Sydney Olympic Park

• It’s a question still hanging over Brisbane’s plans for the 2032 Olympics.
• Often economic studies are carried out before the events to build the case for hosting them.

The Sydney Olympics’ $3.7 billion cost

• Our study found the 2000 Olympics reduced Australia’s real private and public consumption by about $3.7 billion (adjusted to 2023 dollars) over the nine years in which the Olympics impacted the economy.
• It is often claimed that hosting the Olympics brings intangible benefits to the host nation – things such as national pride and social cohesion.

How to calculate the value of a mega event

• It’s important to use a model equipped for the task, and to properly simulate the effect of the event.
• In the past, major event studies – such as KPMG’s pre-Sydney Olympics study – used input-output models.
• Modern CGE models track deviations from what would have otherwise happened, as the effects of an event work their way through the economy.
• Studies undertaken before the event often include predicted legacies, such as a large boost to tourism following the event.

Feelings aside, the Sydney Games had a net cost

• The net direct cost of the Sydney Olympics (Olympic costs not funded by Olympics revenue), when updated to 2023 prices, was $4.5 billion.
• A frequent claim by proponents of big events is that the demand stimulus from the event will far offset its net direct cost.
• But our real consumption result indicates the demand stimulus offset only about a fifth of the net direct cost.

Feelings and other intangible benefits

• That is a sizeable figure to pay for the intangible benefits not already counted in the prices of tickets, broadcasting rights and other organising committee sales.
• However, those intangible benefits – including national and sporting pride, a feelgood atmosphere and inspiring children – might also be sizeable.
• There are no estimates for the value of intangible benefits from the Sydney Olympics.
• The UK study showed households outside London also perceived intangible benefits, though only half as much per household as their London counterparts.

Lessons for future mega events

• In all of the work that’s been done to date on the economics of hosting mega events, a few lessons stand out.
• Events with wide appeal can generate enough revenue to cover their operating costs – and this was the case for the Sydney Olympics.
• The most important lesson is that bidders for such events ought to conduct a rigorous analysis of the event’s expected net value before submitting their bids.
• Some mega events might pay their way, when intangibles such as the feelings they engender are taken into account.