Friday, August 3, 2012

Events Extravaganza Expose

Peter Martin has a topical post on the economics of big events: Olympic-style events boost the economy, right? Take the Sydney quiz.

There are a couple of graphs posted of tourism arrivals and NSW gross state product with a challenge to spot the timing of the Sydney Olympics. Dates have been left off the charts so Loose Change will cheat and post a long term graph of tourism arrivals which includes that information:

I will try and add some events labels onto that chart. Peter has also linked to an excellent post at The Conversation and research on the economic effects of the Sydney Olympics: Hosting the Olympics: cash cow or money pit?
A number of studies during the 1990s estimated that the Sydney Olympics would bring substantial increases in Australian consumption, with a top estimate of $5.6 billion. Did the estimates made before the Games turn out to be realistic? Many factors influenced what happened to the Australian economy besides the Olympics, so we used an economic model developed by our Centre to isolate the economic effects of hosting the Games. We simulated the behaviour of industries, households and government resulting from hosting the Games for each of eight Australian regions over the years from 1997 to 2005. Our results revealed that rather than producing an economic benefit the Sydney Games actually reduced Australian household consumption by $2.1 billion.
The study also assessed the effect on tourism promotion:
Furthermore, the modelling we undertook after the Games revealed no evidence that the Sydney Games had left a tourism legacy. Research by us and others indicates that hosting the Games in well-known tourism destinations does not have a strong advertising effect.
There has been excitement from some at the prospect of a V8 supercar race being moved from Townsville to Cairns. Proponents should take note of the ACT experience related in Peter Martin's post which describes some of the reasons estimates for events are exaggerated.  A review in the ACT estimated a net negative benefit of the V8's. The magic of multipliers is too frequently misused to misrepresent the benefits of events. 

The G20 summit has also produced unrealistic hyperbolic claims of economic benefits with Cairns being promoted for the finance ministers component. I wonder how many people could name the host city for the equivalent 2012 G20 summit despite being held only a month ago? Hint: It's in Mexico?

Related posts: G20 Hyperbole ?; The Paul Hogan myth?


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