Wednesday, 26 October 2011

Economic impact of the rugby world cup

I have commented on work by Sam Richardson on the economic impact of the rugby world cup before: here, here and here. Richardson is now blogging at Fair Play and Forward Passes and is writing more on benefits of the world cup. Back in September Richardson noted,
And while we are on the economic impact figure, there is a wealth of research that has shown that large sporting events rarely generate anywhere near the economic impact that is promised. Even if the economic impact of $411m actually materialises (I'd say it is unlikely, but let's say it did), it would add no more than 0.2% to the nation's Gross Domestic Project. That is not a misprint. It is a very, very small impact. Surprising, really, that it gets the coverage it has received thus far.
and more recently he writes on the spending that has taken place during the RWC,
Paymark, who cover about 75% of all credit card transactions in the country, have found that spending on cards during the tournament "was up by $195 million." I don't know precisely what this phrase means, but I assume it means that spending is up by $195m on last year's figures for the same period. Of course, the first Christchurch earthquakes was during this period last year, so spending was particularly depressed at that time. It stands to reason that domestic spending was likely to rebound at some stage - perhaps the tournament and the performances of the All Blacks were a catalyst?

Of that $195m, the amount spent by tourists was $70m up on the same period last year. What, only $70m? Yes, $70m is 10% of $700m. or $700m with the decimal point moved one place to the left. Obviously it is early days, and this is by no means a complete measure of spending, but it is pretty clear that the impact of spending by overseas visitors would appear to be quite a bit less than initially projected. Of course, projected economic impacts were gross, not net, which are the figures of particular interest.
Richardson is not the only economist who has doubts about the economic impact of the RWC. Shamubeel Eaqub, principal economist at the New Zealand Institute of Economic Research, also isn't too excited about its economic impact,
A leading economist has labelled the Rugby World Cup's effect on economic growth a "red herring", dismissing expectations that there will be a widespread boost as "hopium".
And while tourists will increase spending, business was being displaced from the main centres, and he argues that New Zealanders were spending less overall
The effect would be "minuscule", he said . "From a GDP point of view it should be marginally positive, but we're talking 0.1 per cent – margin-of-error stuff."

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