The strong reason why you should head overseas
A record number of Australians are expected to jet overseas this year.
Only a decade ago, overseas travel was a distant dream for most. The Australian dollar wasn’t called the “pacific peso’’ for no reason. Flights were expensive. Throw in the September 11 attacks, the 2003 threat of bird flu and the 2002 Bali bombings and it’s perhaps not surprising that many holidaymakers chose to stay at home.
A decade on, Australians have well and truly caught the travel bug.
In the year ended June, we made a record 8 million short trips abroad, up from 3.4 million ten years ago. Of course, many people make multiple trips, so the actual number of Aussies travelling is somewhat lower.
But it’s rising.
In 2008 we crossed an interesting threshold: more Australians made trips abroad than foreigners visited here - the first time this had happened in two decades. This “tourism gap’’ has only grown since.
The high Australian dollar has been hurting exporters like manufacturers, education services and our own tourism industry. But it has been a boon for would-be Australian overseas holidaymakers. It’s one of the ways in which the mining boom made us richer.
The dollar is also strong because, in this post- global financial crisis world, Australia is viewed as a relative safe haven for international investors. To invest in Australian assets, like bonds and property, investors must first buy Australian dollars. This pushes up demand for the dollar, and hence it’s price.
So even as commodity prices have fallen and the prospects for our mining boom have diminished, this strong demand for Aussie dollars has kept the currency high. Again, that’s bad news for people employed in currency-exposed industries, but good news for the rest.
Whereas one Aussie would only buy you about 50 US cents a decade ago, today it buys you a muscly $US1.04. You can literally buy double in the US what you could have a decade ago. Is it any wonder we’re shopping online and returning from the states with suitcases packed full of new clothes and gadgets?
But it’s not only the US greenback. The Australian dollar is strong against a wide range of currencies.
Fancy an African safari? Now’s the time. One Aussie will now buy you 9.1 South African rand, up a whopping 25 per cent in just the past two years. South Africa’s mining-reliant economy has suffered from falling commodity prices and mining strikes. But their pain is your potential gain with cut price meals, accommodation and safaris on offer.
Or how about a South American getaway? One Aussie will buy you 2.1 Brazilian real, up 22 per cent in the past two years.
Why not pop by and see Crown Princess Mary of Denmark instead, where one Aussie dollar will buy 6 Danish krone, up 13 per cent in two years.
And while you’re at it, why not visit all the Kings and Queens of Europe? The near collapse of the European Union means one Aussie buys 0.80 euro, also up 13 per cent in two years. Once again, their pain, your potential gain.
And if you’re heading to the US anyway, why not swing by Mexico where one Aussie will buy you 13.5 peso, up 9 per cent.
Truly hard core travellers keen on bagging a currency bargain may travel further afield (please check travel warnings prior to travel!).
Unsurprisingly, war-torn countries have the cheapest currencies.
Over the past decade, the Aussie has gained 100 per cent against the New Iraqi dinar and the Myanmar kyat. We’re up 93 per cent against the Iranian rial, 91 per cent against the Venezuelan bolivar and 90 per cent against the Argentine peso.
Of course, for reasons immediately apparent, that’s not where most Australians choose to spend their holidays.
Of the 8 million trips last financial year, 57 per cent were for holidays, 23 percent were to visit friends and family and 10 per cent were for business.
The number one destination was to New Zealand, with 1.1 million trips to the land of the long white cloud.
And the beaches of Bali still beckon, not just for schoolies. Australians made 911,000 trips to Indonesia in the year ended June.
After that, it’s the US with 819,000 trips, Thailand with 600,000 trips and the United Kingdom with 487,000 trips.
Where the dollar is heading in 2013 is anyone’s guess. It seems unlikely the Australian dollar will plunge any time soon. So long as the rest of the world stays in financial turmoil, the Australian dollar will be in demand.
It’s possible we could slip below parity with the US dollar again should recovery there take hold and the global financial system stabilise.
A Chinese slowdown could also knock the Aussie off its perch, although most analysts expect the Chinese slowdown is nearing an end.
So pack your bags. If you can afford it, it’s the best time to head abroad in a long time.
As for me, I’m off for four weeks. See you in 2013.
Jessica Irvine is News Limited’s National Economics Editor
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