Tourism in Australia: Impact of Global Financial Crises and Proposed Plan

This paper discusses the impact of global financial crises on the tourism industry in Australia and proposes a plan to mitigate the effects. It covers the role of government, international bodies, business organizations, and financial institutions.

Running head: TOURISM IN AUSTRALIA
Tourism in Australia
Name of the Student
Name of the University
Author note

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Table of Contents
Part 1: Position statement:...............................................................................................................1
Part 2: Background context:............................................................................................................2
Credit crunch in leading banks:...................................................................................................2
Financial crises within the economies:........................................................................................2
Reduction in industrial output and fall in revenue generation:....................................................3
Fall in GDP and USD value:.......................................................................................................3
Effect of GFC on Australian tourism:.........................................................................................5
Part 3: A statement of need:.............................................................................................................6
Government of Australia:............................................................................................................7
International bodies and partner governments:............................................................................7
Business organisations and suppliers:.........................................................................................8
Financial organisations:...............................................................................................................9
Tourists (Customers):..................................................................................................................9
Part 4: Scope of the proposed plan:...............................................................................................12
Systems approach:.....................................................................................................................12
Meta-problems approach:..........................................................................................................12
The approach selected and justification:....................................................................................12
Instruments:...............................................................................................................................13
Part 5: Proposed process:...............................................................................................................13

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Consultation:..............................................................................................................................13
Implementation:.........................................................................................................................14
Review:......................................................................................................................................14
Part 6: Bibliography:......................................................................................................................15

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Part 1: Position statement:
Australian Trade and Investment Commission, Government of Australia clearly
mentions its aim to promote tourism in Australia. The central government clearly lays down its
goals regarding National Tourism Policy and Strategy in its official website. It mentions that the
Government of Australia aims to establish a strong and booming tourism, both international and
domestic tourism. The body further mentions that in order to make Australia more attractive as a
tourist destination, the government is taking several initiatives like reduction of taxes, red tapes’
and compliance related complexities (aph.gov.au 2018). The commission also mentions that it
would collaborate with the tourism industry to promote Australian tourism in order to create
demand in the international market. This would enable it to attract more tourists from the
international market which would ultimately lead to high volume of revenue generation
(austrade.gov.au 2018). The tourism industry is an important source of income for the country
and earns up 3.1 percent of the GDP. However, the tourism goals of the Australian
Government are increasing coming under the influence of issue of global financial crises or
GFC (traveldailynews.com 2018). This outcome of the GFC would be falling in economic
activities and generation of revenue. GFC as per Eugenio-Martin and Campos-Soria (2014) leads
to ‘cut back’ of the amount tourists spend towards touring places. This is due to decrease in
disposable income available with the tourists due to decrease in income. The paper would aim to
propose a new tourism plan to tackle with the problem of GFC on one hand and promote
Australian tourism on the other hand. It would aim to point sustainable measures which can be
taken to tourism in Australia tide over this threat of GFC which is hitting all its sectors very
badly.

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Part 2: Background context:
Reserve Bank of Australia in its bulletin of March Quarter 2015 shed light on the issues
which have led to the emergence of global financial crises (rba.gov.au 2018). This bulletin would
provide strong substratum to delve further into the factors responsible for GFC which has taken
the tourism sector in Australian in its spate. The following are the causes of global financial
crises:
Credit crunch in leading banks:
The leading banks in developed markets like the United States and the United
Kingdom suffered from a severe cash crunch around the 2007. According to Alegre and Sard
(2015) loans are assets for banks because they are able to lend the financial capital in the market
to borrowers in form of loans. The banks in return are able to earn immense amount of income in
form of interests which boosts their financial stability. The banks in the leading global markets
like the US pushed immense amount of money into the sectors like real-estate which led to the
increase in the prices of properties. They lent money both to corporate and individuals. These
borrowers were however not able to pay interests to the banks which created intense cash crunch
within the banking sector as a result. This impaired to power of the banks to mobilise funds into
the economies to boost other sectors. Their income fell owing to lowering of their lending power
and were able to give investors high returns on their investments. The investors as a result lost
trust in the profitability of the banks and withdrew their investments which weakened the banks’
financial position even more (Rey 2015).
Financial crises within the economies:
Bordo and Haubrich (2017) point out that the deficiency of financial resources in
the banks resulted in financial crises within the developed economies like the UK and the

