21/07/2020 - 15:00

Less pain from closed border

21/07/2020 - 15:00

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Western Australia’s border closures have sparked heated debate, yet there are some indications the economic impact may be less than contended.

Interstate tourism is on hold during the pandemic. Photo: Gabriel Oliveria

Western Australia’s border closures have sparked heated debate, yet there are some indications the economic impact may be less than contended.

Treasurer Ben Wyatt has said the full force of the pandemic and shutdowns will cut the size of WA’s economy by 5 per cent in the June quarter.

There is a range of contributing factors, with double-digit falls in employment from mid-March to mid-June in both the accommodation and food, and arts and recreation sectors.

Drawing out the impact of the state border closure is complicated.

In June, Tourism Council WA said research by Lucid Economics had found the state was losing 42 jobs every day interstate travel was banned.

But the council declined to release the details of the analysis to Business News.

The council called for a roadmap with anticipated dates for reopening borders, adding that a recent survey had shown 34 per cent of tourism businesses were not viable without interstate visitors.

While unemployment in WA jumped by nearly 28,000 in May, according to the Australian Bureau of Statistics, the Tourism Council’s data suggests only around 1,300 of those were caused by the border closure.

Data from government-backed Tourism WA showed visitor spending from interstate visitors in WA was $2 billion in the 12 months to March.

That suggests a loss of about $167 million for every month interstate movement is blocked, adding up to about 1 per cent of state final demand.

There are two complexities, however.

Interstate travel would likely be significantly lower because of the pandemic, regardless of the border closure.

Data from Tourism Research Australia collected in March found one in three Australians had changed travel plans for trips within the country.

Interstate tourism spending in WA fell 39 per cent in March, TRA said.

That fall predates the state border closure, which started on April 5.

Although Australian data is limited, the United States Travel Association estimates domestic travel in that country will fall 45 per cent in 2020.

Those figures suggest the impact of the border closure will be smaller than in an ordinary period, because interstate tourism would likely be lower even without the border restriction.

A further consideration is that the closures mean Western Australians are more likely to holiday at home.

Tourism activity from travellers within the state is already much higher than interstate spending, at $4.3 billion in the year to March.

International spending was $2.1 billion.

It has also been reported that intrastate Airbnb bookings were up 100 per cent in WA in June compared to 2019.

A state government spokesperson told Business News the economy was stronger because of the closure.

"Deloitte Access’s June quarter Business Outlook released (earlier this month) highlighted that the hard border had prevented 'widespread community transition of the virus', which has allowed 'confidence to return earlier than elsewhere', and noted the particularly high share of intrastate tourism in Western Australia," the spokesperson said.

"The Commonwealth government estimates that Western Australia’s economy would lose around $500 million per week if local restrictions were required to be reimposed.

"In annualised terms, this would be around $26 billion.

"The premier had been considering giving a timeframe to re-open the border until the situation In Victoria unfolded.

"The decision was made to maintain the hard border to reduce the risk of an outbreak of COVID-19 in Western Australia and the requirement for restrictions to be reimposed."

Reopening risk

The growing second wave of COVID-19 cases in Victoria, which has resulted in a fresh lockdown of the Melbourne metropolitan area, highlights the other side of the economic coin.

WA Deputy Premier Roger Cook said in early July the border closures had made it easier to get the rest of the state’s economy moving sooner.

NSW Premier Gladys Berejiklian, who had previously called for interstate borders to be opened, has introduced her own measures to close access to NSW from Victoria.

The Organisation for Economic Co-operation and Development has warned about the potential economic impact of a second wave in Australia, which would lift unemployment and cut growth.

In its economic outlook, released in June, it said a double hit of COVID-19 would reduce GDP by a further 1.3 percentage points in 2020, to be 6.3 per cent lower.

GDP would fall 1 per cent next year, rather than rising a forecast 4.1 per cent.

Unemployment under a second-wave scenario would be 8.8 per cent in 2021, up from a projected 7.6 per cent.

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