The big travel theory

Low interest rates get tourism forums excited, but is it all just hoopla?

Theoretically low interest rates means Australians have more disposable income to spend on life luxuries like holidays, but in reality, are they busy packing their bags?

According to the Tourism & Transport Forum (TTF), the Reserve Bank’s decision yesterday to keep the cash rate on hold is a welcome push for the industry, amid a softening in share prices for some big players like Flight Centre, which adjusted its FY15 profit forecast claiming leisure travel was flat lining.

However, as per the latest overseas arrivals and departures data, Aussies are jetting off overseas in record numbers – with short term departures reaching just under 9.2 million over the 12 months, which is the second highest on record after March 2015.

“With more money in your wallet, a holiday domestically or overseas becomes a lot more attractive,” TTF ceo Margy Osmond said, following the RBA’s decision to keep interest rates on hold.

“Consistently low rates could see more Aussies heading away on holidays, and also offset the impact of the lower Aussie dollar, which is traditionally considered a factor that discourages people from travelling overseas.”

Osmond claims the impact of the Australian dollar on outbound travelling trends is “overstated” and that most plan holidays in advance.

“Short-term fluctuations in the currency play little part in their travel decisions,” she said.

The TTF chief also warned of a slow-down of Australian visitors for some international markets if the AUD maintains its weakening trend, but says it may cause travellers to readjust plans to keep holidays local.

“If we see persistent falls in the Australian dollar against currencies used in key markets like the USA and Europe, people may start to rethink their plans,” Osmond said.

“If the Aussie dollar heads lower, Australians may also start to look domestically for their holidays.”

However, on the flipside, Osmond says the lower Australian dollar could result in an influx of inbound visitors, mainly from established markets of USA, New Zealand, UK and emerging markets in Asia.

“Further falls in the Aussie dollar could also help the number of Chinese visitors to Australia crack the one million mark this year,” Osmond said.

Image: The Guardian

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Email the Travel Weekly team at traveldesk@travelweekly.com.au

flight centre Interest Rates margy osmond rba Reserve Bank tourism transport tourism forum travel ttf