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Speech to the Australian Backpacker Industry Conference (ABiC) 2012



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HON BOB BALDWIN MP SHADOW MINISTER FOR TOURISM SHADOW MINISTER FOR REGIONAL DEVELOPMENT

SPEECH TO THE AUSTRALIAN BACKPACKER INDUSTRY CONFERENCE (ABiC) 2012

09:00, 8 NOVEMBER 2012

Thanks for inviting me to this conference.

Last week the Prime Minister launched The Asia Century document…and missed a golden opportunity.

In talking about liberalising visas there was no discussion about including China in our Working Holiday Visa classes.

While the Prime Minister is saying she’s listening to Kevin Rudd and valuing his input, she has ignored a tweet that he made in the past month saying every major hotel front desk and tour operation needs staff who speak Chinese.

Kevin Rudd is spot on in this regard.

We do need tourism and hospitality staff who understand the Chinese culture and who are fluent in their language.

When I ran an adventure diving and fishing tourism business in Cairns and down the East Coast in the 1980s, there was desperate need for staff who knew Japanese. We’re facing the same challenge now.

That’s why I applaud Tony Abbott’s commitment to Asian language learning. I implore the government to listen to Tony Abbott and Kevin Rudd.

The Coalition is well progressed in our planning and you’ll see a number of practical, well targeted policies introduced should we be returned to government.

Take for instance Tony Abbott’s plans for a revival of the Columbo Plan. We’ll be encouraging our “best and brightest” to go to Asia so our students can immerse themselves in other cultures in our region. We must also consider how to extract value for the tourism industry.

Better integration of Australian and Asian cultures, understanding guest expectations, strengthening two way economies, and immersing ourselves as fast as we can, will see Australia prosper.

We have a huge opportunity in the emergence and growth of the Chinese middle class.

If we engage backpackers and international students - and capitalise on all they have to offer Australia - we have a chance to turbo charge tourism over the next decade and beyond.

Yet all the tourism industry got from Labor in last month’s mini-budget was a further financial disincentive for Chinese and other Asian tourists to come to Australia.

And as a policy there are real questions over whether it even achieves its financial objective.

The key question for us to consider today is whether or not Labor’s latest tax raid will have a 3% or greater impact on applications. Because, according to best assessments at hand, that’s all it takes for this short sighted WHM tax to be completely self defeating.

After Senate Estimates on 18 October this year I warned the tourism industry that you can have no confidence you won’t once again be raided to pay for Labor’s waste and mismanagement.

That prediction was proved right within a month.

Labor’s border protection regime will hit taxpayers for nearly $1.7bn this year.

And Labor’s waste and mismanagement is being paid for by you - the tourism industry.

Back in May, we saw Labor’s $8 increase in the Passenger Movement Charge to $55. A broken promise based not on policy but rather plugging Labor’s budget black hole.

After failing to consult the tourism industry on yet another tax increase, Labor had also planned to increase the PMC every year by CPI. The Coalition was pleased to work with the industry in May to defeat the planned indexation.

What was most galling, after working with the industry to knock off CPI indexation, Minister Ferguson and the Treasurer issued a media release forecasting more ‘periodic’ increases,

That is, surprise announcements of tax hikes being applied - not to raise money for the industry’s benefit.

Like Labor’s Carbon Tax, the passing on of airport AFP costs, slashing of Customs and Border Protection staff at airports and a range of other new measures, the PMC works to make Australia a less attractive and commercially competitive tourist destination.

The Coalition takes a different approach. As my party’s Leader told the tourism industry in June;

“you will never find, from the next Coalition government, changes being sprung on you that we haven’t talked through because that’s not how adult governments operate. Adult governments understand that actions have consequences and they talk about the consequences with the people who will be affected by those actions.”

What worries me, is that these sudden changes are made without any clear evidence that one side of this government is talking to another.

Carbon tax

For instance, take this government’s carbon tax.

At the Tourism and Transport Forum leaders’ summit in 2007, Minister Ferguson warned:

“Australia relies almost exclusively on air travel … That is why I implore the industry to take hold of the debate before the debate takes hold of you and you are left dealing with the added expense of a carbon tax”

Then of course Labor turned around and did the opposite…and denied your industry any targeted industry compensation (unlike motor vehicles or the steel industry)

PMC

Another example; on 2 March the Minister assured the tourism industry that the government would not increase the passenger movement charge. Now, thanks to 'Wasteful Wayne', Australia has the largest passenger movement charge in the developed world for short-haul flights.

Worse yet, the government was already planning to use tenditious research designed to support its secret plans to raise PMC.

Tourism Investment

Another example: Minister Ferguson launched a prospectus to find investors for between 50,000 and 70,000 new beds by 2020. Six days later in the budget, the Treasurer doubled the withholding tax for managed investment trusts, the common investment structure for the accommodation sector.

Visa pricing strategy

If you need any further evidence of Labor’s inconsistency with respect to tourism consider this:

On 17 February, a Department of Immigration and Citizenship presentation on Visa pricing announced an overarching policy goal to:

- improve client’s experience of interacting with the immigration system.

Supposedly, DIAC’s visa pricing policy goals include:

 maintain Australia’s international competitiveness; and

 Reflect visa entitlements, service and community costs.

In light of these statements alone, I’m not sure how the Minister for Tourism can justify his government’s latest tax raid.

Working Holiday Makers

I thought that after the May budget, the tourism industry would be “safe” from further tax hikes for the rest of 2012.

Martin Ferguson does a good job defending the government - and promoting the resources and energy sector.

I wish he would put more resources and energy into tourism.

I wish, as I’m sure you do, that he would focus on protecting tourism jobs from these continuous tax raids.

