Taxpayers' money and private industry

Queensland’s Tourism Minister has announced an “urgent injection of $4 million for the state's tourism industry” to provide a “series of major domestic and international sales and marketing campaigns”.

Queensland taxpayers should be asking two questions about this subsidy. Why should government provide financial support to the private sector, like tourism, for some marketing campaign just because the industry has run into difficult times? And how do we as taxpayers know how this money is to be spent and whether it going to be effective?

What makes the State Government's decision to shell out $4 million on marketing even more surprising is its previous statement that the industry in Queensland was at such a particular state that “throwing money at marketing and advertising is just not going to cut it”. Apparently, the government has done a “backflip” and caved in to industry pressure.

The arguments in favour of government-funded marketing schemes is that the tourism industry employs more than 100,000 - more if the indirect employment is taken into account; it is Queensland's second largest export industry and it is especially important in places such as north Queensland.

Queensland tourism has not been performing well lately. International visitor numbers are stable rather than growing, costs are rising because of fuel prices and the Australian dollar exchange rate is making overseas tourism more attractive to Australian tourists and making Australia less attractive to foreigners.

It is also argued that just as primary industry received support after it went through a rough patch with the drought then so should the tourism industry get a helping hand. Still, some other industries are not so lucky. Ask anyone in the building industry where the subsidies are when this sector goes into reverse.

The real challenge confronting any government wanting to assist the tourism industry is just where, how and to whom do you target assistance to maximise impact?

Tourism is a broad industry and it is ultimately affected by exchange and economic growth rates - macro-economic issues beyond any state government influence.

Ultimately, all governments fall back on providing assistance to tourism through increased marketing support. It can be quickly announced, has clear dollars attached and shows the government is “doing something”.

This brings us to the $4 million question in relation to tourism - what can a $4 million marketing campaign achieve that is not already in train and how long will it take to have any effect?

Not much, if history on such matters is any guide. In 1998 the Borbidge coalition government, following the Asian financial crisis and the drop in tourist numbers from Japan and South Korea, provided an extra $5 million for a special marketing campaign. The tourism industry wanted a further $5 million, but Treasury required an assessment of Queensland's marketing strategies and where the money was to be spent before providing any more funds.

The resultant interdepartmental report showed there was a lack of priority to markets outside of Asia, many marketing strategies showed limited correlation to actual tourism numbers, and tourists from the United States, Germany and United Kingdom, though fewer in number, spent more, stayed longer and largely made up for the Asian tourist shortfall.

Not surprisingly, proposals for additional funding were scuttled by the incoming Beattie government.

The Queensland Government has to convince taxpayers that this extra $4 million is going to achieve some tangible results and is not another example of “crisis” policy-making that has become such a feature of the Queensland policy development these days.