Wither Australian Tourism? Implications of the Carbon Tax

Abstract

This paper estimates the potential economic effects on the Australian tourism industry from the introduction of an economy wide carbon tax to be introduced in July 2012. The manner in which the tax is expected to work is examined together with a discussion of some concerns that have been raised by the tourism industry regarding its impacts on Australia's destination competitiveness, industry profitability and employment. Dynamic computable general equilibrium (CGE) modelling projects that the tax will lead to changes in key macroeconomic variables, reducing growth in real GDP, real consumption and employment. The simulation results also indicate that while some tourism industries in Australia will gain from the tax, most will experience contractions in output relative to baseline values in line with a general shrinkage of the tourism sector as a whole. In the light of the modelling simulations, the paper concludes with an assessment of the validity of the main stakeholder concerns regarding the implications of the tax for the Australian tourism industry.