Currency & tourism trends
By Craig James, Chief Economist, CommSec
UK and Egypt may prove winners for Aussie tourists
Currency & tourism trends
Aussie dollar lifts: While the Aussie dollar fell slightly against a stronger greenback in 2016, it rose against
a raft of other currencies. Of 120 currencies monitored, the Aussie dollar lifted against 66 currencies in 2016.
Tourist departures still rising: In the year to October tourist departures rose by 4.7 per cent. The strongest
growth was in trips to Brazil followed by Pakistan and Poland.
Hot destinations: On the back of currency changes, the UK could prove a hot destination for Aussie tourists in 2016. The Aussie dollar has also lifted sharply against the Egyptian pound following a devaluation of the latter in November.
What does it all mean?
Where will Aussie travellers be headed in 2017? Clearly it has more to do than just changes in currencies. But the UK has always been a favoured destination for Aussie travellers and the Aussie is up nearly 20 per cent against the pound than a year ago. So the UK will no doubt be on many short lists in 2017.
Egypt devalued its currency in November in order to secure a bailout from the International Monetary Fund. A year ago the Aussie could buy around 5.6 Egyptian pound. Today the Aussie dollar is worth near 13 Egyptian pound. So again Egypt could be on tourist short lists in 2017. Tourist numbers to Egypt have been lifting since falling to historic lows in mid-2014.
Mongolia, Mexico, Argentina, Sweden and China are other countries where the Aussie travel dollar goes further as a result of currency changes in recent months.
Aussie dollar in 2016
The Aussie dollar started 2016 near US73 cents and ended the year US72 cents. So at face value, the weaker currency suggests that 2016 wasn’t a great time to be travelling abroad. But in fact the US dollar was stronger against most currencies in 2016. So actually the Aussie dollar was stronger against the majority of currencies – up against 66 of 120 currencies monitored.
The mixed performance of the Aussie dollar meant that tourist arrivals and departures both rose over 2016. But the weaker Aussie dollar compared with a few years ago is supporting arrivals to a greater extent. In October, tourist arrivals were up 12.7 per cent on a year ago, outpacing a 4.3 per cent lift in departures.
The continued solid growth in tourist arrivals is providing support for domestic businesses such as retailers, transport operators and tourist destinations. And Aussies are also travelling more domestically, especially compared with 5-6 years ago when the Aussie dollar was super-strong.
Strongest & weakest
The Aussie dollar was strongest against the Syrian pound in 2016 (up 132 per cent) followed by the Egyptian pound (128 per cent) and the Surinamese dollar (84 per cent).
The Aussie dollar was weakest against the Brazilian real (down 19 per cent) followed by the Russian rouble (down 17 per cent) and the Icelandic krona (down 14 per cent).
The Aussie dollar was more mixed against the major currencies in 2016, falling against the US dollar (1 per cent), New Zealand dollar (3 per cent) and Japanese yen (down 4 per cent). The Aussie dollar rose against the Euro (2 per cent) and the UK pound (18 per cent).
Against the US dollar, the Aussie dollar was at US73.06 cents at the end of 2015 and finished 2016 at US72.36 cents (range US68.24 cents to US78.35 cents).
Aussie tourism trends
The latest data on overseas tourism arrivals and departures is October 2016.
In the year to October, the destination that has grown fastest for Aussie tourists was Brazil (up 38.7 per cent) from Pakistan (up 38.2 per cent) and Poland (up 32.9 per cent).
There were only 11 countries where the number of Aussie tourists was lower in 2016 than the previous year including Turkey, France, Greece, Thailand and Papua New Guinea.
Of the major destinations, the number of travellers to New Zealand rose by 4.4 per cent with Indonesia up 10.2 per cent, the US up 5.1 per cent and the UK up 0.9 per cent.
What are the implications for investors?
The Aussie dollar can neither be regarded as weak or strong. So the currency is probably not having a strong impact on local spending in either direction. But tourism flows are clearly influenced by a variety of factors. So it is encouraging that tourist arrivals are still growing at a firm clip. At the same time the Aussie dollar is well off the highs of previous years, thus serving to cap the enthusiasm for Aussies to travel abroad. Local businesses would be pleased to have more Aussie consumers who are spending money at home.
Originally published by Craig James, Chief Economist, CommSec