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The strong reason why you should head overseas

Jessica Irvine

by Jessica Irvine

03 Dec 05:50am

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Filed under: Australian Dollar, Economics, Tourism, Travel

35 comments

A record number of Australians are expected to jet overseas this year.

The Aussie dollar is just as strong

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

Comments on this post close at 8pm AEST.

Most commented

35 comments

Show oldest | newest first

    • expat says:

      05:48am | 03/12/12

      Venezuela is not a war torn country.. It’s just a good example of the path to socialism showing its true colours.

      Reply

    • Expat Ozzie says:

      09:26am | 03/12/12

      @expat: “war torn”

      Really?? since when has Venezuela been at war?? I must have missed that one.

    • Expat Ozzie says:

      09:37am | 03/12/12

      @expat: Apologies for not reading your post more clearly, must be to early…..I need a coffee me thinks!!

    • BJ says:

      06:18am | 03/12/12

      The best thing about Australians going overseas is that it gets the sort of people who go on overseas holidays out of this country.

      Reply

    • TR says:

      09:01am | 03/12/12

      Exactly.
      Where those types of people that enjoy immersing themselves in other cultures, can come back with a greater appreciating and understanding of how other parts of the world live. And then sharing this wealth of learning onto others, in a hope to make us all less naive for what we have here in Aus.

    • CC says:

      09:06am | 03/12/12

      @BJ - You’ve obviously never travelled.  Getting out of Australia, seeing other cultures, experiencing what life is like outside of your insular little world is exactly the kind of people you want to keep in the country after they’ve travelled. 

      Getting out on your own in the world will change your life, guaranteed.  It opens your eyes to many things, you experience amazing personal insights as well as external awareness, only something you could understand if you actually did the travel.  In fact your comment proves the kind of ignorance that becomes a problem when you are completely insular in your own little world.

      Australia has very little in the way of history, we are a very young nation in contrast to places like europe, south america, africa, all of asia…the list goes on. There is nothing in Australia that can compare to that sort of history, and cultural development.  You need a good wake up slap and get out there and see what the rest of the world has on offer.  Sure Australia is amazing, I’ve seen and experienced amazing things in Australia, but its a completely different world to anywhere else you will experience.  Get on a plane pal, you obviously need it.

    • Dan says:

      09:06am | 03/12/12

      Especially the 900,000 or so that go to Bali…

    • Jetsetter says:

      09:12am | 03/12/12

      @bj

      And you’re the sort of people that explain why we do.

    • Kika says:

      09:56am | 03/12/12

      Geez - jealous much, BJ?

    • Mark says:

      10:09am | 03/12/12

      Trololololololololololololol

    • TChong says:

      07:49am | 03/12/12

      Jesssica
      “war torn coutreies…,”
      Venezuela,despite what its far Right expats claim is not war ravaged, neither is Argentinia or   Myanmar

      Reply

    • expat says:

      08:50am | 03/12/12

      Hey don’t blame the right wingers.. We are not sitting her claiming its war torn, yes its a poor business environment but thats socialism for you.

    • St. Michael says:

      03:30pm | 03/12/12

      Argentina is fighting a war, though: its government is fighting a war against its own citizens, and the principal weapon it’s using is its own, overinflated currency.  It’s a war it’s been fighting since the time of Peron, and it’s been winning, to the detriment of its own citizens.  There’s a reason investors get out of Argentina first when there’s market jitters, and it ain’t because bullets are flying over there.

    • jimbo says:

      09:20am | 03/12/12

      Hey BJ. What sort of people would they be.  Come on, out with it!

      Reply

    • KK says:

      09:54am | 03/12/12

      Greedy Australians have priced themselves out of the tourist dollar, and this is our major problem here at the moment.  Its very hard to justify supporting local business when you can actually holiday cheaper, and experience completely different worlds overseas.  For example, I can ski here in Victoria for about 2500 for 1 week skiing and accom.  Or I can go to NZ, and do the same holiday for about 1800 including air fares, accom and lift passes PLUS I get to see NZ with different landscapes that we just dont have, the skiing fields are far better quality, etc etc its just a no brainer, Australia is over-priced and if they dont realise it soon the tourism dollar will evaporate.

      Reply

    • iansand says:

      10:09am | 03/12/12

      And, provided you go for over 2 weeks and are a bit careful with your airfares, you can go to North America for the equivalent amount that it would cost in Australia.  Or Japan.

