It’s more than a game? The economics of major events
The cancellation of the Commonwealth Games by Victorian Premier Dan Andrews came as a shock to many.
The Premier cited cost blowouts saying they would cost $7 billion instead of the $2-3 billion originally anticipated. As the Gold Coast Games cost around $1.5 billion and Birmingham $1.7 billion how did Andrew get $7 billion? Was it because it was in the regions and not in Melbourne so they needed new infrastructure? Or was it because they were spreading the cost of security across several towns? It seems a bit of a mystery.
But should we really be shocked? After all, there is opposition to hosting economic events on financial grounds all over the world. From the Olympic Games to the financing of a local footy stadium in Tasmania (a bargain at $715 million by the way) the economics of sport has become controversial.
In fact Matt Carroll, CEO of the Australian Olympic Committee (AOC) explains the new candidature model of hosting under the International Olympic Committee (IOC)’s ‘New Norm’ saves bidding expenses and countries (especially ones with limited resources) attempting to outbid each other.
“As much as possible you want the Olympics, to be able to be hosted on existing infrastructure. That is the benefit of a place like Brisbane that has excellent sporting facilities, especially when you factor in the Gold Coast and Sunshine Coast as well,” he said.
That is why when two great cities Paris and Los Angeles both bid for 2024, the IOC negotiated for Paris to hold the 2024 Games and LA the 2028 Games. With Brisbane from another OECD economy, following up as host in 2032. The ‘New Norm’ saves the situation of a country bidding and missing out, building too much infrastructure that may become obsolete and having the over commitment to the event being a drain on an economy already struggling to tackle poverty and the environment.
But Carroll also points out that the Olympics and the Commonwealth Games are important for ‘second tier’ sports that don’t have the resources of the NRL, AFL, Cricket and Tennis and increasingly Soccer. “The Games matter for these sports, like hockey for example, that don’t have the commercial capacity of other larger codes. These sports are important grass roots sports with great followings in the suburbs and regional Australia.”
This why UTS, at the Centre for Sport, Business and Society, is investigating how greater participation in sport helps to improve productivity and drive down health costs and related social expenditure. There has to be lasting economic and social benefits shared across the community for the long term if a major event is to be deemed successful beyond the big splash this year.
After all, whilst we all love a Cathy Freeman, Sam Kerr or Steve Smith, we can’t have all our sports resources invested in the top 1 per cent of our talent.
There is no trickle down in sports economics, nor does it work in the wider economy.
So should we then worry about the economics of the FIFA Women’s World Cup?
After all, it is the biggest event Australia has hosted since the COVID19 Pandemic and one of the biggest hosted since the Sydney 2000 Olympics.
But there are things going for it. First, there is the big economic splash, of course, with estimates from Football Australia (FA) of $400 million plus in total benefits, including 3,000 full-time jobs and 60,000 visiting the country.
Second, no new infrastructure was required so costs were kept down being faithful to the ‘new candidature model’ as mentioned by Matt Carroll.
Third, sharing the hosting rights with New Zealand meant a sharing of revenue but also kept the overhead costs down as well.
However, when the carnival is over, what will be the legacy beyond the boost in trade and tourism? The Football Association (FA) in Australia has been thinking of the long term benefits of co-hosting the World Cup with Legacy23. Legacy23 is the FA’s plan to deliver immediate and long-term community benefits and economic impact derived from Australia co-hosting the World Cup. Legacy23 is particularly thinking about how to manage the expected surge in girls playing soccer inspired by the World Cup (and boys as well given the high profile nature of the event).
According to Sarah Walsh, the FA’s Head of Women’s Football, Women’s World Cup Legacy & Inclusion:
“We are looking at 407,000 new participants coming into the game who are women and girls, so the real problem and an opportunity we have is that they’re going to need more places to play. We have over 2500 pitches and community clubs in Australia, but only one in five community clubs are actually female friendly. It’s a real concern and it’s a real opportunity that the legacy plan hopes to really correct and capitalise on.”
The expected surge in participation (in both girls and boys) means that bread and butter improvements like better community facilities, change rooms and the like, are needed, especially ones that make it safer for girls to participate in soccer and other sports.
However, Legacy is one thing but there is also leverage.
At Austrade we developed the Business Club Australia (BCA), a business diplomatic networking club that generated $1.7 billion in trade and investment deals between the Sydney 2000 and Beijing 2008 Olympics alone demonstrating ‘the power of schmooze’. We actually found having BCA at the Commonwealth Games in Melbourne 2006 was pretty useful as a number of key trading partners were involved – India, South Africa, Singapore, Malaysia and Canada for example and, of course, the UK member countries.
It could be that we haven’t leveraged the Commonwealth Games enough, especially in the new post-Covid environment of geopolitics, where links with the Pacific nations, for example, really matter. Sports (especially the Rugby codes and Soccer) can help in this regard but so can the Commonwealth Games. The Foreign Minister Senator Penny Wong’s re-engagement with the Pacific has been excellent so far. I hope the Commonwealth Games cancellation has little adverse impact on our friends in the Pacific.
When the Commonwealth Games were held in Brisbane in 1982, a giant Kangaroo float nicknamed ‘Matilda’ charmed the crowd and TV audience especially when she winked at the end. In 2023, it will be several Matildas hoping to win our hearts and minds at the FIFA Women’s World Cup.
Almost 6 years ago, I wrote a report about the crowd for the Matildas 6 being 15,089 in Penrith when the Matildas won in a friendly against the well-fancied Brazil team in spectacular style. The packed crowd were treated to a feast of quality football with a highly skilled strike by Lisa de Vanna and a glancing header by Sam Kerr as Australia defeated Brazil 2-1.
Now they will play in front of 80,000 plus at the Olympic Stadium in Homebush in the opening round of the Word Cup (following New Zealand vs Norway in Auckland earlier in the day).
With numbers like that I doubt even Dan Andrews would not think of cancelling them.
*Tim Harcourt is Industry Professor and Chief Economist at IPPG at University of Technology Sydney (UTS) and host of Footynomics – The Economics of Sport (www.footynomics.com.au)
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Terrific analysis as always. Thanks Tim. Your explanation makes clear that it’s the Commonwealth itself that’s broken and redundant as a meaningful geopolitical entity in the 21st century. Ipso facto – no point to the Commonwealth Games – which Blind Freddie would have seen any time in the last decade.
To my mind Chairman Dan has “jumped the shark” as Victorian Premier with the Commonwealth Games being the most obvious of several questionable high cost/high debt projects. Kept in power by the irrelevance and incompetence of his opposition.
Mark McGowan knew when to quit before hubris and an economic recession soured his considerable legacy. Does Dan?