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US. This discussion can be strengthened by drawing from the discussion of Claessens and Van
Horen (2015). They mention that banks play the tremendous role of collecting deposits from
individual investors and corporate organisations. They make this money available to the
industries which boosts their operations. The global industries engage in financial transactions
worth billions and use the online methods of transaction using the payment gateways of banks.
Thus, it can be inferred from the discussion that banks not only play significant role in
mobilisation of funds within the global economy but also provides gateways for the movement of
the funds. The weakening of the leading banks led to deficiency in the capital available to the
industrial which hit their productivity. Thus, the global financial crises literally jeopardised the
financial activities in the global economy.
Reduction in industrial output and fall in revenue generation:
Dungey and Gajurel (2015) points out that lack of available financial capital led to
reduction in industrial output and fall in revenue generation. Alegre and Sard (2015) can be
reiterated here. They mention that loans which banks led to the industrial sector boosts their
operations and hence revenue generation. The robust operations of the global companies are
dependent to a great extent on the business loans they borrow from banks. When the banks were
not able to make the requisite loans available to the companies, their productivity automatically
suffered. The outcome of this fall of productivity was that they were not able to produce goods to
meet the market demand. This in turn resulted in the lower revenue generation in these
companies. Thus it can be pointed out that the reduction in industrial output and fall in revenue
generation contributed towards intensifying GFC.

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Fall in GDP and USD value:
The lowering productivity hampered the gross domestic products of the major economies
like the US and the value of their currency suffered.
Figure 1. 10 years historical price of USD on NASDAQ
(Source: nasdaq.com 2018)
This factor can be pointed out from the analysis of the 10 year USD value graph shown
above. The graph clearly shows a sharp decline in the USD rates towards end of 2008 and
beginning of 2009. It can further be pointed out that the fall in the USD rates kept on making
resurgence almost every year. This frequent fall in exchange rates of USD weakened its position
in the global currency markets. It can also be pointed out that the USA is the leading global

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economy and it provides financial assistance to several economies. The USA and the UK are
home to several global companies (Claessens and Van Horen 2015). Thus, weakening of these
economies weakened several other economies in the world. Thus, weakening of the American
economy had its effect on the entire global leading to a breakdown in the global economic
system.
Effect of GFC on Australian tourism:
Figure 2. Statistics showing inbound tourists in Australia
(Source: tra.gov.au 2018)
GFC would have devastating impact on the tourism market in Australia which is worth
$130 billion and account of 11 percent of Australian export (dfat.gov.au. 2018). It would be

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prudent to point out that the United States of America alone accounts for around 15 percent of
the country’s inbound tourists. The United States of America is one of the main economic
partners of Australia. They two countries collaborate in important areas like environment,
tourism and economic development (usa.embassy.gov.au 2018). It can be pointed out from this
analysis that breakdown of the American economy owing the GFC would also have direct effect
on the Australian economy. Secondly, weakening of USD in the international market would
mean that the Americans would be traveling less to Australia (nasdaq.com 2018). Thirdly, since
the American economy supports economic development of several other economies, its
weakening would also slow down the economic development of these dependent. This would
result in less number of tourists from these countries heading towards Australia. This would
mean the the Australian tourism industry and the Australian economy as a whole would receive
lower amount of foreign currency reserve. This would result in the draining of the foreign
currency reserve available with the Reserve Bank of Australia. The outcome of this weakening
would be devaluation of AUD against international currencies (Goodfriend 2015). This would
mean that Australian tourists would have to pay more to visit foreign countries. This factor
coupled with the low amount of disposable income would discourage Australian tourists from
travelling to foreign tourists destinations. This, it can be inferred from the discussion that GFC
would hit the Australian tourism industry both outbound wise and inbound wise, thus lowering
its revenue generation.
Part 3: A statement of need:
The Australian tourism plan should aim to mitigate the impact of GFC and boost
Australian tourism. The Australian tourism sector generates a whopping $ 13 billion revenue
(dfat.gov.au. 2018). This means that the tourism would strengthen the entire economy of

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Australia as a whole. The plan would require support from stakeholders like government,
financial institutions, investors, business organisations, suppliers, customers and the society as a
whole. The National Tourism Planning should aim to strengthen and promote the tourism
industry of Australia in the face of the GFC. The following are the main participants of the
National Tourism Planning of Australia:
Government of Australia:
The Government of Australia would play the most important role in formation and
implementation of National Tourism Planning. The government bodies both in the central and
the state level need to collaborate to form the policies. The government bodies of Australia like
the Department of Foreign Affairs and Trade form laws and policies pertaining to international
tourism (dfat.gov.au 2018). The state governments form tourism laws and policies for their
respective states. Australia has embassies in several countries like China and these countries in
turn have their embassies in Australia. The embassies collaborate with each other in tourism
related issues to ensure smooth operations in the tourism market.
International bodies and partner governments:
The international bodies like the European Union and partner governments would play
very significant role in the National Tourism Plan of Australia. As pointed out that the majority
of the revenue generation of the tourism sector in Australia is dependent on international
tourism, inbound and outbound. This means that the international organisations play a very
important role in the operations of the tourism market. For example, the Government of Australia
and the European Union signed 2008 European Union-Australia Partnership Framework. The
essence of the agreement is cooperation in areas like foreign policies and migration, all of which
have significant role in the tourism sector (eeas.europa.eu. 2018). The country entered with free

