The impacts of Australia's departure tax: Tourism versus the economy?

Abstract

This study estimates the flow and expenditure effects of the recent increase in Australia's Passenger Movement Charge (PMC), as well as the economic impacts on the Australian economy and the tourism industry. After discussing the nature of the PMC, it outlines the types of industry stakeholder concerns as to its effects on tourism both before and after the recent increase. It then presents a framework developed by the authors that can be used to distinguish the effects of the increased PMC on the wider economy and on different tourism markets. A computable general equilibrium model is then used to estimate the economic impacts of the increased charge on different Australian tourism markets – inbound, outbound and domestic. The implications of the modelling results for the validity of the industry criticisms of the PMC are discussed. The results confirm that the tourism industry will suffer, though it also indicates that the Australian economy will gain – thus there is a clash between the industry and wider economic interests. The types of issues addressed in this paper can inform policy making regarding the gainers and losers from departure tax increases in tourism destinations generally.