These days it’s not unusual for cities to realise they prefer not to host major sporting events such as the Commonwealth Games and Olympic Games. What is unusual is that it’s taken so long for Premier Daniel Andrews to pull the plug.
The later the decision, the greater the disappointment and the ire of organisers, athletes and sport fans. And, no doubt, the greater the wasted spending.
Even so, it does take great political courage – and maybe overconfidence – to make such a decision, especially based on an undocumented claim of such a massive cost overrun – from $2.6 billion to as much as $7 billion.
If there isn’t a political price to be paid at the next Victorian election, it really will prove Andrews’ invincibility – with able assistance from a hopelessly divided opposition.
It isn’t hard to believe that the now-expected cost is far higher than the initial estimate. But the latest estimate of up to $7 billion does stretch credulity.
Overruns are a virtual inevitability in games hosting. This is shown by a table of overruns for the summer and winter Olympics, prepared by researchers at Oxford University.
It shows that Sydney’s stated overrun of 90 per cent in 2000 was on the high side, but nothing to compare with Atlanta in 1996, Barcelona in 1992 and the all-time winner, Montreal in 1976.
Even so, the table does suggest that the size of overruns has fallen in recent times as, presumably, host cities wise up. Perhaps now it’s cities with more experience – and good existing sporting facilities – that are more likely to seek and win the games, or perhaps these days cities know to take more care with their budgeting.
Initially understating the likely cost seems standard political practice for all public projects, let alone major sports events. “It’ll be great fun, bring us the international recognition we deserve, not to mention huge tourist dollars – and it won’t cost all that much.”
But it’s not just the pollies who mislead us. We’re all so keen to enjoy the games at home that we’re easily convinced they won’t cost much and will bring great benefits.
What gives hosting international games such a great risk of blowouts is partly the international sporting body’s demand for many new venues, but mainly the need for them to be completed by a specific, immovable date.
This leaves the games organisers hostage to greedy unions and private contractors.
But there’s rarely a shortage of “independent” consultants willing to take a highly optimistic view of what it all will cost, and what the (always greater) monetary benefits the games will bring in. Even to the extent of putting a dollar value on the supposed “social” benefits they will bring.
It’s all too easy to overestimate the benefit that all the spending by sport fans – local and visiting – will bring. Economists have put much thought into what they call “the economics of special events”, remembering, as most people don’t, to allow for the greatest insight of economics, “opportunity cost” – what your decision to do X means you now won’t be able to do.
Another pertinent concept is “intertemporal substitution” – decisions to move spending between time periods. Remember, too, that the amount of benefit varies with the perspective from which you view it.
Holding the Commonwealth Games in Melbourne, for instance, would attract many visitors from other states, spending on tickets, travel, accommodation, meals and so forth.
From the perspective of the Victorian economy, that’s a benefit. From the perspective of the Australian economy, however, the extra spending in Victoria is cancelled out by the reduced spending in other states.
From a national perspective, the only benefit is from overseas visitors, spending money in Oz that they otherwise wouldn’t have.
Most of the spending would come from Victorians themselves. But it’s likely most of this is money they otherwise would have spent in Victoria on other things, at other times in the year. So, little net benefit to the state’s economy, except for spending by overseas and interstate visitors.
It’s a different matter, however, for the mayors of the five regional cities that were planned to share the hosting of the games. Their cities would have benefited greatly from the spending by visitors from the rest of Victoria, other states and overseas.
Andrews’ decision to regionalise the games was intended to be their special feature, a new model for how the games could be run. But this dispersion seems to have added greatly to the games’ cost. Even at $2.6 billion, Victoria would have been spending much more than other state hosts of Commonwealth Games.
Andrews has promised that the regional cities will still get their planned new sporting venues, but it’s hard to see how this squares with his new view that the state has more pressing spending priorities.
So, just why has Andrews cancelled at this embarrassingly late stage?
He hasn’t said so, but it’s obvious. Because he spent so much coping with the pandemic, and the great debt this has left him with. He has no room left for spending on bread and circuses.
It’s now become common for cities to think twice about their plans to host Commonwealth or Olympic games – though not for them to leave it this late.
It’s noteworthy that Melbourne had no rivals in its bid for these games. And that no other Australia state is interested in filling the vacuum.
Why has hosting become less attractive? Because it’s finally dawning on cities that building so many new sporting venues – which will be little used after the games’ fortnight – is a waste of money that could have been spent on far more lasting and useful things.
But I doubt this means the days of these funfairs are numbered. The international controlling bodies will have to trim their demands for new facilities, and rotate the games between a few cities that have maintained adequate existing venues.
