SYDNEY — The Sydney Olympic Games should give a smart boost to Australian economic growth of around 1.0 per cent in the September quarter, but the gains will be mostly transitory.
Most of the rise comes from Games tickets and the television broadcasting rights that were sold over the past year, but will be booked in the official statistics in the September quarter.
Construction of Olympic venues was completed long ago, new hotels are open and ready for the influx of visitors and only the minor work of road and sidewalk upgrades remains.
A recent Reuters survey of 26 analysts found a median forecast of a 1.0 percentage-point contribution from the Games to gross domestic product (GDP) in the three months to September.
But forecasts varied widely, from an increase of 0.1 to 1.5 percentage points, because economists say it is hard to judge how much regular activity will be disrupted.
‘Remember there’s the couch potato effect,’ said Westpac chief economist Nigel Stapledon. ‘Which is that most Australians will watch it on the TV, and because they’ll be watching the Olympics for two-and-a-half weeks they won’t be doing much else.’
Domestic tour operators have reported very low bookings for the Olympic period.
He added that the impact on GDP will be ‘a bit illusory’ since the A$1 billion in TV rights and around A$500 million in ticket sales don’t represent any new economic activity.
Central bank holds the key
The fillip from the Games will help keep Australia’s robust economic growth above four per cent, a blistering pace that has seen inflation edge higher and helped trigger the Reserve Bank’s five interest rate rises in the past year.
But overall, even the Games won’t have an outsized impact on Sydney’s economy, which is much larger than that of previous hosts Barcelona and Atlanta.
And that reduces the chances of a post-Olympics hangover.
‘It really comes down to the setting of interest rates, the pace of global growth and what the currency is doing,’ said UBS Warburg chief economist Mark Rider.
The central bank has already said it will look through temporary distortions to the data during the next few months.
One of the biggest beneficiaries will be Australia’s trade deficit which, though shrinking from its Asia-crisis levels, is still high.
The government has forecast the Olympic Games will add about A$1.75 billion to services exports over the financial year to 30 June, 2001, and see a fall in the current account deficit of about one percent of GDP in the September quarter. One of the monthly trade figures might even post a surplus, for the first time in over two years.
Over the longer term, the ‘spotlight effect’ should boost tourist numbers, though the likely impact is hard to quantify.
The government says the Games will have only a small impact on household consumption.
‘Expenditure by Australian residents on Olympics-related tourism should be largely offset by a decline in domestic tourism to other destinations and some crowding out of other spending,’ this year’s budget papers said.
Simon Doyle, an economist at AMP Asset Management, expects only a 0.1 per cent net boost to growth because of the disruption to normal activity.
‘A lot of businesses will be closing down or taking holidays, so that will affect demand in the opposite way,’ he said.
Source: SOCOG