The Economic Consequences of the Sydney Olympics: The CREA/Arthur Andersen Study

Abstract

This paper assesses the economic impact of the 2000 Olympics. It draws on economic modelling I undertook for Arthur Andersen (financial adviser to the Sydney Organising Committee for the Olympic Games). The analysis is undertaken with a large-scale multiregional computable general equilibrium model, so as to take into account both the positive and negative flow-on effects of Sydney staging the Games. The effects of Olympics construction and operating expenditure, and of spending by Games visitors and additional tourists are modelled over a 12-year period, under specific assumptions regarding the Australian labour market, capital supply constraints and Australian government policy on foreign debt. Olympics expenditure not funded by Games revenues is modelled as being met by an increase in New South Wales state tax revenues (via a larger revenue base and slightly higher tax rates than would otherwise be the case) and a substantial diversion of government expenditure from non-Olympic to Olympic items. Simulation results indicate that NSW activity is 0.3% higher over the 12-year period due to the Games, but there is little effect on the other states. However, the final outcome is sensitive to the degree the Olympics promotes tourism from overseas and the labour market reaction.