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trade agreement with China, its largest tourism partner which aims to strengthen the economic
sector of Australia including tourism (austrade.gov.au 2018). The Government of Australia
entered a similar agreement with its present second important tourism partner, India
(india.embassy.gov.au 2018). India and China together account for around half of the
international tourism business in Australia (tra.gov.au 2018). The analysis of these agreements
shows that the agreements not only allows Australia to form a strong National Tourism Planning
but also allow it to tide over GFC. These nations like China and India are experiencing immense
economic growth. These two countries are also emerging as sought after tourist destinations.
This m aeeans that collaborating with these countries would enable Australia to diversify the
losses its tourism sector suffered due to GFC in the US. It can be pointed out that in other words,
the aims of the tourism plan would also be diversifying the loss it would incur due to financial
crises (Rey 2015). Thus, involvement of the governments and international bodies would
contribute towards making the tourism plan of Australia stronger and financially sustainable,
thus immune to GFC to a certain extent.
Business organisations and suppliers:
Lee and Fernando (2015) point out that business organisations and supplier firms would
play significant roles in the National Tourism Planning. The tourism sector in Australia involve
several types of organisations like travel companies and hotels. The industry also involves hotels
and suppliers of tickets. This means that the industry in order to form an effective tourism plan
require to gain participation of these bodies as well. It can be pointed out that top tourism
companies operate in multiple countries. They in fact generate immense revenue in foreign
currencies which in turn contribute towards foreign currency reserve of Australia (Jones 2017).
These companies have operations in emerging markets like Thailand, Malaysia and China. Thus,

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they can enable the Government of Australia attract tourists and revenue from these countries.
This can help the country to diversity the loss it suffers by losing America and the UK due to
GFC. Thus, it can be inferred that business organisations and suppliers would play a significant
role towards the successful implementation of the National Tourism Plan of Australia.
Financial organisations:
Alegre and Sard (2015) can be reiterated to emphasise on the tremendously important
roles financial organisations like banks would play in the National Tourism Plan of Australia.
The banks provide loans to the tourism organisations to operate in the tourism market. It can also
be pointed out that the tourism companies involve in immense amount of financial transactions
which includes multi-currency transactions as well. The banks also provide gateways to the
tourism companies to process their financial transactions. The companies deposit their earnings
in the firm of foreign currencies with the banks which in turn deposit the same with the Reserve
Bank of Australia (Goodfriend 2015). Korstanje and George (2015) in this regard point out that
since foreign travel involves risks, the travel insurance companies play significant roles by
providing travel insurances to international tourists. It can further be pointed out that availability
of travel insurance enable customers to obtain insurance for their valuables and documents.
Thus, presence of travel companies encourage international tourists to travel to Australia. Thus,
it can be inferred that financial institutions play significant roles towards efficient
implementation of National Tourism Plan in Australia.
Tourists (Customers):
It can pointed out that the tourists both international and domestic would play important
roles in the efficient implementation of National Tourism Plan of Australia. Fang, Ye and Law
(2016) point out that the tourists create demand for the tourism services. The inbound

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international tourists visit Australia and outbound Australian tourists visit foreign countries. The
Australian government, tourism business organisations and the financial institutions are able to
generate immense revenue by serving these tourists. The foreign tourists are the sources of
foreign exchanges which contribute to the foreign exchange reserve of the country (Jones 2017).
Thus, the tourists would be the actual drivers of the National Tourism Plan. They create demand
for the tourism services, generate revenue for all the stakeholders involved in the tourism market
of Australia including the government and also the sources of foreign reserve of the Government
of Australia.

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Figure 3. Participants of the National Tourist Plan of Australia
(Source: Author)
o ernment o A traliaG v f us
orm la and policie or t e to rim ectorF s ws s f h u s
nter into ilateral a reement it partner o ernment li e t e and inaE s b g s w h g v s k h US Ch
nternational odie and orei n o ernmentI b s f g g v
orm international to ri m la it in t eir re pecti e ri dictionF s u s ws w h h s v ju s s
Allo A tralia to enter into ilateral to ri m a reementws us b u s g s
ine or ani ationBus ss g s s
er e to ri tS v u s s
tain re en e in orm o orei n c rrencie and depo it t e ame it anOb v u f f f g u s s h s w h b ks
inancial in tit tionF s u s
Pro ide loan to ine or ani ation in ol ed in to ri mv s s bus ss g s s v v u s
aciliate lo o ndF f w f fu s
Pro ide orei n e c an e it t e Av s f g x h g s w h h RB
Pri ide ate a or pa mentv g w y f y s
Pro ide inancial er ice li e tra el in rancev s f s v s k v su
To ri t c tomeru s s( us s)
reate demand or to ri m er iceC f u s s v s
Act al depo itor o orie n e c an eu s s f f g x h g s
enerate re en e or t e to ri m ectorG v u f h u s s

