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8634.0 - Tourism Indicators, Australia, Sep 2002  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 07/02/2003   
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This article has been contributed by Umme Salma, of the Bureau of Tourism Research (BTR). It was first published in BTR’s Tourism Research Report, Volume 4, Number 2, Spring 2002.

INTRODUCTION

Tourism’s total worth is greater than the direct contribution estimated by the Australian Bureau of Statistics (ABS) in the Tourism Satellite Account (TSA). The TSA does not include tourism’s indirect contribution. This article summarises the results of BTR’s research on tourism’s indirect economic contribution between 1997-98 and 2000-01, complementing the TSA estimates of tourism’s direct contribution for this period. The report identifies the national contribution of tourist expenditure in terms of Gross Domestic Product (GDP), value added and employment.

BACKGROUND

The first ever TSA for Australia was released by the ABS in October 2000. The TSA estimated the direct economic contribution made by the tourism industry in 1997-98. Following release of the TSA, the BTR undertook a complementary study to estimate the flow-on or indirect effects created by tourism consumption in the national economy for the same year. The results were published in BTR’s Research Report No. 6 (Salma 2001) and in the March quarter 2002 issue of Tourism Indicators, Australia (cat. no. 8634.0).

In April 2002, the ABS released the TSA updates for three years covering 1998-99 to 2000-01. To provide a comprehensive picture of tourism’s worth in the national economy in these years, the BTR has estimated the flow-on or indirect effects of tourism consumption made during this period.

METHODOLOGY

The methodology and the basic underlying model have remained the same as for the 1997-98 study of indirect effects (Salma 2001). The indirect effect model uses tourism consumption data for 1998-99, 1999-2000 and 2000-01 provided in the TSA and estimates the flow-on effects.

The industry structure of the national economy is assumed to remain the same during the period. In its estimation of direct contributions, the ABS made the same assumption and has used the relationships in the 1997-98 benchmark to calculate tourism output and tourism value added from demand side data for the last three years. While this may be a valid assumption for the earlier years, for 2000-01, with the introduction of goods and services tax (GST), the input-output structure (1) is likely to change. However, in the absence of more recent input-output data from the ABS incorporating the effects of GST, the assumption remains.

Compared to 1997-98 TSA estimates, the updated estimates have limited coverage. The ABS provides employment estimates only at persons employed level. It neither provides a measure of full-time equivalent employment, nor does it give any details on the gender or the extent of full-time and part-time employment within the tourism sector, as was provided in the 1997-98 estimates. Consequently, the BTR’s updates of indirect effects also report selected results, in line with the limited coverage of the TSA updated estimates.

INTERPRETING THESE ESTIMATES

The estimates of the total contribution of Tourism presented in this article differ from the official measure of the contribution of Tourism to the economy. The ABS estimate of the contribution of Tourism corresponds to those estimates recorded as direct contributions. The estimates of indirect contributions presented are estimates of the gross value added, GDP and employment that are attributable to industries which provide inputs to produce tourism output of industries characterised as Tourism industries in the satellite account. For example value added associated with the production of crude oil that is subsequently used in petroleum manufacturing and then used in transport of a tourist is recorded as tourism value added using this methodology. In the Australian National Accounts and other ABS industry statistics this value added would be recorded against the Mining and Manufacturing industries.

Thus these indirect effects should be understood as a method of redistributing value added, GDP, employment that occurs outside the Tourism sector to the Tourism sector. They reflect the value of production, employment that occurs on an economy wide basis as a result of the demand of tourists for goods and services.

WHAT IS MEANT BY THE INDIRECT ECONOMIC EFFECTS OF TOURISM?

The economic contribution of tourism has two elements: direct and indirect. The direct contribution is solely concerned with the immediate effect of expenditure made by visitors. For example, when a tourist uses a taxi service, the direct output effect includes only the service of the taxi driver and the direct employment effect includes the proportion of the driver’s employment that is spent driving tourists.

The taxi driver, however, buys fuel from a petrol station, machinery parts from a garage, meals while on duty from a food outlet and so on. Petrol stations, garages and food outlets all hire staff and produce output to serve the taxi drivers, who in turn serve customers, some of whom are tourists. The food outlet in turn engages food manufacturers, electricity companies, delivery services and many other industries to provide the necessary inputs required to prepare the snacks it sells. Similarly, many industries are involved in supplying the necessary inputs to the petrol stations and the garages. The chain effects on output and jobs started by the initial taxi service demand of the tourist comprise what is termed tourism’s indirect effects on output and employment.

RESULTS AND ANALYSIS

Graph F1.1 presents tourism's direct and indirect share of the Australian economy in 2000-01.

Table F1.2 summarises macro results of the BTR’s indirect economic contribution study and presents results covering the last four years in conjunction with the TSA estimates.