    • subotic doesn't believe it says:

      09:54am | 03/12/12

      Why do we need to go overseas to get a bargain?

      Are we being ripped off by high taxes and overpriced goods here in our own country?

      Are you saying that our politicians & businesses are crooks, thieves, rip-off merchants and liars?

      Gee, who have thunk it?

      Reply

    • PJ says:

      10:16am | 03/12/12

      Bloomberg reports African Mining is booming this year. So far 2012 it has grown from Minus -16.8% to Plus +32% under the same Commodity prices faced in Australia. Bloomberg also states, that despite a general recession, in particular manufacturing, African Economies have grown 3% this year thanks to the Mining Boom. Our precious, and given the Gillard Governments reckless spending, very necessary Mining boom is packing up and off to Africa. It cannot be Commodity prices because Africa faces the same restraint. Why are we losing our Mining Boom?

      “Resources projects in Australia were 40 per cent more expensive than in the US and its workforce was 60 per cent less productive than the US.”
      ANDREW BURRELL: The Australian. This is why, and the Australian goes on to report:

      “The local head of US energy giant Chevron, the biggest foreign investor in Australia, has warned $100 billion worth of projects are “hanging in the balance” due to soaring costs and declining confidence in the federal government’s policy settings.”

      In a UK meeting with world investors, BHP’s CEO Kloppers continually referred to the Gillard Government’s loss of the Olympic Dam project worth $30 Billion to Australia. Kloppers warned Investers that investment in mining projects in Australia were no longer profitable thanks to MRRT (threatening a 30% take) and Carbon taxes adding 15% to costs.

      Rio Tintos China MD, Mr Bauert, told a conference that Australia had become the most expensive place to do business for Rio, after being considered the cheapest five years ago.

      This Punch article reads like Nero’s music sheet to a burning Rome.

      If you are part of the new Socialist Bourgeoisie, then holiday now while Australia burns under $300 Billion debt and $120 billion dollar budget deficit black hole. All achieved in 4 years. Another 4 years and $600 billion debt and $240 billion budget deficit? No, not likely/ Luckily our Loan sharks will loan us much more. Soon it will be time for you to pay what you already owe.

      Cheering the High dollar, It’s like celebrating being Marie Antoinette as she made her fateful comment about the poor ‘let them eat cake’ darlings, we socialist yuppies are off overseas to shop.

      The ‘overseas holiday shoppers’ celebrated High dollar is taking a nasty toll on Australian industries from manufacturing, to tourism to education.

      We’ve got 12.5% of our 1.5 million kids growing up in homes where no Aussie has a job, we have SA reporting a 38% hike in utility cut offs for Australian families that could no longer pay there bills and homeless has increased 17% also under the Gillard Government.

      The High Dollar, driven cruelly high in part by the high interest rates from our recklessly free spending Government borrowings, is a total evil for those suffering that cannot afford to ‘party shop’ in New York, or vote Labor again.

      Reply

    • Daylight Robbery says:

      10:27am | 03/12/12

      Isnt it great, all that AUD pouring out of the country on vacations and online spending not even a drop in the ocean for the US when US tourists are at an all time low.
      Yet building the strength of other ASIAN economies of whom we will be competing with very soon.

      Good to see the ASIAN have been reciprocating for the Asian decade years.

      We are hemorrhaging like a stuck pig while our dollar sits at dangerous highs

      Australia is a bunny in the headlights

      Reply

    • Wurp says:

      11:25am | 03/12/12

      Asia is becoming economically stronger and makes up 60% of the world’s economy. That’s why Australia should have stronger economic, political and cultural ties with Asia. Australia should see them as an ally, not an enemy.

    • Last Man Standing says:

      06:28pm | 03/12/12

      “Australia should see them as an ally, not an enemy”

      Australians have poured a small fortune into Asia over two decades in tourism.
      Then there is the aid money, the refugee money.

      What happens? Well, an bombed Australian embassy later, a hotel and a couple of other mishaps. 
      Australians are wishfull thinking if they think AsiaOceania give a rats about Australians once they overtake AU economically.
      Dont think for a second anything will be reciprocated to this nieve country.
      Dog eat dog countries think a little different. Life has little value.
      Hence, the yanks have added a little team in the North of AU to protect their oil&gas; mining contracts etc.
      Australia has given away its technology, its manufacturing, its retail.  Falling behind the future.

