Facing the global challenges of high inflationsupply chain disruptions and the conflict in Ukraine, HSBC Chief Economist Paul Bloxham predicts increased travel will be a silver lining for the Australian and New Zealand economies.
Bloxham (Australia, New Zealand and Global Commodities) revealed ideas for its upcoming presentation at Flight Center Corporate’s annual Illuminate conference on October 20, which returns in person for the first time since 2019.
Bloxham said travel would be a key factor protecting Australia from a hard landing amid the slowing global economy.
“Travel is going to be a beacon of hope in today’s struggling world. Households have been spending less during the pandemic and the country’s unemployment rate is at its lowest since the mid-1970s. So Australians have been saving more of $250 billion and are ready to deploy those funds,” Bloxham said.
“Now that the world is reopening, there is a strong appetite for travel among the population and we expect to see a continued increase in travel activity, particularly domestically. Australians are also starting to travel again overseas. large numbers of foreigners.
“Business travel is picking up faster than leisure, with companies returning to face-to-face contact, especially at conferences and other events.”
Organized by Flight Center Travel Group’s FCM, Corporate Traveller, Flight Center Business Travel, Stage and Screen and FCM Meetings and Events corporate brands, Illuminate is Australia’s annual business travel event and is free to attend. This year it will be held in person at the Venue of Alexandria in Sydney and will be broadcast live nationally.
Bloxham will also share his outlook on the global economy and how Australia and New Zealand are doing relative to the rest of the world, amid the many challenges that have emerged this year, many of which have not not been encountered since the 1970s.
“Globally, inflation rates are well above what we have seen in decades. While inflation is around 8% in the United States and 9% in Europe, its growth in Australia has fortunately been slower. We expect Australia to avoid a recession, unlike some other countries,” Bloxham said.
“Supply constraints are also a deep global issue, due to the impact of the pandemic, the war in Ukraine, labor shortages and a shortage of shipping containers. Policymakers – central banks and treasurers – will have to tighten policy settings to try to slow demand.
Bloxham said the interest rate increases introduced in Australia and the subsequent decline in property prices will help discourage households from spending to dampen inflation.
“I expect consumer spending in Australia to slow from 6% to nearly 2% next year. Consumers will also shift more of their spending towards services, including travel and hospitality,” a- he declared.
“Although this will be a challenge for Asian economies because they are big producers of manufactured goods, Australia – which has a strong service-based economy – will be in better shape. The return of international tourists should also be a key objective for policy makers and will benefit the economy.
“Closing our borders has been an effective strategy to manage the pandemic. However, it has done damage and it will take some time for international travelers to return. First I expect a rebound in travel between New Zealand and Australia – something we are already seeing.
Bloxham also believes the Australian dollar will weaken further – predicting a drop to $0.63 by mid-2023 – encouraging travelers to our shores.
“It will be attractive to international travellers, who may see us as a cheaper option for them, which will help the economy. While it’s slower to bring international leisure travelers back at the expense of businesses, their return presents a great opportunity for local businesses,” he said.
“All in all, the Australian economy is doing well. Spending is strong, the unemployment rate remains low and the labor market is strong. While we’re operating beyond our capacity, and it’s crucial that we slow things down, travel is something we expect people to choose to spend on.
Featured Image: Paul Bloxham (YouTube/Curtin University)