunication services Public administration and safety Electricity, gas, water and waste water Mining Health care and social assistance Employed persons (000) Source: TRA s estimates Tourism multipliers The concept of indirect (and total) contribution to the Australian economy fully values tourism s supply chain. This is different to the concept of total and indirect multipliers, which reflects the economy-wide impacts on other sectors of the Australian economy. Care should be used in using multipliers as they are a measure of average effects, not marginal effects, and consequently do not take account of economies of scale, unused capacity or technological changes (ABS 1995). The calculation for the indirect contribution of tourism requires output multipliers. These are sourced from ABS input-output tables (ABS Cat. no ). Details on the output multipliers used in this analysis are presented in Table 7 in Appendix B, and are from the latest available input-output data for , released in September Applying these multipliers to tourism consumption expenditure in Australia in also provides tourism multiplier values for indirect output in Appendix B. 19

28 share in total tourism consumption at basic price (per cent) Tourism industry output multiplier Using this methodology, tourism s output multiplier for is valued at , which means for every dollar tourism earns directly in the Australian economy, it value adds an additional 88 cents to other parts of the economy. At 1.88, tourism s multiplier is larger than Mining (1.62), Retail trade (1.74) and Education and training (1.44). When applying both multipliers, a one per cent increase of tourism direct consumption expenditure of $91 billion ($910 million or one per cent of total) in , generated an output of $814 million (in nominal terms) outside tourism and increased employment of 2,871 persons outside tourism. Tourism multipliers over time The output multiplier value for the tourism industry may change depending upon the composition of tourism products consumed by visitors and the total multiplier value of the industries producing these products. The tourism industry output multiplier value seems to be influenced by three main products: Long distance transport; Takeaway and restaurant meals; and Accommodation services. These three products constituted around half (47 per cent) of the total tourism consumption in As can be seen in Figure 7, the tourism industry output multiplier value was highest at 1.91 in , but declined to 1.88 in This was consistent with the decline in the share of Long distance transport consumption expenditure, which declined from 21.4 per cent in to 18.3 per cent in The share of Takeaway and restaurant meals expenditure remained steady at 16.2 per cent, whereas Accommodation services share rose from 9.5 per cent in to 12.6 per cent in In , the multiplier value remained unchanged from at 1.88, in line with the increase in Accommodation services consumption, while the share of Long distance transport expenditure remained unchanged. Figure 8: Relationship between tourism product share and tourism output multiplier Long distance passenger transportation Takeaway and restaurant meals Accommodation services Retail margin Food products Recreational, cultural and sports services Education Tourism industry output multiplier (RHS) Source: Derived from ABS unpublished data 10 Tourism output multiplier changes every year depending upon the proportion of consumption expenditure by visitors. For , the tourism output multiplier value was 1.88, which was lower than the multiplier value of 1.91 in

29 Conclusion This report provides estimates of the total contribution of tourism to Australian GDP, GVA and employment for the period to The results presented reflect revised indirect tourism contribution estimates published by the ABS, and revisions to TRA s National Visitor Survey and International Visitor Survey data. The report highlights tourism s role in Australia s economic growth and its performance as compared to other industries. The report confirms that: Tourism is a critical component of the Australian economy, contributing around 6.0 per cent to national GVA and GDP, and 8.0 per cent to total employment. Tourism s indirect contribution to the economy is higher than some other industries including the Mining and Retail trade industries. The benefits of the tourism industry are far reaching, and significant for the economic growth of all sectors within Australia. Tourism s contribution to the Australian labour force is larger than that of the Mining industry. This shows that while Mining is important for Australia s economic growth, tourism is crucial not only for economic growth, but also for Australia s social growth. Despite its significant contribution to the economy, the tourism industry is at a disadvantage in terms of investment and innovation when compared with other industries, in particular Mining. For the tourism industry to achieve its potential, it is important that increased investment flows to areas such as innovation. This will allow improved productivity and smooth possible imbalances in the various industries that comprise tourism. 21

30 References Access Economics (2011, completed 2010), The 2020 tourism industry stretch goal (now called the 2020 Tourism Industry Potential), implications and imperatives, consultancy report for the Department of Resources, Energy and Tourism, Access Economics, Canberra (unpublished report). Australian Bureau of Statistics (ABS) 2013, Australian National Accounts, Tourism Satellite Accounts, , Cat. No , ABS, Canberra. ABS 2013, Overseas Arrivals and Departures, Cat. No , ABS, Canberra. ABS (1995), Information Paper: Australian National Accounts Introduction to Input- Output Multipliers, Cat. No , ABS, Canberra. Statistics New Zealand (2012), Tourism Satellite Account: 2012, Wellington: Statistics New Zealand Tourism Research Australia (2013), Travel by Australians June 2012 Quarterly Results of the National Visitor Survey, Tourism Research Australia, Canberra. Tourism Forecasting Committee, Forecast 2013 Issue 1, Tourism Research Australia, Canberra. United Nations Statistical Division, Statistical Office of the European Communities, Organisation for Economic Co-operation and Development, World Tourism Organization, Tourism Satellite Account: Recommended Methodological Framework, 2008, Luxemburg, Madrid, New York, Paris: United Nations. United Nations World Tourism Organization 2010, TSA Data Around The World Worldwide Summary, Statistics and Tourism Satellite Account Programme, June, UNWTO, Madrid. 22

