The economic benefits of the Rugby World Cup may have been wildly overestimated by the tournament's backers, a senior academic said yesterday as the Reserve Bank hosed down expectations of a $700 million boost to the economy.
The Reserve Bank yesterday published a paper on the macroeconomic impact of the cup in which it set out the assumptions underpinning its February estimate of $700 million in spending by visitors.
The Reserve Bank has stuck with its $700 million estimate despite expected visitor numbers rising from 85,000 to 95,000, citing offsetting factors such as the strength of our dollar.
While the $700 million figure has been used by the Government as an indicator of the tournament's direct economic returns, the paper's author, Adam Richardson, pointed out that although that sum was equivalent to 1.4 per cent of New Zealand's annual gross domestic product, economic activity would not be boosted by that amount.
Some of that spending would have occurred anyway by tourists who would now be "crowded out" by cup visitors. And more of that spending would be offset by an increase in imported goods and services required to accommodate the extra visitors.
While cup spending by New Zealanders themselves would be significant, the extra boost to the economy would depend on factors such as limits on disposable income.
"Spending related to the tournament may just offset spending on other activities."
Mr Richardson said it was difficult to quantify any impact hosting the tournament would have on consumer confidence, "which could potentially increase general domestic spending".
"On the other hand, an unexpected early exit of New Zealand from the tournament could have the opposite effect."
He said the net impact of the tournament on both short and longer term economic measures remained to be seen.
Senior lecturer of law at AUT University Craig Dickson said the Reserve Bank's uncertainty over the tournament's economic returns was consistent with his view that while hosting the tournament here was a great idea for a number of reasons, "getting wealthy isn't one of them".
"Clearly the downstream spend that is supposed to occur from all these tourists is very difficult to measure but overseas experience over a number of years would indicate that it is often wildly overestimated by the cheerleaders of these sorts of events."
Professor Dickson believed as few as 25,000 of the 95,000 visitors expected for the tournament were in addition to tourist numbers that would be expected in a non-tournament year.
* 95,000 visitors are expected during the Cup, but as few as...
* 25,000 of these will be on top of normal visitor numbers.