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World Cup an expensive party or sound investment?
Gavin de Malmanche
Wednesday November 15, 2006

Special events such as the Rugby World Cup in 2011 may not deliver the pot of gold everyone has been led to expect. It may be prudent to send the proposed event elsewhere in New Zealand before it is too late.

New Zealand has a low wage base, low literacy and numeracy skills, high child poverty, a high incidence of family violence and a high incidence of violent crimes, plus a high imprisonment rate. It also has high obesity rates and numerous other negative OECD statistics.

So there may be areas other than rugby where large amounts of cash can be invested for the greater national benefit.

Governments for political reasons justify popular special events like the rugby and soccer World Cups and the Olympic Games by hiring international consultants such as PriceWaterhouse and Deloitte's. Their job is to present economic figures that support their employers' claims.

According to Australian research, politicians and involved organisations "typically claim benefits that are several times the size of the extra expenditure into the state or nation that these events generate".

Australians Peter Forsyth (Monash University), Larry Dwyer and Ray Spur of the University of New South Wales argued in the Australian Financial Review of August 15, 2005, that: "Event benefits need hard-headed economic appraisal. Proponents of the Australian Rugby World Cup in 2003 claimed economic benefits of $800 million to $1 billion.

"A subsequent study for the Department of Industry, Tourism and Resources indicated an impact on Gross Domestic Product [GDP] of less than $300 million."

These authors favoured more rigorous analysis by way of a mixture of the current accepted methodology and some new "complementary techniques" to determine more accurately net benefits from special events.

PriceWaterhouse estimated 6.1 billion people worldwide would see television coverage of the Sydney 2000 Olympic Games. It was thought about 3.5 billion would see coverage of the 2003 Rugby World Cup.

It was vigorously argued by the vote-conscious and poll-sensitive Australian Government that this coverage would translate into a boom for one of Australia's largest export earners, the Australian Tourism Industry.

But if we look at the Australian Government's claim, publicity is one thing; putting bums on seats is another. The number of short-term international visitors to Australia increased 8 per cent the year before the Olympic Games. In 2000, the year of the Games, they increased another 8 per cent. However, short-term visitor intake actually declined for two years in a row after the Games. It dropped 4.76 per cent in 2001 and 4.65 per cent in 2002.

The Australian Bureau of Statistics tells us normality returned with an 8.6 per cent increase in Australian short-term international visitors in the following year (which included the staging of the 2003 Sydney Rugby World Cup) and a 7 per cent increase the year after.

However, when you relate these figures to the performance of the New Zealand tourism industry, whose average annual growth (according to Bob Fyfe, Air New Zealand's chief executive) between 1998 and 2005 was 7 per cent, the effects of the Australian Olympic Games and World Rugby Cup on additional tourism export income may not have been as great as the Australian politicians and hangers-on had claimed.

It is evident that during the Australian Rugby World Cup, high-spending American tourists did not visit Australia in their usual large numbers. In October and November, the two months of the Rugby World Cup, their numbers actually declined from 72,200 in 2002 to 71,500 in 2003. Instead of the normal increases, their numbers declined because Americans don't play rugby and did not want to be mixed up with anticipated large crowds of rowdy rugby fans.

The example explained by the university researchers Forsyth, Dwyer and Spur, involved the huge disparity between the forecast Australian Rugby World Cup GDP increase of between A$800 million ($925 million) and A$1 billion and the actual increase of less than A$300 million. That makes it difficult to accept the figure quoted by Eden Park's development committee chairman Rob Fisher that the much smaller Lions New Zealand tour last year "had an estimated benefit of $250 million". Auckland ratepayers may have had trouble identifying their $53 million share of that windfall.

During the two months or so of the 2011 Rugby World Cup, the New Zealand media will have something to write about. A lot of beer will be drunk. People will see some big hits on and off the field and we will witness some terrific tries. It will be a great party. But at what cost?

When we wake up there will have been several outcomes.

* The Government will have lumbered us with a stadium costing between $226 million and $700 million which after the cup will remain empty for most of the time.

* The Government will have lumbered us with more GST tax which will immediately be wasted away in the labyrinth of departmental bureaucracy.

* The Government will also have used our money to pay a share of the $150 million IRB tournament fee.

* Since the Government committed New Zealand in the first place they will have committed the New Zealand low wage taxpayer to the lion's share of the cost contributions.

* The Government will have ensured the cash-strapped ratepayer will have paid a "double whammy" contribution.

* The GDP increase covering the period up to and including the World Cup, whatever that is, will have disappeared and we will be back to square one.

Finally there is plenty of evidence that all the effort will not boost New Zealand's year-in, year-out export income and will not make one iota of a difference to our urgent need for a better standard of living, better education and better health and welfare etc for our people.

It seems Prime Minister Helen Clark has hoodwinked us.

All because she is desperate for the rugby vote and wants to go down in history as the sole person responsible for New Zealand winning the right to stage the 2011 Rugby World Cup.

* Gavin de Malmanche is an Auckland ratepayer, and was an Eden Park ground member for many years. He played representative rugby in the late 1950s and 60s.