18 Jul 2022
Words Josh Mangleson Informer 103

What the Federal election outcome means for the industry

While roofs over heads proved to be a key battleground in the recent federal election, policies and promises were all delivered in the context of residential housing markets. And rightly so, given the challenging issues of both availability and the cost of housing across the nation. But what are the outcomes of this shift in the political landscape for commercially managed accommodation businesses across the country? 

In short, there are no direct policies or promises from Australia’s new government that will immediately benefit or disadvantage accommodation businesses. To be fair, nor were there any under the Morrison government’s pre-election pledges. However, there are broader economic challenges the Albanese government will face in the coming months which may impact tourism and hospitality businesses nationally.

Beyond housing, the other great challenge in this election proved to be the spiralling cost of living. This will not disappear overnight, and certainly possesses the potential to impact accommodation businesses. Cost of living is determined by a range of factors, however a simple measure of its overall movement is to compare inflation - measured by the Consumer Price Index (CPI) - against wage growth (measured by the Wage Price Index). Most recently, wages’ growth was more than doubly outpaced by inflation, which has resulted in real wages declining.

These are two of the biggest economic challenges the Albanese government faces, and their outcomes will have implications for managed accommodation businesses nationally.

A major component of recent CPI increases impacting cost of living is automotive fuel, which rose 11 per cent in the 12 months to the March quarter 2022 (more than twice the rate of the index as a whole). While this was measured before the temporary excise cut introduced by the Morrison government, fuel costs have continued to rise steadily since.

For accommodation businesses, this produces a demand side impact of reducing real disposable household incomes, in turn decreasing the amount available to spend on things such as holiday accommodation. This has the potential to impact accommodation businesses, particularly those associated with long travel distances, where increased spend on fuel is required. 

For example, consider the cost of a 4,000km round trip from Brisbane to Melbourne. A rise in the fuel price by just $0.35/L (keeping in mind the temporary excise cut is $0.221L on its own) would increase the cost of the journey by more than $150 (assuming national average fuel consumption of 11.1L/100km). And larger families with less efficient vehicles could face even greater cost increases. Consumers may be faced with the choice of either travelling fewer distances and holidaying closer to home or foregoing a night’s stay. This presents a particularly interesting conundrum given, as this edition of Informer explores, that Australians are finally embracing more remote regions.

This presents a particularly interesting conundrum given, as this edition of Informer explores, that Australians are finally embracing more remote regions.

An incredibly tight labour market is also present in Australia with a record number of over 300,000 job vacancies for April 2022, many of which were in the accommodation and tourism sector. And this was despite the Morrison government having delivered a 48-year low in unemployment by the end of its tenure, suggesting a structural mismatch in the labour market. 

This may be partially resolved by normalising immigration, an area in which Labor has yet to reveal a clear policy. However, they have acknowledged this issue and signalled their intent to focus on resolving it. A lack of suitable employees the accommodation and tourism sector faces may mean paying higher wages for temporary staff, putting pressure on the bottom lines of accommodation businesses.

These are two of the biggest economic challenges the Albanese government faces, and their outcomes will have implications for managed accommodation businesses nationally. How Labor seeks to rein in inflation, while encouraging wages growth to balance the cost of living, along with how they approach a mismatch of available jobs to growing and skilling the labour market, will be an early test of this government’s economic credentials.