Tourism’s worth is much greater when the indirect contribution is taken into account. A comparison of the direct and indirect estimates over the last four years indicates that the indirect contribution of tourism has been slightly higher than the direct contribution in terms of gross value added (GVA), thus more than doubling the contribution of tourism reported in the TSA.

In 1997-98 indirect tourism GVA was 4.4% of national GVA compared to 4.3% directly contributed by tourism. Over the next three years, these shares remained the same apart from a minor increase in both shares in 1998-99.

F1.1 TOURISM'S SHARE OF THE TOTAL ECONOMY 2000-01


F1.2 INDICATORS OF DIRECT, INDIRECT AND TOTAL CONTRIBUTION OF TOURISM(a), 1997-98 TO 2000-01

1997-98(b)
1998-99
1999-2000
2000-01

Direct contribution
Tourism gross value added ($m)
22,389
23,667
24,819
26,284
%
4.3
4.4
4.3
4.3
Tourism GDP ($m)
25,174
26,613
27,868
31,814
%
4.5
4.5
4.4
4.7
Tourism employment ('000 jobs)
513
521
535
551
%
6.0
6.0
6.0
6.0
Indirect contribution
Tourism gross value added ($m)
22,858
24,169
25,152
26,772
%
4.4
4.5
4.4
4.4
Tourism GDP ($m)
23,524
24,874
25,885
27,287
%
4.2
4.2
4.1
4.1
Tourism employment ('000 jobs)
341
360
374
397
%
4.0
4.1
4.2
4.3
Total contribution
Tourism gross value added ($m)
45,247
47,836
49,971
53,056
%
8.8
8.8
8.6
8.7
Tourism GDP ($m)
48,698
51,487
53,753
59,101
%
8.7
8.7
8.5
8.8
Tourism employment ('000 jobs)
853
881
909
948
%
10.0
10.1
10.2
10.4

(a) Including percentage shares of the respective national aggregates. Tourism gross value added and tourism GDP are in current prices.
(b) Estimates for 1997-98 were revised after obtaining new data from the ABS and they differ very slightly from the published estimates in BTR’s Research Report No. 6.
Source: Direct effects are from Australian National Accounts: Tourism Satellite Account, 2000-01 (cat. no. 5249.0). Indirect effects are from BTR’s economic contribution model.


On the other hand, indirect tourism GDP consistently accounted for a lower share of national GDP compared to direct tourism GDP over the four years considered. The difference between GVA and GDP is explained by net taxes on product. The higher share of direct tourism GDP in the national aggregate is a reflection of relatively higher taxes on tourism consumption compared to non-tourism consumption, and also of relatively higher net product taxes on consumption than on intermediate inputs.(2)

Direct and indirect tourism GVA and indirect tourism GDP grew at an average annual rate of 5% between 1997-98 and 2000-01, and direct tourism GDP grew at a rate of 8%. The higher growth in the latter is largely due to price increases in tourism goods and services following the introduction of GST in 2000-01.

Although GST brought about a larger share of national GDP for the direct tourism sector, this did not apply to indirect tourism GDP, again largely because of changes associated with the introduction of GST. The introduction of GST was accompanied by the abolition of wholesale taxes. Industries previously paying most of the wholesale taxes, and now also being generally exempt from paying the GST, have a lower level of net taxes on product compared to the pre-GST period. As indirect tourism GDP is accrued from business activities providing inputs to the tourism industry, the lower tax level on businesses has generated a lower share of indirect tourism GDP in the national aggregate.

Not only did the share of tourism GDP change during 1997-98 and 2000-01, its composition also changed, as is evident from table F1.3. In 1997-98, domestic tourism contributed 79% of directly created tourism GDP with business and government visitors and household visitors accounting for 11% and 66% respectively. In 2000-01, compared to 1997-98, domestic tourism became relatively less important accounting for 76% of direct tourism GDP, with both of its components exhibiting a decline in their respective shares.


F1.3 SHARE OF TOURISM GDP BY TYPE OF VISITOR, 1997-98 TO 2000-01

1997-98
1998-99
1999-2000
2000-01

Direct effect
Domestic business & government visitors
11
11
11
10
Domestic household visitors
68
68
67
66
Total domestic visitors
79
79
78
76
International visitors
21
21
22
24
Total
100
100
100
100
Indirect effect
Domestic business & government visitors
13
14
14
14
Domestic household visitors
63
63
63
61
Total domestic visitors
77
77
76
75
International visitors
23
23
24
25
Total
100
100
100
100

Source: Direct effects are from Australian National Accounts: Tourism Satellite Account, 1997-98 and 2000-01 (cat. no. 5249.0). Indirect effects for 1997-98 are from Salma (2001) and for later years, the present study.


In terms of its contribution to indirect tourism GDP, domestic tourism’s share has dropped from 77% in 1997-98 to 75% in 2000-01. During this period there has been a shift in favour of business and government visitors and away from household visitors.

