There was a small double win for the Australian consumer this week that has set up the travel industry for what could be a very promising 2024.
It was an economic double win, although one of the “wins” on the surface was actually a slightly alarming loss, but a loss that the industry and Australians in general are already well aware of. It becomes a win in that action, while not being directly taken, seems not far off.
I’ll explain the loss that’s a win first.
On Thursday, price gouging rocked the mainstream media headlines as the Australian Council of Trade Unions (ACTU) released the Inquiry into Price Gouging and Unfair Pricing Practices.
While no one accused former chair of the Australian Competition and Consumer Commission, Alan Fels, and his team of coming up with catchy report titles, the ACTU did accuse a range of industries including banks, supermarkets and energy, of exploiting market powers in ways that were partly responsible for driving up inflation.
Unsurprisingly, perhaps, the other industry that was thrown in with the bad apples was the commercial aviation industry. Even more unsurprisingly, Qantas was the main protagonist in the report when it came to the aviation sector.
Fel’s didn’t hold back (and therefore joins a long line of power brokers who haven’t held back) when it came to Qantas’ performance, saying that the national airline may have to share some accountability for the Reserve Bank of Australia’s (RBA) decision to aggressively raise interest rates.
He said, “Qantas’ ability to reduce supply while increasing prices and suffering no material loss of market share, may have affected CPI (inflation) in December 2022, and therefore may have impacted the Reserve Bank’s inflation expectations and rate increases.”
Fels continued by saying that up to 25% of inflation in the ‘Holiday Travel and Accommodation’ category was possibly due to Qantas.
Where is the win in that? The fact that, yet again, calls for tighter scrutiny of airfares are getting headline attention in Australia’s major media sources. The momentum is there for something to finally be done, and when the media latch on this tightly, it doesn’t often let go until there is some sort of action.
For any action to be truly effective it will also likely have to address significant issues that directly affect pricing, like slot hoarding, for example.
It was only in December last year that the ACCC said it would be closely monitoring airlines over price gouging.
As the ABC reported then, “Analysis of government data by the ACCC found that, in November, the cheapest economy return fares on in excess of 10 routes were more than double what they were back in 2019, before the pandemic.”
Action is needed and momentum is gathering.
The second win is a more obvious win, and that is the Coalition waving through the Federal Government’s changes to the stage three tax cuts which will provide savings to a greater portion of Australians.
While the stage three cuts were pushed as the stage that would target high earners and “encourage aspiration”, with one and two focused on low and middle income earners, the change means more Australians will have extra income in their pocket.
With the RBA again holding interest rates last Tuesday before an expected drop towards the end of the year, and inflation now sitting at 4.1% (it was as high as 7.8% in Dec 2022), consumers have something to be happy about.
It sounds like the best of both worlds, with economists from a range of institutions suggesting that it will boost the economy without having a substantial effect on inflation.
Gareth Aird, CBA’s head of Australian economics, told The Guardian, “Tax cuts will add to demand in the economy, but they will kick in at a time when demand has further weakened from where it is today – and it has been moderating quite materially over the past six months.”
More money for consumers to spend on travel is welcome, of course. Considering that as recently as December a number of experts were predicting a slowdown in the travel industry in 2024, it’s a promising sign.
Deloitte, in its 2023 Tourism Market Outlook, had said, “Much of the weakness in the global economy that was expected to unfold in 2023 is now being pushed into the first half of 2024.”
There is reason to believe there might be more positivity in market now. What we know for sure from numerous recent data sets is that when Australians have extra money, they tend to prioritise travel.
The final piece of that puzzle was that part of the driver for additional expenditure by consumers in travel was the fact that it was exceedingly difficult to get into the housing market in Australia.
It looks like that isn’t set to change in 2024.
CoreLogic data shows that house prices rose 8.1% over 2023 and experts are still predicting that 2024 will record increases. Commonwealth Bank chief economist Stephen Halmarick forecast 5% increase in house prices for 2024 and Jo Masters, Chief Economist of Barrenjoey Capital Partners, felt similar.
Supply is still thin and for those not able to get a foothold in the market, it’s easy to see why part of those savings might be shifted towards investment in travel instead.
It looks like the travel industry in 2024 could be quite a positive place.
The rest of the week
There was a lot going on around the industry as the news cycle continued to ramp up for 2024.
Meanwhile Emirates returned to Adelaide which was a big win not only for South Australia but for Australian travellers in general. It comes after the recent news of Emirates increasing its presence in Perth and Brisbane.
In cruise news, Associate Editor Myles Stedman rewrote Cruise Weekly’s front page very patiently yesterday after the strike in Tasmania was averted, while Regent Seven Seas Cruises (RSSC) unveiled its new program, Regent Elevate, for trade partners.
There was plenty more news, of course. If you’ve gotten to the end of this and find yourself on the sidelines of a school sports match or enjoying a coffee on the deck wanting something more to read, there’s no better time to go back through the week’s issues of Travel Daily and Cruise Weekly.
Enjoy your weekend.