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Part 4: Scope of the proposed plan:
The scope of the proposed National Tourism Plan of Australia would have two main
objectives. The first objective of the plan would promoting the tourism industry of Australia and
attracting more international tourists. The countries targeted would include the already existing
top tourism partners namely China and India. The tourism plan should in turn concentrate
towards attracting tourists from other markets like Southeast Asian countries and Middle East
countries (Claessens and Van Horen 2015). The second objective of the plan would be achieved
from achievement of the first objective. The second objective would be diversification of the
losses the Australian tourism industry suffers due to GFC and the extreme dependence on the
American tourists in the early 2000s. The following are the proposed approaches which the
Government of Australia can take to achieve National Tourism Plan:
Systems approach:
The systems approach takes into consideration the interactions between the different
participants of the tourism plan. They include, government bodies, international bodies, business
organisations, suppliers, financial institutions and customers.
Meta-problems approach:
The meta-problems approach deals with problems within the systems of an organisation.
The approach deals with the challenges and emphasis on their efficient management.
The approach selected and justification:
The most appropriate approach in this case would be systems approach. This is because
efficient implementation of the National Tourism Plan would require collaboration of all the
stakeholders like governments, business organisations, suppliers and customers. Thus, it can be
justified that systems approach is appropriate for National Tourism Planning. The main policy of

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National Tourism Plan would be formed by the Government of Australia and involve all the all
participants mentioned (Claessens and Van Horen 2015).
Instruments:
The implementation of the National Tourism Plan of Australia would involve the
following instruments:
Instruments Descriptions
Advocacy Tourism plans, accreditation from international bodies and
projects to boost tourism which can also involve multiple
countries.
Money and funds Subsidies from governments, Free trade policies and foreign
exchanges
Government actions Laws, policies and bilateral agreements
Laws Laws, legislations etc.
Part 5: Proposed process:
The proposed process to develop a National Tourism Plan should involve consultation,
implementation and review. The three mentioned components are described as below:
Consultation:
The Government of Australia `should consult all the participants while forming the
planning. The government should consult the partner governments to gain knowledge about their
tourism laws and policies. The Australian Government should also consult the international
bodies like the EU. Then it should collate the knowledge gained from these bodies to form its

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National Tourism Plans. The government should also consult the business organisation to gain
information about important tourism aspects like customer expectations and market trends.
Implementation:
The implementation process would involve enforcement of the National Tourism Policies
through business organisations. The government should ensure that the business organisations
and suppliers comply with the laws and do not exploit tourists (Rey 2015).
Review:
The government should review the National Tourism Plan in various terms./ First, it can
compare between the number of inbound tourists from different countries and the income from
them. Then, it can also compare between the foreign exchange earned from tourists of different
countries. Thirdly it can compare between the number of domestic tourists and foreign tourists.
earY n o nd to ri tI b u u s s n o nd to ri tI b u u s s n o nd to ri tI b u u s s
inaCh ndiaI AUS
o oN f
to ri tu s s
Amo nt ou f
orei nf g
e c an ex h g
earned
o oN f
to ri tu s s
Amo ntu
of
orei nf g
e c anx h g
e earned
o oN f
to ri tu s s
Amo ntu
of
orei nf g
e c anx h g
e earned
2019
2020
2021
2022
2023
For example, it can compare between outbound tourists from particular countries. A fall
in the number of tourists would mean that the government need to promote its tourism in that
particular country. The review can be carried annually to take appropriate actions.

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%20report.pdf [Accessed 12 Sep. 2018].
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Bordo, M.D. and Haubrich, J.G., 2017. Deep recessions, fast recoveries, and financial crises:
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Claessens, S. and Van Horen, N., 2015. The impact of the global financial crisis on banking
globalization. IMF Economic Review, 63(4), pp.868-918.
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digital-trade/Pages/international-tourism-engagement.aspx [Accessed 12 Sep. 2018].
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Eugenio-Martin, J.L. and Campos-Soria, J.A., 2014. Economic crisis and tourism expenditure
cutback decision. Annals of tourism Research, 44, pp.53-73.
Fang, B., Ye, Q. and Law, R., 2016. Effect of sharing economy on tourism industry
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Rey, H., 2015. Dilemma not trilemma: the global financial cycle and monetary policy
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