The opportunity cost of the Melbourne Grand Prix

September 15, 2017
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The opportunity cost of the Melbourne Grand Prix

Last Sunday, my wife Nancy and I had a great weekend in Mooloolaba, where I took part in the Ironman 70.3 event, along with a thousand or so other competitors from all over the world as well as hundreds of spectators. As Nancy said, even though the Sunshine Coast isn’t far from Brisbane, we’d never get around to going if there weren’t an event like this, but the beautiful setting makes us keen to return.

While I was there, a friend mentioned that the Melbourne Ironman event had been cancelled because the date of the Grand Prix had changed, producing a clash. That got my mind away from transition times and back to economic policy.

The Grand Prix is subsidised to the tune of $60 million a year, a payment justified by the supposed benefits of tourism, estimated at 35 000 interstate and international visitors. Every serious economic analysis I’ve seen suggests that the net benefits are nothing like $60 million.

But, although I’m always banging on about opportunity cost, this particular example hadn’t occurred to me. In addition to the subsidy cost, the Grand Prix costs Melbourne events that would otherwise attract visitors without any subsidy**. The last Melbourne Ironman attracted over 2000 entrants, of whom a large share would have been visitors with accompanying family. It’s probably not the only event lost to Melbourne because of the Grand Prix. Add to that the potential visitors who choose an alternative destination to avoid the noise and congestion of the race, and you’ve cancelled much of the tourism benefit attributed to the Grand Prix.

* There are also nebulous benefits said to be gained from global TV viewers, who are supposed to be attracted to Melbourne by hours spent on the couch watching fast cars doing laps of Albert Park, interspersed with a promo clips/coffee break opportunities. I’m dubious.

** Various tourist bodies are listed as event partners for Ironman, but as far as I can tell, the monetary value of their support is trivial.

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