Maximising the benefits – the economics of the Brisbane 2032 Olympics

By Tim Harcourt

 

The winner is Brisbane! Yes we heard the immortal words from Tokyo that Brisbane will be hosting the Summer Olympic Games in 2032 after Paris in 2024 and Los Angeles in 2028. Brisbane will be the third Australian city to host the Olympics after ‘the friendly games’ in Melbourne in 1956 and of course Sydney in 2000, which was declared to be ‘the best Olympic games ever’ by International Olympic Committee (IOC) President Juan Antonio Samaranch.

 

Certainly, Queensland has been the bearer of good news for Australians suffering COVID19 lockdowns with the universally popular Queenslander Ash Barty winning Wimbledon and now Queensland Premier Anastacia Palaszczuk bringing home the Games hosting rights from Tokyo.

 

And whilst Australians like a ‘Barty Party’ and as shown in 2000, an Olympics Party or several, get ready for some debate about the costs of putting on the Olympics compared to what the potential benefits are. This is particularly the case as the Olympics – particularly the IOC and its methods, have become unpopular (as have world sporting bodies in general like FIFA in soccer, and how they award hosting rights to the Football World Cup, for example).

 

For example, a well-known University of Oxford study shows historically that the cost to the host city on average blows out. The study that studied the Olympic Games from Rome 1960 to Rio in 2016, found that Games budgets are exceeded by 172 per cent. Even, Sydney 2000, regarded as the best ever and well managed, had a cost overrun by 90 per cent, although it did better than Rio on 352 per cent and even the 2014 Sochi Winter Olympics in Russia on 289 per cent.

 

And that’s before COVID19 hit, which has engulfed the global economy and the world of sport, causing Tokyo to postpone the 2020 games a year and to have no spectators. Japanese estimates show that hosting the Tokyo Olympics and Paralympics without spectators is estimated to result in an economic loss of up to ¥2.4 trillion (A$29.1 billion). Of course, this is better than outright cancellation which would cost an estimated Y4.5 trillion ($A54.6b).

 

So what do we know about Brisbane? Westpac and KPMG got out of the blocks early and estimated that hosting the Brisbane Olympics would bring about $17 billion in benefits to Australia and just over $8.1 billion in benefits to Queensland, including a $4.6 billion economic boost to tourism and trade and $3.5 billion in social improvements such as health, volunteering and community benefits.

 

And what about costs? The costs of hosting the Games were estimated to be around $5 billion including the cost of the Opening and Closing Ceremony at $85 million, the Torch Relay $30m, Venues $690m, Technology $646m, People Management $796m and Athletes Operations $1.052 m. These costs are financed by TV broadcast rights, ticket sales, tourism and private and public sector sponsorships.

 

Researchers, such as those at Oxford University, are always concerned that the costs blow out, and the politicians always over egg or double count the benefits, particularly in terms of tourist numbers emanating from the Games (they nearly always claim you’ll get the tourism numbers anyway, especially in a place like Queensland, or you’ll divert tourists away from other destinations who will miss out). But whatever anyone claims, there will be debate about costs and whether we should hold the Games or not. And some critics claim the estimates of benefits are never as forecast. Although, even in the case of Sydney 2000 they forget that the terrorist attack of September 11, 2001 happened almost exactly a year later and impacted world trade and tourism.

 

I think the more important question is now we’ve got them, and we have a reasonable idea of costs, what’s the best way to maximise the economic and social benefits of Brisbane 2032.

 

As KPMG and Westpac have shown there are clear economic benefits from hosting the Olympic Games. And work done by my colleagues at the Institute for Public Policy and Governance (IPPG) at the University of Technology Sydney (UTS) show that there are also social, health and environmental benefits from sports participation and major sporting events that overlap with the economic benefits.

 

For example, we have the economic benefits in terms of improvements to transport and infrastructure as well as the boost to economic activity of the major event itself. But we can ensure, like we did in Sydney, that the infrastructure helps with social benefits, especially in terms of transport and housing. The associated activities can be structured not just to Olympic venues in Brisbane, the Gold Coast and Sunshine Coast but also to help disadvantaged communities including Indigenous communities in remote, rural and regional Queensland, and in lower socio economic suburbs and towns. Importantly, the Brisbane bid was badged as Paralympics as well as Olympics so some of the infrastructure used can be utilised by disabled athletes and community members for many years to come.

 

Of course, the hosting of the Olympics and Paralympics can be utilised to help boost sport itself in terms of community participation bringing with it health benefits, higher education participation, less crime and help build social capital in Queensland and across the whole Australian nation.

 

The Olympic Games are also a chance to help Australia put the green back in the green and gold in terms of the environment. In The Airport Economist Climate Innovation special episode I interviewed some excellent companies, including Queensland-based Tritium, who have battery powered the future of transport, even the submarine used by Hollywood legendary producer James Cameron!

 

And as an international trade economist, I must emphasise international trade and the opportunities for small and medium sized enterprises (SMEs) that hosting the Olympic Games brings to local exporters. At the Sydney Olympics 2000, Austrade set up a business networking club, Business Club Australia (BCA) that was a match-making club for SMEs looking to meet international partners and investors who were coming to Australia for the Games. For instance, the Sydney architecture firm who built the Water Cube at Beijing in 2008, was able to get started courtesy of BCA in Sydney watching Cathy Freeman win the Gold Medal next to his eventual customers plus 100,000 cheering Australians in the Olympic stadium at Homebush. It was a great example of the “Power of schmooze” where networking can lead to potential business. In fact, between, Sydney 2000 and Beijing 2008, BCA had facilitated $1.7 billion in trade and investment as the China-Australia trade relationship really took off. At BCA in Beijing, the Mandarin speaking Australian Prime Minister Kevin Rudd launched my book ‘Going the Distance’ on the Economics of Sport in both English and Mandarin which really impressed our hosts and the Australian exporters in attendance.

