The Economic Impact of the Olympic Games

The Economic Impact of the Olympic Games

With the Olympic games being held in Sydney this year, I wondered if perhaps the performance of the economy was being affected in part by the fiscal stimulus provided by Olympic construction in Sydney and other parts of the country. Australia's economy has been performing well recently, suggesting that there might be some effect. Over the last five years, growth in Australia's gross domestic product has averaged 4.35%, almost a full point above it's thirty year annual average of 3.5%, and the unemployment rate is near a ten year low. According to one estimate, the Olympics will tack on an additional six and a half billion dollars, about 1.6% of the GDP, to Australia's GDP over the 1994-2000 period. A natural question to ask is if this growth is due primarily to the Olympic preparation, or if, instead, it is a result of some other change in policy, or perhaps just plain old luck.

One way to address this question is to see if other host countries have experienced increases in GDP around Olympic years. Below is a graph of one measure of the boost to GDP that countries receive from hosting the Olympics. Each point represents the average, over all of the host countries since 1952, rate of growth of GDP. What this graph suggests is that prior to the Olympics and during the Olympic year GDP growth is higher than average - maxing out at nearly 1.5% above average GDP in the 3rd year before the Olympics. This number seems consistent with the estimates for Sydney - at least prior to the Olympic year. However, the graph also suggests that growth rates are lower in the years after the Olympics, than in the years prior to the games.

The economic benefits of the 2000 Olympics can be classified as direct and indirect. Direct benefits include the impact of the Olympics on exports, investment and employment. In terms of exports, the main impact will be inbound tourism, sponsorship fees, media broadcast rights, and ticket sales. The staging of the Olympics will encourage more international tourists to visit Australia. Sponsorship fees received from international sources were strong leading up to the Olympics and according to the Reserve Bank of Australia (RBA), broadcast rights, approximately one billion dollars in value, were recorded as exports in September quarter 2000. Ticket sale sold to overseas visitors, up to a hundred million dollars in value, were also recorded in the September quarter 2000. The RBA correctly estimated that the overall boost to export receipts were equivalent to around one percent of of GDP in the September quarter of 2000.(RBA, 1999, p27) According to the Tourism Forecasting Council, one and a half million additional international tourists are expected to visit Australia in 2005-2006 than in 1994-95 because of the staging of the Olympics. This is estimated to generate an additional two and a half billion dollars in tourism exports (Arthur Anderson/CREA,1999, p 2). The Olympic games have also provided an important boost to employment. The Olympic Co-ordination Authority(OCA) estimates that more than 35,000 people have worked on Olympic Co-ordination Authority construction sites since the first project at Homebush Bay was started. It is estimated that since the Olympic Co-ordination Authority was formed in 1995, over twelve and a half million hours have been worked on Olympic related projects. There will also be multiplier effects. According to the Olympic Co-ordination Authority, every job created on a construction site created two more off site for suppliers, material producers and transport workers. (Olympic Co-ordination Authority,1999, p5.) The Olympics also boosted North South Wales' employment by 5,300 in an average year of the 12 years representing the Olympic period. In addition 2,200 jobs were created outside North South Wales over the same period (Arthur Anderson/CREA, 1999, p3).

It is also important to highlight the indirect benefits that the Olympics will bring. Indirect benefits will also come from increased exposure to Australia as host of the millennium Olympic Games. Austrade is driving the Government's Australia Open for Business campaign, which takes advantage of the heightened global interest in Australia at the time of the Olympics. A global promotion for Australia as a prime business destination is supported by a number of new business programs, which capture new interest to turn it into export and investment revenue. The key program under Australia Open for Business is Business Club Australia. Also, managed by Austrade, Business Club Australia connects Australian exporters with overseas buyers and