In my view, Labor is sacrificing the WHM market because it either thinks it’s not important, or because Labor thinks you can withstand a bit more ‘pain’. The Minister is fond of saying how “resilient” the sector is. Well, enough is enough.

So, why are backpackers so important to Australian tourism?

Research completed by the National Institute of Labour Studies in 2009 that shows Australia derives considerable economic benefit from the Working Holiday Program. Department of Immigration And Citizenship (DIAC) indicates that average working holiday maker spends $13,218 and earns $4,756.

When applied across the 134,000 working holiday makers who came to Australia in Labor’s first year in office (2007-08) this translated to expenditure of $1.78 billion and earnings of $0.64 billion—a net gain to the economy of $1.14 billion. After offsetting the jobs taken by Working Holiday Makers (WHMs), it is estimated that this expenditure created approximately 8,500 fulltime jobs.

I agree with Tourism Australia Chair Geoff Dixon that Australian tourism has to adapt to the new reality of a high dollar which will influence inbound travel decision making.

However, a focus on business, luxury, and casino high roller tourists should not be at the exclusion of budget holidays --such as caravan or holiday parks, backpackers, or the Working Holiday Maker program.

We need to deliver value for money at every price point. After all, the tourism industry is a price-point sensitive market.

That’s not to say WHM visitors are less valuable than other tourists. Consider these facts:

 Backpackers stay longer in Australia  They engage social media constantly delivering marketing benefits we often don’t consider (and I’m glad to share this stage with Global Gossip;  Today’s backpacker often returns to Australia as tomorrow’s

international student. Under Labor international student market receipts have declined by $3.6 billion  Cementing Brand Australia loyalty of backpackers drives repeat visitation as a higher spending tourist;  Research now quantifies their significant contribution as purchasers of

tourism sector goods and services;  They are most easily recruited to fill hospitality sector jobs of any potential worker on offer (7% of restaurant staff, and 10% of tourism business

staff overall)

 As a group they often engage conservation volunteering - something Destination Melbourne is leveraging, plus our friends at Keep Australia Beautiful.

As Regional Development Shadow Minister (along with my role as Shadow Tourism Minister) it would be remiss of me not to highlight the importance of WHM visitors to Regional Australia.

To quote my federal parliamentary colleague, Independent MP Rob Oakeshott, talking about the WHV:

"Of all the options at the Treasurer's disposal (to deliver a surplus), knocking off working, independent travellers ... and international students is an odd message of Australia supposedly wanting to engage the world around it."

"I think there are great dangers in doing these cuts at a time when the economy, other than in mining, is not growing.

"The actions of government need to encourage, rather than discourage, non-mining sector growth.

What’s the likely impact of this latest charge?

Wayne Swan thinks this latest charge “will have an impact”.

Martin Ferguson and Kate Lundy have been out there selling the message that it won’t.

They can’t all be right.

What we need is proper economic modelling to determine:

1. what Working Holiday Makers bring into the country 2. what they spend while here (both earned money and monies brought in) … plus tax paid (average $2550 per year).

It’s important to consider that only a very small reduction in the numbers arriving will be enough to negate the extra revenue from the visa fee increase.

For anyone interested, I’m more than happy to provide three pieces of economic modelling I have received on this issue - it’s too complex to cover in a ten minute speech.

What is required is detailed economic modelling and analysis of this current increase.

The WHM market is too important to risk with back-of-the-envelope guesswork.

We need to understand the elasticity of this segment to appreciate what further increases will mean to the performance of the sector.

And that must be followed by economic modelling which makes some proper assumptions of the impact of this decision. With this robust analysis and scenario planning the government can then draw some calculated conclusions on what we can expect the outcome to be.

Today, I call on the government to undertake the proper analysis upon which to base such critical decisions.

With respect to the “evidence” I’ve seen from the Department so far, I’d say it’s important the industry be given time to properly review it. Concerns I have are that:

 it focuses on a limited time period, and  it takes no account of other factors in play.

For example, it doesn’t model the economic conditions at the time; increased activity by the industry, Tourism Australia, State Tourism Organisations in marketing Australia and the working holiday scheme.

It is poor public policy to ratchet up the fee at the decision point for the visa.

A much better policy is to keep the fee as low as possible (reflecting only the costs of administering the visa program). We’ve already announced that will be our focus in office.

Furthermore, it’s much better to gain revenue through growing the visitor economy - not stunt it through short sighted tax grabs.

Conclusion:

It’s a great shame that we have to focus on this issue today.

So much work has gone into the position paper prepared by ATEC earlier this year - and I know this was done in conjunction with their BYTAP industry group.

A number of amendments are going to be made to the 457 scheme to benefit the industry, which is a good outcome.

Today, ABiC was supposed to be a sounding board for Tourism Australia’s new youth campaign.

The TA campaign would then be focussed on targeting your core demographic internationally espousing the benefits of working and holidaying in Australia.

My message to you today is, however, don’t be fooled into focusing on this issue as a distraction.

Stay focused, and stick to your guns.

Keep driving home the message “Stop Taxing Tourism”

Get the government off your back and out of your pocket.

But you need to help me help you.

If you have a petition you want tabled - give it to us …that’s part of our job as MPs. Moreover, whatever evidence you can put to me and to the Minister - don’t hold back. We are employed to represent your views in our respective party rooms. And if I may leave you with one message it’s this:

The best industry assessment to hand indicates if the $80 fee increase goes ahead it would take a decrease of only 3% in working holiday maker applications before the Federal Government was a net loser due to the reduction in tax receipts from working holiday makers.

And if this tax is self-defeating - a responsible government would heed this warning, undertake proper modelling and reconsider its position.

Need I remind you of the Mineral Resources Rent Tax that is costing the government - not delivering any revenue.

[END]