 

The Australian and Queensland Governments could revive the BCA concept in some form to really help our SMEs take advantage of the unique opportunity hosting the Olympic Games brings. This is really important especially when exporters especially given China trade situation when exporters are doing it tough, and a chance to reset international engagement in a post-COVID environment.

 

Hosting the Olympics will also do a lot to help promote ‘Brand Brisbane’ as well as ‘Brand Australia’, In fact, Brisbane has a lot to gain as it is not a dominant city that everyone knows like Sydney, LA or Rio, nor a national capital like London or Paris or Tokyo. It’s a great opportunity to promote Brisbane in the lead up to the Games and to leave a legacy when the carnival is over.

 

And it has already done some good with much of Australia locked down. For now, Brisbane winning the 2032 Olympics and Paralympics has given us all a pandemic boost that gets us looking to the future in these troubled times of COVID19.

 

 

 

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Comments

  1. Kevin Densley says

    Hi Tim. I enjoyed reading your piece, for its credible, lucid, well-backed up series of points, as well as its overall position concerning the Brisbane Games, encapsulated in the following quote: “I think the more important question is now we’ve got them, and we have a reasonable idea of costs, what’s the best way to maximise the economic and social benefits of Brisbane 2032.”

    Good one!

  2. I have Brisbane friends who reckon the Olympics will at least force some work to improve the public transport system. But one has to wonder why this improvement shouldn’t be happening anyway?
    The reported cost of the Tokyo Olympics, counting major blowouts, is $37 billion! Correct me if I’m wrong, but doesn’t that make that $5b estimate for the Brisbane games – still eleven years away – seem more than a little unrealistic?

    On a related front, the Victorian Government is yet to present credible and transparent figures for our hosting of that other global circus, the F1 grand prix. I mention this as evidence that we should be extremely sceptical of all claims made by starry-eyed politicians revelling in the spotlight. I often wonder if the emperor is really wearing any clothes. (I’m speaking metaphorically here, with no reference to that Japanes guy in the business suit at last night’s opening ceremony.)

  3. Daryl Schramm says

    Thanks for your contribution here Tim. It gives me an insight into the possible and probable benefits of such an event coming to Australia from an academic/economic slant. A valuable addition to recent items and comments on our website.

  4. Tim – a wonderful contribution to the discussion. When I read and hear discussion around “economic benefit” I wonder about the basis of the calculation. Economic benefit for whom? State Governments borrow massive amounts of money on the basis that the Olympics will provide an economic stimulus and therefore a benefit. To a certain extent I agree. There is no doubt that the Olympics (all things being equal) generate activity, but its not all government activity. In fact I would think that most of it is non-government activity (ie, private enterprise, private tourism companies, private technology businesses, private TV and media etc, etc). This is all great but it does nothing to help the State Government debt. It puts money into the pockets of business (which is good) to employ (which is good) and to pay tax (which is good). But the income tax raised goes to the Feds not the State. Meanwhile the State carries the debt.

    I understand the argument about the trickle down – all solid economic activity will eventually find its way back to the State, but the time lapse can be significant. Essentially there is a disconnect between “economic activity” and “cash”. And the time lapse can be significant. And if anything goes wrong during that time lapse (see Sept 11, 2001 for example) the cash may never come. Herein lies the disaster and the reason, in my view, why the cities holding the games often end up in a debt ditch.

    Economists and governments often overlook the timing issues around economic activity and the generation of cash.

  5. Well written Tim, this seems quite a concise piece of work. As I mentioned in Andrew Starkies piece on the proposed 2032 Brisbane Olympics, if I haven’t fallen off the twig by then I’d be happy to park the Zimmer frame next to the couch, partake in my James Squire Orchard Crush, and happily watch the events. But I have niggling concerns, as is my wont, Omnibus Dubitandum.

    Others have expressed their concerns about the costs of the event, the promised benefits not equating to the outlay. To my knowledge the Los Angeles games of 1984 was the first summer games since not run at a loss, since 1932. Coincidentally 1932 was also Los Angeles. Over its history the Olympic Games has been an expensive exercise though some have done very well out of it: television stations,sSports goods manufacturers. Interestingly it seems overall the Winter Olympics have been better managed in terms of costings.

    I must note citing the reference to KPMG, and Westpac Bank, with cynicism. KPMG were one of the players in the 2008 Global Financial Crisis, as their role of over estimating valuation of bank assets was a contributing factor in that ‘meltdown’. Westpac, being fined $1B plus for their role in money laundering, , certainly didn’t come out of the Banking Royal Commision smelling of roses. What was the end result of that Royal Commision? Neither has an unblemished record re decision making/advice.

    I know people wax lyrical about infrastructure expenditure built during an Olympic Games, but why does an Olympic Games get presented as the basis for infrastructure work/expenditure? I hear of the 22 venues built for the 2004 Athens Games, 21 are unused.

    Maybe if we changed the paradigm the games may really benefit the people of Brisbane and associated areas. Going back to Seoul in 1988 the Government run games recorded a profit. No ‘market forces’ or that sort of nonsense then/there. Will a (the) Government run the 2032 games?

    Tim I’m very happy Brisbane has the 2032 Olympics. It will be a wonderful spectacle. But what would make it better would be a transparent process of putting it together, with the proposed benefits for people clearly researched, discussed and in place for us to see, not an opaque execrcise.

    Glen!

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