During his recent Budget statement, the treasurer, Josh Frydenberg, confirmed that the government are anticipating that borders remain closed to travellers until at least the middle of 2022.
To be honest, this was probably just official confirmation of what many of you have suspected for some time was going to be the case.
This article looks at how another potential 12 months of closed borders could impact on you.
First off, it’s worth saying that closing borders, as the Australian government did in March 2020, has delivered the results it was intended to.
Strict, early lockdowns backed up the closure of borders to non-citizens and residents and a compulsory two weeks in hotel quarantine for anyone entering Australia have largely managed to stop the Covid virus being re-imported into the country.
As a result, Australia has achieved a relatively low number of deaths and incidences of the virus – 900 and 30,000 respectively – compared to many other developed nations, which has meant health services have not been overly impacted.
The impact of closed borders on foreign travel
As you’d expect, closing the borders has had a dramatic effect on the number of people leaving Australia. You can come back, but a mandated period of hotel quarantine is required. Not only that, but anyone forced to quarantine is having to do so at their own expense. Currently the cost is around $1,400 per person.
This means that the number of people arriving in Australia has been reduced to a trickle. A quarantine might be acceptable in an emergency – someone returning to visit sick relatives for example – but if you were previously coming and going for work purposes such delays on entry are untenable and you will have made alternative plans involving more use of video conferencing.
It’s also had an impact on the numbers leaving Australia. Even for expats, who consider themselves just “one flight away” from home, there’s a big disincentive to leave if your return is jeopardised. Many people who divide their time between UK and Australia – so called “boomerang Brits” – are being forced to stay put.
Unless there’s an unexpected change in circumstances, this will be the situation for at least another year.
An increase in the number of permanent leavers
There is one group of people who are travelling, however, but their willingness to travel is not a positive sign for the government.
As a reaction to the severity of lockdown and what they see as the draconian closure of borders, a growing number of Australians are looking to leave permanently because of disillusionment at the action.
Many of them are immigrants who have lived in Australia for some time, to the extent that they now consider themselves Australians.
Upset at the travel restrictions, they are returning to the country of their birth, with no immediate plans to return, even when border controls are eased.
The key challenge they face is one of not knowing. The uncertainty of when the borders are even potentially going to reopen makes it challenging for anyone to plan ahead.
The government tacitly accepts this is happening. The federal budget predicts the loss of 174,000 people by mid-2022 as a result of the border bans, a dramatic increase from the 93,200 it estimated just six months ago.
Employers now fear a labour shortage
The numbers of those who are leaving and not coming back are one of the reasons many employers now fear a serious labour shortage in the coming year.
Holes are appearing in the workforce that, in the short term, will be difficult to fill.
There is also a strong feeling that Australia is handicapping itself in the competitive market of attracting global talent to work here.
Highly-skilled individuals, who may have previously been more than happy to enjoy the high standard of living here, are being put off coming. The thought of spending their first fortnight – maybe with their family in tow – in a hotel near Tullamarine or Kingsford Smith doesn’t appeal, and neither does the inability to move freely between countries subsequently.
Certain sectors are suffering through border closure
With the compulsory quarantine discouraging visitors, the tourism and hospitality sectors are being particularly hard hit.
For example, an estimated 40,000 UK cricket fans are having to shelve their plans to visit Australia later this year for the upcoming Ashes series. That’s a lot of cancelled flights and hotel bookings, together with empty restaurants and bars in the five Test-venue cities.
It’s been calculated that international visitor spending dropped by more than 70% between 2019 and 2020, and that the equivalent percentage will be even higher for 2020/2021.
But it’s not all doom and gloom
Rather than end on a negative note, it’s worth pointing out that the government lockdown and travel restrictions have been very successful in controlling the spread of the virus.
As we mentioned earlier, there have only been 900 fatal cases of the Covid virus – a remarkably low figure given that 86% of Australians live in urban areas where the virus is most likely to spread.
Equally, with the virus pretty much under control, Australia has been ahead of the curve when it comes to the easing of lockdown restrictions, such as people being able to return to the office, attend sporting events and eat out.
Get in touch
Please get in touch with us if the closure of the border means you need any advice regarding your financial planning arrangements.