Mixed views on RWC economic impact

The Treasury’s latest Monthly Economic Indicators says short-term prospects for the country are positive, pushed along by the RWC and the earthquake rebuild and underpinned by the high level of the terms of trade underpinning growth. In August, the estimated number of international RWC visitors was revised up by 10,000 to 95,000.

A Reserve Bank paper on the macroeconomic impact of the Rugby World Cup, however, says it will be challenge to disentangle the temporary fluctuations in economic data caused by the Rugby World Cup to work out how the economy is evolving. Those 95,000 overseas visitors are forecast to spend $700 million (equivalent to around 1.4% of quarterly GDP). However, spending by locals on, for example, tickets and associated entertainment may be at the expense of spending on other things.

The official commissioned report by Horwath Asia Pacific in June 2006 estimated the RWC would result in total economic activity amounting to approximately $1.15 billion. It would contribute $507 million in additional GDP in the economy ($240 million in additional GDP in Auckland). And it would provide the Government an additional $112 million in tax revenue.

But Auckland University professor of economics Tim Hazledine said the gain to tourism and the effect of visitor spending has been overstated. He controversially estimated hosting the cup could end up costing taxpayers more than $400 million. Rugby World Cup Minister Murray McCully dismissed Hazledine’s analysis as pathetic and contended: “The idea that we should assess the costs of infrastructure that we will enjoy in perpetuity against the direct economic return from 45-day tournament is ridiculous.” The benefits of the tournament in the years following would “run into billions of dollars”, McCully argued.

But Hazledine has had his supporters. New Zealand Institute of Economic Research principal economic Shamubeel Eaqub said people had blown the event out of proportion. He had studied other major events and found the estimated benefit typically fell to about tenth in post-event analyses, and the rise in visitor spending was mostly invisible on graphs.

However, ANZ National Bank chief economist Cameron Bagrie is more enthusiastic pointing to 1.8% growth in GDP in the quarter the Lions and their Barmy Army fans toured in 2005. “The feel good factor on top of the additional tourists can be very influential. This will be temporary fillip but nonetheless provide some much needed cashflow.”

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