31 Appendix A: Methodology for calculating indirect contribution The indirect contribution model developed and implemented by TRA uses relationships derived from the latest available input-output (I-O) table for from the ABS. The model assumes that from to , the industry structure of the Australian economy remained consistent with input-output tables. This also means that the model produces estimates based on the supply and demand relationships generated by the input-output tables. It does not take into account any year-to-year variation in supply and demand ratios. This assumption holds in terms of recently revised supply-use tables for the whole time-series based on Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC 2006). Direct and indirect effects are measured in terms of three key economic indicators: tourism GDP, tourism GVA and tourism employment. It is difficult to directly measure employment in tourism because employees in tourism-related industries generally provide services to both visitors and non-visitors. The TSA measures direct tourism employment by applying the tourism GVA ratio in the benchmark year to the ABS Labour Force Survey estimates for tourism-related industries in subsequent years. This method assumes that the employment generated by tourism is directly proportional to the value added generated by tourism in the benchmark year. While this might not be strictly accurate, the method provides a way of apportioning total industry employment between servicing demands of visitors and non-visitors. Tourism industry GVA ratios are used for generating employment estimates for the subsequent years until a new benchmark is produced using revised estimates in terms of supply-use tables, service industry surveys and other new information. Employment estimates presented in this report are based on the benchmark year. The model The Australian TSA measures the direct effects of tourism activity. This is the activity of those businesses which directly supply a product to a visitor (tourist). For example, it includes a hotel providing accommodation to a visitor, or a retailer selling a souvenir to a visitor. When a visitor buys a meal in a restaurant, the direct tourism demand is the price of the meal. However, it does not include the indirect effects of tourism, which is of considerable interest. These are the up-stream effects of tourism demand on businesses which provide goods and services to the tourism industry. The indirect tourism demand generated from the supply of a meal to a visitor, for example, begins with the production of intermediate inputs used by the restaurant (e.g. the production of meat and vegetables used to make the meal, electricity for cooking etc). Producers of these inputs have no direct relationship with the visitor. Indirect tourism demand is calculated through input-output analysis. This analysis provides a breakdown of the supply and demand of commodities in the Australian economy. Input-output is based on a fundamental identity which equates supply and demand as follows: Let, in a simple production function form, t ij = At i + f i 23

32 where: t = total outputs of industry sectors A= inter-industry coefficients f = final demand for outputs of the industry sectors Solving the input-output model: t = At + f t At = f (I-A) t = f t = (I-A) -1 f where (I-A) -1, is the Leontief inverse, or input-output inverse/multiplier. TRA uses the following mathematical relationships to estimate indirect tourism contribution: Indirect output = [(I-A) -1 - I] F Indirect employment = E [(I-A) -1 - I] F A = a matrix (coefficient) derived from the I-O table. This table contains data on the flow of goods and services in the economy (e.g. who buys what, and who produces what) I = Identity matrix (ones in the diagonal and zeros elsewhere) (I-A) = matrix calculated by subtracting the coefficient matrix (A) from the identity matrix (I) (I-A) -1 = An inverse matrix showing by what factor (row) industry sells goods and services to (column) industry because of change in final demand F = Tourism consumption at basic prices E = Employment/output ratios The model uses input coefficients generated by econometric equations that predict input purchases based on an economy s characteristics. Output from the model includes total industry output, employment, and value-added for all industries in the Australian economy. Total industry output is defined as the value of production by industry per year. Employment represents total wages and salaried employees for both full-time and part-time workers. Total value added is defined as: all income paid to workers by employers self-employed income interests rents royalties dividends profit payments excise and sales taxes paid by individuals to businesses. 24

33 Appendix B: Input-output multipliers and tourism multipliers Input-output multipliers: The introduction of direct and indirect definitions in TSA has overlapped with a similar terminology (not the concept) that has been used historically in the input-output modelling technique. In the I-O modelling concept, direct contribution is the initial consumption demanded in the economy. The indirect contribution is the total flow-on effect on industries providing intermediate inputs to the industry supplying goods and services to the initial consumption. In order to account for tourism contribution correctly, the consumptions of TSA Direct and are combined to calculate the flow-on effects using the I-O multipliers. As mentioned, this report adopts and reports the TSA Direct tourism contribution as those in the national TSA, the contribution of the TSA Indirect contribution is then combined with the flow-on effect of tourism contribution in this report for the reporting purposes. Charts 8 and 9 summarise our process. As seen from Figure 8 and 9, total contribution is the same in both TSA and I-O multipliers approaches. Estimates in this report are provided separately for direct and indirect tourism effects in nominal terms unless stated otherwise. The report provides mainly tourism GDP, tourism GVA and tourism employment. Figure 9: Flow-on effect of tourism consumption TSA direct tourism output $74,588 m TSA indirect tourism output $16,319 m Total tourism consumption $90,907 = $74,561 + $16,319 I-O multipliers Total flow-on economic output generated by tourism consumption $171,294 m 25