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Economics Legislation Committee

McKEE, Mr James, Director, Tourism Industry Council of Tasmania


CHAIR: Welcome. Thank you very much for appearing before the committee today. I invite you to make a brief opening statement, should you wish to do so, and then the committee will ask you some questions.

Mr McKee : I will make just a few comments about Tasmania. The figures are quite clear: Tasmania is the most tourism dependent state economy in Australia. About 9.6 per cent of our GDP comes directly and indirectly from tourism, and so anything which impacts that has a resounding impact on the broader economy. Backpackers in particular contribute to our economy not only as customers but also as employees in the tourism industry. It is fair to say that some of the more regional areas, such as the east coast and the north-west coast, rely very heavily on backpackers as a source of employment simply because those areas have such low populations. In such a seasonal tourism industry, in the high season we do not have the people there to employ to meet the increasing demand. Backpacker employment in the industry is a key part of the system.

We also note that most backpackers spend most of the money they earn in Australia. The Tasmanian Visitor Survey results for the year ending June 2016 show there were 44,000 backpackers and they spent around $79 million and 887,000 visitor nights. For Tassie that is quite significant. We would argue that anything that negatively impacts on the length of stay for backpackers in Australia disproportionately affects regional areas in Tasmania. That is because they tend to arrive at the back end of their visit in Australia—they will go and do the big ticket items in Sydney, Melbourne, Queensland and the Great Barrier Reef. Our particular concern is that, if their earnings are limited, then we are at the bottom of their visitation schedule and we are likely to be the first to fall off. That then has a subsequent flow-on effect—not only do we not get them, but it flows into the other things that I mentioned. That is one of our key concerns: that they will not even get here, let alone in diminished numbers.

We are particularly concerned because there does not seem to be any modelling of the impact in the market that we can really understand, especially around the price-sensitivity thresholds as to when visitors, and particularly backpackers as visitors, will change their behaviours. That is the critical piece for us. At what point do the tax and other disincentives start to impact their length of stay? Do such disincentives determine whether they even turn up in Tasmania? That is probably as much as I need to say.

Senator McALLISTER: I would like to hear you talk a little bit about the overall significance of this visitor class to the Tasmanian tourism economy. We have heard from a range of people about the labour market side, but it would be good to hear you talk about the function this group plays in the Tasmanian economy.

Mr McKee : It is very much a dual role. There is a labour market component which I have just outlined. It is significant to the industry in itself, simply because on the east coast, for example, it is very seasonal—winter is dead—and the local population is not sufficient. In the peak season backpackers fill the demand. We have an experience problem. There is simply not the people to staff the facilities; the choice of staff is often less than adequate in providing a premium tourism experience—which is what people expect in Tasmania. The situation is particularly acute on the east coast and up in the north-west, where the populations are lowest and where backpackers tend to migrate because of the labour market opportunities.

Senator McALLISTER: I will interrupt you there, because your remarks suggest that these employees bring experience with them. So your contrast I think is between a level of experience in the domestic workforce that is insufficient to meet peak demand. Are you saying that when these working holiday-makers arrive they have the experience already necessary to fulfil the task?

Mr McK ee : They bring a different perspective, which adds to the experience of holiday-makers. To be frank about it, in some of those more regional areas a lot of our local employees are excellent at what they do, but it tends to be fairly low level, and they are very constrained in what they see as good service. A lot of these working holiday-makers come with the understanding of what they expect as a visitor, so they bring a different perspective, which adds value to a tourism operation. They are not necessarily of a higher skill level, but they have a more rounded experience, which adds value to what a private operator can offer to a more standard visitor.

Senator McALLISTER: Is that in part driven by exposure, prior to arriving in Australia or Tasmania, to other kinds of tourism services?

Mr McK ee : That is correct.

Senator McALLISTER: I interrupted you, but I think you were making remarks about their role on the labour-force side for your industry. Did you want to make any remarks about service demand in the sector?

Mr McK ee : Absolutely. I think the figure I gave you was that, in their own right, they spent $79 million or thereabouts in the 12 months up to June 2016. That is not insignificant, and a lot of that is spent on services which underpin the broader visitor services industry. For example, for a lot of our restaurants in the middle end of the segment, this adds a critical mass in terms of their earnings. If it was to reduce significantly or to disappear, that would start to pull into question the viability of some of those smaller, middle-tier and lower-tier eateries. That is just one example.

Senator McALLISTER: Do you have any information about the net impact on domestic employment? Some of the agricultural witnesses earlier in the day were able to talk about the relationship between Australian workers' level of employment and employment opportunity and working holiday-makers. Have you got views about that?

Mr McK ee : I do not. I am sorry, but I am a stand-in for today.

