What will the rugby World Cup mean to New Zealand? (Part 1)

In the latest series of Conversation about the Rugby World Cup, Sam Richardson of Massey University looks at the costs and benefits for host New Zealand.

New Zealand has been rocked by a number of events beyond its control in recent years. The global economic downturn, the devastating earthquake in Christchurch city and the rising New Zealand dollar have eased the country’s economic climate. However, on the horizon there is a ray of hope possible.

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Count the costs

The Rugby World Cup has been labeled by the International Rugby Council (IRB) as the third largest sporting event in the world.

The initial prediction of the economic impact in 2005 is an increase of 408 million New Zealand dollars (approximately 324 million Australian dollars) for the nation’s gross domestic product. This number was revised in June 2006 to 507 million New Zealand dollars (403 million Australian dollars).

A 2008 Deloitte report proposed a potential increase of NZ $ 550 million for GDP. Recently, a report from the Reserve Bank of New Zealand proposed a stream of 95,000 international visitors to the country would inject 700 million New Zealand dollars into the economy.

Studying the economic impact of major sporting events is often fraught with shortcomings. Such studies tend to produce unreasonably gross impacts in the host economy.

These shortcomings include the substitution effect, which suggests that event spending results in less spending in other sectors of the economy and the crowding effect, which means that the tournament can do. discouraged tourists who may have come to this country.

Another shortcoming of these studies is the lack of consideration of the costs associated with the event itself.

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Tickets do not include costs

Much of the spending so far on facilities and infrastructure is from all levels of government. It is likely to have been diverted from alternative projects in host cities. These costs, which economists call opportunity costs, are not significantly different in this discussion.

Organizers of the Rugby World Cup have budgeted a ticket sales of 268 million New Zealand dollars (A $ 213 million). If this goal is reached, the tournament will take place with an expected loss of approximately 40 million New Zealand dollars. Two thirds of this tab will be selected by taxpayers and the third third will be chosen by the New Zealand Rugby League.

Economic impact data have been used as justification for organizing the tournament despite the anticipated losses.

Past research has shown that the perceived economic impacts of major sporting events are often significantly less than originally anticipated.