Amazon deal may push tourism – economist

New Zealand’s deal with Amazon has big potential tourism benefits, but in a world in which tourism is off the agenda for an indefinite period of time, says an economist.

Amazon could spend $650 million on the first season of the television series based on The Lord of the Rings, currently being filmed in New Zealand, whichwould qualify it for a subsidy of $160m.

Having secured higher-than-usual subsidies, Amazon committed to running an innovation programme alongside the films, obliging it to ‘‘build a wider relationship between New Zealand and the Amazon group’’.

Eric Crampton, chief economist at the New Zealand Initiative, said the forecast benefits to communities of film subsidies tended to be heavily overestimated. However, this deal had the potential to provide more benefits than would normally be the case, and had explicit ties into New Zealand’s tourism strategy.

‘‘So if we think about a system that’s throwing a lot of money at Avatar films that are entirely CGI and cannot plausibly do anything to say build tourism to New Zealand ... [Amazon] are working almost hand in glove with Tourism New Zealand and if you want to evaluate it, it should be evaluated on that basis.’’

However, the Government was not allowing tourists into the country, and had no plan on how and when tourists might be allowed to return, he said.

‘‘You wonder at what point we might start seeing tourism benefits in the context of a closed border and Covid. And there’s a bunch of other things that are packed into the MOU [memorandum of understanding] that may or may not deliver anything. The primary benefits look to be in getting better tourist exposure, but within a context of no tourism allowed and nobody knowing when tourism will be enabled again.

‘‘We do know that the subsidies for the Lord of the Rings films, the first round seemed pretty effective in tourism promotion more broadly, and this one looks like it will be like that again and if you weigh it up on that kind of basis you kind of know what you’re getting.’’

BNZ chief economist Paul Conway said the deal was exciting, although it was unfortunate that New Zealand was subsidising one of the most profitable businesses on Earth. Founder Jeff Bezos is the richest person in the world, with a US$177 billion (NZ$247B) fortune.

‘‘But having said that I understand that is the nature of the business globally, and if we didn’t stump up taxpayers’ money therewould be a real risk of them going elsewhere, for better or worse,’’ he said. ‘‘The bit I do like about it is they’re going to bring the technology, they’re going to employ New Zealanders. New Zealanders are going to learn from the best in the business. Amazon is clearly at the global productivity frontier and them coming and doing this in New Zealand is a way to diffuse the latest and greatest technologies, and ways of doing things in the film space, the TV space, and bringing that into New Zealand.’’

New Zealanders needed to be involved with production at all levels, and gain exposure to Amazon intellectual property and how it did business, he said.

Stuart Nash, minister for tourism and regional development, said Amazon was granted an extra 5 per cent from the Screen Production Grant on top of the 20 per cent grant the production qualified for.

More than 1200 people were employed as part of the Aucklandbased production of season one of the TV series, and another 700 people were indirectly employed by providing services. The production would take several years and would film on location throughout the country.

At present, New Zealanders accounted for around 95 per cent of the crew, 21 per cent of major roles, and 80 per cent of the heads of department.

‘‘New Zealanders are going to learn from the best in the business.’’

Paul Conway

BNZ chief economist