Senator BILYK: Where is Mr Martin? That is what I want to know.

Mr McKee : He had a legitimate reason for not speaking here today. I am sorry about that. I should have begun with an apology. He did send his apologies.

In broad terms, and I hope this goes some way to answering your question, I think for the proportion of our labour force, in the tourism industry in particular, the contribution is higher as a proportion than on the mainland. But I do not actually have the figures to support that.

Senator BILYK: I am sorry, but I missed the first half of your submission, because it is just a verbal submission. If you have already answered this, just tell me and I will read the Hansard later. We heard from other witnesses that one of the problems with trying to source local labour is not just the seasonality of the issue but the fact that if they are on unemployment benefits they lose time and income by having to wait and get back on and come off and go back on. I have just been thinking this through this morning. Do you think there is a way we can make that easier? Tassie has great tourism areas, where locals might be happy just to work seasonally and where the populations are small. Do you have any views on that? It is a bit outside the question.

Mr McKee : It is a good question and one we think about regularly. It is a vexed issue. Particularly in the regional areas, where a lot of our tourists go, they expect a similar experience to what they get in Launceston and Hobart, overseas or on the mainland—we just do not have the populations. Most of the working elements of those are tied up at some of that base level in tourism—for example, the hotel will employ year round a certain level, but there is just not the population when it comes to the peak season to actually employ—

Senator BILYK: Somewhere on the east coast.

Mr McKee : somewhere on the east coast—and where a Bicheno goes from a couple of hundred to tens of thousands.

Senator BILYK: St Helens.

Mr McKee : It is quite significant. So a key part of it is just not having them there. We do—and this goes Senator McAllister's point—have the challenge of many of those people have lived there their whole lives and do not have a perspective on this. This is not denigrating them; it is just saying that that is part of the challenge. So the opportunity to have these working holiday visa worker with their broader experience and what they bring to that experience is quite significant. We cannot put a dollar figure on it but we certainly know that, without that, we struggle.

We are trying to do many things. Industry is working much more with locals around training and trying to build some better service skills into the local population, but it really does come down to numbers in those areas and seasons.

Senator BILYK: Thank you. The other question is with regard to working holiday-makers who work in the tourism sector. What sort of impact do you think they have on travelling around the rest of Tasmania? As a Tasmanian senator, I am particularly interested in the Tasmanian experience for people. Have you got any comments to make about how that might be impacted or not by these proposals or this legislation?

Mr McKee : Can you just ask the question again.

Senator BILYK: They are working in the tourism sector but, hypothetically, they are in St Helens or Bicheno. They are there for a few months maybe—peak season, we will say—but then they do not necessarily just leave Tassie, do they? While they are there, they spend that money in that local community and then they will go off. Do you think they generally do travel around Tassie and work in other parts of Tassie? Do they maybe even tend to do different work? Have you got any suggestions?

Mr McKee : Absolutely. We know that, generally within that 12-to 18-month period, particularly the 12-month period, they will work for six of it to sustain themselves and then spend six. That is a fairly standard backpacker model for Tasmania. So we often find that they will work when the work is there, which is generally in the peak season—whether that is in agriculture or in the tourism industry—and, when the work is not there, they travel and they do sustain some of it out of peak season.

We do find that they do cross over quite well, and so they will work in a hotel over summer and then they will go and pick at the back end of the season when that work is available and use that as part of their getting around mechanism and then spend their money. Again, the evidence is reasonably clear that they tend to spend all their money here. If it is earned here, it stays here.

We are finding increasingly that a number will do the work, have their holiday and then try and stay on so that is actually an important consideration as well as making it easy to stay, if they want to stay a second year, and to get a second-year visa. That is an important consideration as well.

Senator BILYK: Thank you.

Senator WHISH-WILSON: Mr McKee, the TICT is an advocacy group for your members. Have you had any formal discussions about the legislation before the Senate in terms of whether you support it or do not support it?

Mr McKee : We have and we certainly do not support it in its current form. Our main concern is that the impact around that threshold of what will change visitation is not well understood or modelled as far as we can see. So, without that sort of modelling or understanding, it is quite difficult to have a positive position. We are just particularly concerned because of that flow-through. It only takes a small reduction in the working holiday visitors to have all these cascade or domino effects through the employment in the industry, let alone the expenditure—

Senator WHISH-WILSON: I have described this as an anti-Tasmanian tax. Would you recommend to the committee that the legislation be amended in some way, or would you recommend that we reject it?

Mr McKee : Our main concern is the lack of understanding about that threshold issue. So, as it stands, we would not be supportive, as the Tourism Industry Council, and our members have been fairly clear about that. Our desire would be to see that modelling done so that in our view a more robust proposal could be put forward if it needed to be put forward.

