A funny thing happened when Australians were effectively trapped in their own country after March last year, in a quarantine policy that has been described as Fortress Australia.
While there was plenty of fear about the effect of losing overseas students and other migrants on the economy and jobs market, what was entirely forgotten was the extraordinary amount of cash Australians spend on overseas travel.
It is an effect that looks set to continue, with little chance seen of the Australian border opening up this year.
Tens of billions spent here rather than overseas
In the 2019-20 year, Australian residents travelling abroad spent an estimated $64.94 billion on their trips.
Trapped in Australia and unable to travel – in some cases even interstate – this money found some other places to go.
Our booming property market is one obvious place – both directly and through the much-vaunted bank of mum and dad.
Retail spending is another, with supermarkets and when they finally re-opened, restaurants, doing unprecedented business as Australians made up for overseas travel with a splurge on the next best thing.
If you can’t go to Thailand, the next best thing is to eat out at a Thai restaurant and if even that is impossible, make it at home with ingredients you picked up at Woolworths.
Great time to renovate
Combining those two trends, it has also been a great time to be wearing a fluoro vest as renovations and the queue at Bunnings jumped as much as sales of paper masks and hand sanitiser.
Similarly, sales of furniture and appliances boomed, causing veteran Harvey Norman chief Gerry Harvey to say retail conditions were the best he had ever seen.
Savings are also up, as are debt repayments, despite the galloping pace of property prices.
And even the humble used car has been on the rise, up around 40% as the relative lack of available new cars and a fear of public transport made that used Toyota all of a sudden seem much more desirable.
Far cry from predicted 20% property plunge and 8.75% unemployment
It is an unsurprising economic boom in retrospect but one that went largely unannounced at the time as economists predicted a 20% fall in property prices and unemployment to rise to 8.75% and even more as the pandemic induced shut-downs of large parts of the economy were implemented.
As it turned out, the property market barely took a pause before booming again and unemployment peaked at 7.5% before falling rapidly.
However, all of those fearful forecasts led to interest rates falling to record lows, government handouts in the form of JobKeeper and JobSeeker to rise to unprecedented levels and long held caution about Budget deficits and debt levels were thrown to the wind.
Stimulus add fuel to the fire
The waves of stimulus and low interest rates have instead added fuel to an unexpected fire as the effects of lower immigration and student numbers sent the unemployment rate down rather than up as expected.
While the initial COVID-19 pandemic had an incredibly savage effect on economic growth, it was relatively short and the economy has come roaring back to life.
By the September quarter of last year, GDP rose by a staggering 3.4% and followed that up with another 3.1% rise in the next quarter – a stunning comeback that has continued as the stored-up stimulus ammunition and unspent offshore holiday money are spent at home.
Travelling at home is lucrative
It turns out that having Australians travel at home is even more lucrative than hosting offshore tourists and there are more of them, with 11.3 million Australians travelling overseas in the year before the pandemic compared to 9.5 million tourists coming here.
Which makes the timing of the reopening of the international borders particularly interesting.
Unlike most countries, Australia has actually banned most outbound foreign travel as well as sharply rationing incoming travel combined with quarantine and the longer that situation continues, the tighter the labour market should get and the more wage growth and inflation will get to rise.
That could also put pressure on interest rates.
An earlier opening of offshore travel in both directions would most likely reduce that pressure, adding another dimension to the usual complex array of factors that feed into economic readings from employment and interest rates through to inflation and GDP figures.