    • Daylight Robbery says:

      10:34am | 03/12/12

      ” 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. “

      This is what is going to plummet Australia into a death spin. Our dollar is being distorted by the US printing money.

      Australians are whining about why goods in Australia are so expensive and saying retailers are ripping them off.

      Retail is the second highest employer in Australia. If you were worried about AU manufacturing being ruined, wait till retail employment disintegrates and Aussie retail staff turn up for your jobs.

      Australia is being slowly stewed.  Another recession we had to have.

      Reply

    • Kev says:

      10:56am | 03/12/12

      Until the tourism industry stops ripping locals off through exorbitant charges people will keep going overseas. If they are struggling then they only have themselves to blame.

      Reply

    • OS only says:

      11:06am | 03/12/12

      The AUD could be worth US$0.50 and this country would still be a rip off

      Reply

    • ramases says:

      11:50am | 03/12/12

      The main reason that Australians go overseas for their holidays is cost.Another reason is service and another is being treated like a welcome guest instead of a bloody nuisance.
        I have travelled Australia and many countries overseas and the difference has to be lived to know what I am talking about. Here we are treated like unwelcome guests who must pay through the nose for inferior accommodation and food whilst overseas nothing is too much trouble for the hosts and you are treated like royalty.
        Until the Australian tourism industry realises that their bread and butter is the Australian people and starts to treat people well then more and more people will opt for overseas.

      Reply

    • Frank of Ingle Farm says:

      12:06pm | 03/12/12

      print more currency tolower value of AUD // like USA has due to GFC

      Reply

    • Frank says:

      12:18pm | 03/12/12

      Buy gold and lock in the high aussie’s purchasing power now.

      Reply

    • Kai says:

      12:20pm | 03/12/12

      Why are you talking about going overseas for a holiday?
      Surely the conversation should be about going overseas permanently?

      Reply

    • the nothing person says:

      12:28pm | 03/12/12

      If Tony Abbott goes to The Lodge without the secret passwords and secret handshakes, , then many many voters may exit Australia for the real world !!

      Reply

    • Tell It Like It Is says:

      12:46pm | 03/12/12

      The best reason to go overseas is to have a holiday from the unbearable ALP government.

      Reply

    • chanelle says:

      01:29pm | 03/12/12

      and i have been! this year alone, new york, israel, london, switzerland, france, jordan - each of these cities/countries, ‘known’ to be ‘expensive’ are much cheaper than Australia. wake up Australia - you’re being screwed, left, right, front, back and centre. Why are you taking this lying down?

      Reply

    • Modern Primitive says:

      02:01pm | 03/12/12

      She’ll be right, mate. Besides, I don’t have time to think for myself, my favourite show is on telly.

    • K^2 says:

      03:45pm | 03/12/12

      I tried standing up to it, but then you just end up taking it standing up.

    • Esteban says:

      04:31pm | 03/12/12

      Hats off to Jessica who has turned her honeymoon research into an article!

      A honeymoon destination needs to be safe, clean and hassle free. If it has to be overseas the NZ sounds good.

      Jessica , in the new year or earlier if you get a chance, I would love to see an article on the implications for global currencies on the undermining of the USD$ as the sole petro dollar by a deal done between China and Russia regarding oil in Yuan. The deal was announced in September.

      This potentially world changing deal has had so little commentary about it that I am not even sure that it is not an internet hoax.

      If the limited repoirts are true then the implications are massive and there are lots of heads in sand.

      Reply

    • K^2 says:

      04:53pm | 03/12/12

      @Esteban - there has been loads of saber rattling over oil trading currencies in the past 10 years.  At one point there was talk of everyone switching to Euro and then suddenly the US went to war in Iraq, coincidence I suppose, nothing to see here.

      There was also talk of the “Amero” (mexican/US and south american currency) but that could well have been an internet hoax also - or perhaps just too many issues with the countries involved for most of them to agree to it. 

      I would say if anyone was able to change the oil trading currency away from the USD it would be china and russia, although China is currently holding 1trillion (at least) in US currency and I doubt they would want to do much to devalue that, unless of course they choose to flood into the market and crash the US dollar.  I doubt this too as China/America have been labelled Chimerica - after the chimera, to demonstrate how closely tied their economies atually are.  I think any thing that hurts the US would also hurt China, so I doubt they will sabotage themselves, at least not just yet.

 
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