Senator WHISH-WILSON: Just testing whether you ever want to be a politician there, with that question—to see how you'd handle it! This is a question I asked of the last presenters. My feeling, from having been around backpackers for years, as to why they tend to come to Tasmania, is this: when they look at their holiday, there are things they want to see here, like our unique temperate rainforests—some of the last left in the world—and these kinds of things. Do you have any data, as a matter of interest, or any survey evidence as to why backpackers do come here? Is it for the work, primarily? Is it because they actually have Tasmania on their priority list? Or is it just kind of random?

Mr McKee : The evidence suggests two things. One is that they tend to come here because it is Tasmania; it is a brand—it is a general brand thing. There is a specific segment of the market that comes to walk, in particular, and increasingly we see mountain bikers; so they are outdoor-adventure types. But it tends to be a much more general thing; they come because Tasmania is a thing to do. But we do know that it is at the bottom of the list. So not that many of them will come specifically to Australia to come to Tasmania; they tend to come to Tasmania generally at the end of their journey, and generally because they know there is work here so they can sustain themselves while they are here. But they will generally go and do the Great Barrier Reef and Sydney and Melbourne before they come here, and that is part of our concern.

Senator WHISH-WILSON: Okay; that makes sense.

Senator BILYK: Senator Whish-Wilson said he thought it was anti-Tasmanian. If I am correct, in the Legislative Council in Tasmania, Mr Greg Hall, who was here earlier, moved a motion in the upper house to say the changes should not exist at all and the legislation should not exist. And that was moved unanimously, as I understand. Do you have any comments to make in regard to that?

Mr McKee : In principle, we certainly, at this stage, would support that it does not exist, simply because, again, there is not the evidence that demonstrates what the impact will or will not be. And that is our primary concern. At this stage, the Tourism Industry Council have a policy position of not supporting the change.

Senator BILYK: As we heard from a previous witness, 'If it ain't broken, don't fix it!'

Mr McKee : I think our concerns go beyond that. If there is going to be change, let us have a thorough look at the evidence about it—particularly about what that threshold of change to the visitor economy will be. We think the current proposal should be not proceeded with, on the basis that we just do not have the evidence to help us understand what the impact will or will not be.

Senator DUNIAM: Welcome, Mr McKee, and thank you for your evidence so far. Just on the basis of the TICT's position and your concerns around not knowing what the impact would be of the legislation being passed, do you know what the situation would be if the legislation did not pass? If the legislation is not passed by the Senate, does the TICT have a view on what situation we would be in?

Mr McKee : What situation the industry would be in?

Senator DUNIAM: Yes. For your information, the witnesses so far have talked about reverting to existing arrangements. I do not know—and others on the committee may—whether that is something that is legally possible without introducing new laws to affect a direction to Treasury or some other amendment. I am unaware of what would happen if this bill fails. Do we revert to the 32½ per cent tax rate? If that is the case, what impact does that have with the ATO then going out searching for these backpackers and wanting to collect the tax rates? We are all here talking about certainty and I assume you would want to know what that certainty will be. I am concerned that if a bill is not passed, the uncertainty still exists but it may be even worse. I just wonder if TICT has a view on that.

Mr McKee : We are cautious about throwing the baby out with the bathwater. What we would like to see before anything proceeds is a good understanding of the impact so that we can have a proper conversation. As you say, the uncertainty that exists is not helpful for anyone. At the moment, things seem to work. I cannot answer your question directly, because I do not have an answer.

Senator DUNIAM: You might be able to take it on notice—and the secretariat will be in touch. I am interested in what the TICT's views would be if the bill did not pass and we reverted to a situation where a higher tax—

Mr McKee : I will take that on notice.

Senator DUNIAM: The other point that has been made by a number of other submitters—and you may have heard it raised earlier—is that if the bill passes we might look at reviewing operations in one or, in the case of the last witnesses, two years time. In the absence of modelling as has been described by you, is that another option: we get the certainty and then we look at how things are operating for a proper assessment?

Mr McKee : If the bill were to pass, it would certainly be something we would be keen to see, but our position at the moment is that it should not proceed until such time as we have had that opportunity to understand that better and have a robust conversation about it. But, as a fallback, if the bill were to proceed, we would certainly be keen to participate in the review process.

Senator DUNIAM: I only ask those questions from the point of view of the need for certainty which has been advocated by everyone, and timeliness in resolving this issue, which has been a key point as well. The longer we talk about it and flow out different figures and different arrangements and things like that, the more uncertainty circulates through social media and word of mouth. I ask those questions in that vein, but I am sure the TICT understands that issue very well.

CHAIR: Thank you very much, Mr McKee. You are free to go.