The decline in the relative importance of domestic tourism has been matched by a commensurate improvement in the role played by international visitors. For both direct and indirect tourism GDP, international visitors’ contribution increased over the years, and the rise was more marked in the case of direct GDP.

There were two reasons behind the change in the tourism GDP shares of different types of visitor: variation in the growth of their tourism expenditure, and a compositional change in their consumption basket.(3)

Aggregate tourism expenditure by international visitors increased by 26% between 1997-98 and 2000-01, compared to a 14% increase for domestic visitors, resulting in an increased share of international visitors in direct GDP contribution.

The increased share of international visitors in indirect tourism GDP is more an outcome of relative changes in the composition of consumption baskets of domestic and international visitors. In 2000-01, the composition of the consumption basket of international visitors has moved relatively more towards items produced by industries with output multiplier values higher than the average tourism multiplier of 1.96.(4) Examples are food and drinks, accommodation, and air and water transport.

In contrast, domestic visitors spent, in dollar terms, proportionately more on items such as petroleum products, transport equipment, property and business services, and retail trade; all of which are produced by industries with relatively lower output multiplier values.

EMPLOYMENT

Indirectly created tourism employment grew from 341,000 jobs in 1997-98 to 397,000 jobs in 2000-01, indicating an annual growth of 5%. Compared to this, directly created tourism jobs grew by only 2% per annum, from 513,000 in 1997-98 to 551,000 in 2000-01. The overall share of employment created directly and indirectly by tourism has grown, from 10% in 1997-98 to 10.4% in 2000-01, resulting in an overall growth rate of 3.6% in all tourism jobs.

The relatively higher growth in indirectly created jobs than in directly created ones, is as before, largely due to changes in the composition of aggregate tourism demand over these years. Taking all visitors together, consumption shares have gone down for items such as retail and repairs, accommodation services, community, health and personal services. For a given level of expenditure, these industries created more jobs directly than the number of jobs created through their flow-on effects. Hence, a decrease in their consumption has caused relatively more loss of direct jobs than indirect jobs.

The negative impact on direct job creation was reinforced by the fact that over the years considered, consumption share increased for items such as petroleum products and ownership of dwellings, which created more jobs through flow-on effects than through direct effects. Although expenditure share increased for items such as education and recreational services, which have higher direct employment multiplier values, the overall effect acted relatively more in favour of indirect job creation.

Tables of detailed assessment of direct and indirect tourism employment over the last four years can be purchased from the BTR.(5) As expected, industries such as Accommodation, cafes and restaurants and Retail trade, which produce items on which tourists usually spend money, contributed the bulk share of employment directly created. On the other hand, the non-tourism industries grouped together as “All other industries” were the main source of indirect job creation in tourism.

Within the All other industries group, Property and business services contributed the most throughout the years, followed by Agriculture, forestry and fishing, Wholesale trade, and Repairs.

When direct and indirect employment effects are combined the Accommodation, cafes and restaurants industry topped the list, followed by Retail trade, and Manufacturing.(6)

CONCLUSION

Following release of the TSA, BTR’s estimates of indirect economic contribution of tourism provide a comprehensive picture of tourism’s worth over the last four years.

The study shows that although tourism’s direct contribution maintains the same shares in national employment, the share of indirect employment has gone up from 4.0% in 1997-98 to 4.3% in 2000-01. The shares of both direct and indirect GVA have remained the same with an increased share of direct tourism GDP, which is largely due to the introduction of GST.

The entire analysis was undertaken with reference to 2000-01, a year in which substantial changes were introduced in fiscal measures, affecting all industries. As the ABS will revise its estimates for this particular year, the BTR intends to do so for its indirect estimates. Hence, the above conclusions are subject to revision.

END NOTES

(1) A part of national accounts which provides detailed information about the supply and demand of commodities in the economy, and about the structure of and interrelationships between industries.

(2) See Salma (2001), pp10-11.

(3) The tables detailing consumption shares by type of visitors can be purchased electronically from the BTR. Contact: 02 6213 6940.

(4) See Salma (2001) for aggregate tourism output and employment multiplier values and industry specific multiplier values.

(5) Tables detailing employment and value added by industry, directly and indirectly created, for every year from 1997-98 to 2000-01.

(6) All manufacturing industries are grouped together as the TSA (ABS 2002) did not provide any breakdown of employment in this industry group.

REFERENCES

Australian Bureau of Statistics 2000, Australian National Accounts: Tourism Satellite Account, 1997-98, cat. no. 5249.0, ABS, Canberra.

Australian Bureau of Statistics 2002, Australian National Accounts: Tourism Satellite Account, 2000-01, cat. no. 5249.0, ABS, Canberra.

Salma, U. 2001, BTR Research Paper No. 6, Tourism’s Indirect Economic Effects 1997-98, BTR, Canberra.

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