The economic effect

Government estimates of economic benefits queried by some

It will inject up to $1 billion into the economy; thousands of jobs will be created; it will revitalise Auckland’s dilapidated downtown wharves and bring fleets of superyachts in need of multimilliondollar repairs.

Or so has been widely reported in the frantic past few weeks of negotiations and protestations about where and how to host the 2021 America’s Cup in Auckland — but some have questioned these predictions.

The Ministry of Business, Innovation and Employment (MBIE) yesterday released a glowing report about the economic benefits of hosting the regatta, concluding that every $1 invested would come back more than seven-fold by 2055.

Between $600 million and $1 billion would be injected into the economy between 2018 and 2021 — far outweighing the $200m-odd it will cost to host the event, the report says.

That’s far greater than the economic rewards of previous Cups held in the city, which returned an estimated $495m in 2000 and $529m in 2003, Auckland Council data shows.

In its report, MBIE further estimated that hosting the Cup would create between 4700 and 8300 jobs.

“These positive economic impacts are important and significant. But it is necessary to view these impacts in the wider context of the infrastructure costs and the additional costs to businesses to deliver the goods and services.”

Sectors to reap the rewards included services, manufacturing (mainly around boat building and superyacht refits), tourism, hospitality and accommodation.

The report estimated a cost-benefit ratio ranging from 1.2 to 1.8.

“The America’s Cup is an iconic event in New Zealand’s sporting history,” the report says,

“Successive Governments have seen the benefits that flow from investing in both the event itself [when held in New Zealand] and from investing in Team New Zealand ... [even when not held in NZ].

“The flow-on effects for New Zealand’s marine industry and ‘ Brand New Zealand’ are significant.”

MBIE concluded that even over the short term, between 2018-2021, hosting the Cup would pay for itself.

“If Government were making an investment decision simply based on the activity generated to the end of the America’s Cup regattas, the benefits outweigh the costs.”

MBIE had to rely on assumptions mainly informed by the 2003 Cup in Auckland to reach its estimates. It examined the spends of the primary “expenditure groups”, notably the yachting syndicates themselves, superyachts, other visiting boats, international visitors and media.

The Marine Industry Association has also released some stunning statistics about what the Cup will bring.

It said about 160 superyachts could be expected to arrive, spending on average $2.7m each, $436m all up.

At the same time, the association said international yachting syndicates would set up shop in NZ from as early as 2019, providing a huge boost to the marine industry, with flow-on effects to other sectors and regions outside of Auckland.

But some aren’t sure the numbers add up — and if it’s really possible to quantify the benefits of such an event.

As independent economist Shamubeel Eaqub pointed out, the $200m to be spent is money Auckland Council or the Government could be spending somewhere else.

“The thing with these kind of events is there might be a lot of activity that relates to the America’s Cup but it doesn’t necessarily mean it’s extra,” he said.

“It just means it’s displaced some other kind of activity. That’s why you have to be really careful with this economic impact stuff because what they’ll do is look at these very specific aspects . . . but not at where the money is coming from or whether or not it displaces other activities.”

And although visitor numbers tended to shoot up during such events, there was a notable decline in the months before and after.

Equally, the domestic money that was spent during the event wasn’t “new money” — it was money that would have been spent anyway.

“Of course there are going to be economic benefits but you just have to be really mindful that not everything that’s related to this event is going to be new,” Eaqub said.

While there was no doubt the Cup would be fantastic for the marine industry, that did not mean it was hugely beneficial to the economy as a whole, he said. “When you go back to the economic data . . . after we had the last America’s Cup you can’t tell that anything happened because it’s such a small part of an economy that’s so massive.”

Therefore, Eaqub said, rather than overstating the economic benefits the Cup would bring the focus should be on having an enjoyable, memorable event for New Zealanders and overseas visitors.

It was also a fantastic way of getting stuff done.

“It really helps to get the city organised. You’ll recall before the Rugby World Cup we got big infrastructure projects done on time, beautification of the city was done on time and things like that.

“So there is a finish mark — something to aim for — that concentrates people’s minds and efforts and we all get the benefit of that.”

Michael Goldwater, of Stop Stealing Our Harbour (SSOH), which is vehemently opposed to any further expansion of Auckland’s wharves into the harbour, said MBIE’s report did not take into account the harbour amenity that would be “confiscated” for generations to come.

“Economic impact assessments — a GDP-based assessment methodology — has been discredited by both Treasury and the Ministry for Business and Innovation, and should not be used for decision making purposes,” he said.

“SSOH believe that a proper costbenefit analysis will show any benefit to hosting the America’s Cup to be significantly less than what has been touted in the media.”

Furthermore, it was “undemocratic” of MBIE to release its the 59-page report just two days before a vital Auckland Council meeting in which councillors are expected to vote on their preferred option for the America’s Cup base.

“You’re asking a council entity to use something like $200m of public money on almost zero information and the information that has been released . . . is not accurate,” he said.

Goldwater reiterated that his organisation completely supported holding the Cup in Auckland but said it should be based on existing landbased waterfront sites, creating an exciting “village” atmosphere around North Wharf and Wynyard Quarter.

There might be a lot of activity that relates to the America’s Cup but it doesn’t necessarily mean it’s extra Shamubeel Eaqub. economist