The impacts of exchange rates on Australia's domestic and outbound travel markets

Abstract

In Australia, domestic tourism generated AUD 71 billion in 2010–11, representing approximately 75.2% of national tourism revenue. While the number of domestic overnight visitors increased by 2.34% in that year, the number of Australians traveling overseas grew by 7.45%. In fact, the dramatic appreciation of the Australian dollar against major currencies has motivated more Australians to travel overseas rather than within their own country. The purpose of this study is to examine the economic factors that influence the demand for Australian domestic and outbound tourism. In particular, the research explores the extent to which the appreciation of Australian dollar has affected the Australian domestic tourism industry. Using panel generalized least squares models, the empirical findings show that exchange rates influence the Australians’ decisions to travel.