Despite living in one of the largest and diverse countries in the world, Australians are ditching their homegrown destinations in search of overseas fun, new research has suggested.

The findings, from Australian market research firm Roy Morgan, suggest that the Australian tourism industry captures 61 percent of holiday expenditure from Australians, a number that has fallen eight percent since 2001.

According to Tony Charters, the founder of a new tourism conference in Melbourne, the drop has been caused by demographic changes, particularly as young Australians want to travel further afield.

"Research on younger consumers indicates the future will see the current customer base continue to erode, with Australia’s domestic clientele literally dying out," he said.

To fix the problem, Charters proposes an overhaul for Australia's domestic tourism industry, parts of which are already struggling from the effect of devastating natural disasters which swept the country last year.

More sophisticated products would be needed to persuade Australians to spend money at home, he said, with new high quality experiences offering everything from backpackers to ecotourists.

New short breaks, city-based tourism and niche products could also be a focus, he said.

The Tourism and Events Excellence conference will be held in Melbourne September 5-7.