News story 15th Mar 2016

What impact does sport have on the bottom line of a city?

The gloves were off in this month's ESA-Monash Forum as the National Economic panel discussed whether government investments in major sporting events usually generate net benefits for the city or region where the investment is made.

Grand Prix

Out of 25 respondents, 32 per cent disagreed or strongly disagreed with the statement and the majority – 52 per cent - were left feeling uncertain.

Panelists, including Professor Warwick McKibbin, expressed uncertainty as a result of the ambiguity surrounding the question.

Professor McKibbin questioned whether the gains to the city or region included the cost to the taxpayers who didn't live in the city or region.

"It could be that the economic output of a city rises but the tax payers in other parts of the State pay higher taxes which leads to lower overall utility" he said.

Professor Peter Sheehan said it was impossible to answer this question for sporting events in general. "In Melbourne, for example, the investment in the Tennis Centre has generated massive net benefits, but it is doubtful whether there have been net benefits from the investment in the Grand Prix," he said.

While the majority of the panel had more questions than answers, some panelists including Monash Business School's Professor Stephen King were quite outspoken about the negative impacts of sport on a region's economic standing.

While Melbourne is considered the sporting capital of the world and Australia as a sports-obsessed nation, it seems most of these esteemed economists believe the negatives outweigh the benefits when it comes to hosting major sporting events.

For the complete panel results, please visit the ESA Monash Forum pages.

Dr Liam Lenten's overview of this month's poll results is also available here.

The ESA Monash Forum is a joint initiative between Monash Business School and the Economics Society of Australia (ESA). It is designed to explore the extent to which Australian economists agree or disagree on key national and global public policy issues.