Scoop Document: NZIER On Convention Centre Economic Impact

Friday, 30 August 2013, 1:52 pm
Article: The Scoop Team

A report released to the Green Party under the Official Information Act gives details on the estimated benefits of the National Convention Centre planned to be built SkyCity in exchange for changes to the gambling laws.

A Greens press release says:

A report the Government has relied on to assess the employment impact of the SkyCity convention centre shows the deal will increase the number of jobs in New Zealand by just 18, Green Party Co-leader Metiria Turei said today…

“National told New Zealand that selling our gambling laws would create 800 job at the convention centre and employ 1000 workers during the construction phase. What they didn’t mention is that the cost to the rest of the economy destroys nearly as many jobs.”

The Government has called the Greens' claims disingenuous.

The text of the executive summary follows. It is based on a text scan of the original document. It lacks some formatting and diagrams and will contain errors.

For the original report, in full, refer to the original PDF: NZIER - National and regional impact of the National Convention Centre

National and regional impact of the National Convention Centre
A general equilibrium evaluation

Report to Sky City Auckland and Ministry of Economic Development

June 2011

Executive summary

Objective

We use a computable general equilibrium model of the New Zealand and Auckland economies to estimate the economic impacts of Sky City Auckland‘s National Convention Centre (NCC) between 2012 and 2018.

Direct effects

The initial impact upon the economy is generated by the construction of the centre. Construction will generate $240 million of investment and capital creation in the Auckland region between 2012 and 201l. Upon construction, the NCC will draw export revenues of nearly $90 million per year into New Zealand, as well as inducing domestic spending from other regions. Part of that expenditure will be on the NCC’s services but the majority will be induced tourism: conference attendees will spend time and money in New Zealand far beyond their conference attendance fees.

[Figure 1 Impact on key macroeconomic variables]

Regional effects

The effect upon the Auckland region of the investment phase is marked; employment increases by 0.025% as construction peaks in 2013 with the construction of the NCC. That means an extra 300 jobs in the Auckland region. Gross Regional Product increases by $13 million in 2013 at the peak of construction activity.

Once operational, the NCC will bring in an additional $90 million of visitor expenditure to the Auckland region each year. Of this amount, $72 million will come from overseas delegates, and $18 million from non-Auckland domestic delegates. By 2018 the gross regional product of Auckland has risen by $23 million (0.03%) as a consequence of the NCC’s construction and employment has risen again to create a total of 340 extra jobs.

Benefitting greatly is the retail sector as induced tourism boosts demand for their products by 0.12%.

Table 1 Regional and national impacts
Cumulative change from baseline

Note: (1) The average Increase in GDP across the first 5 years of operation is $48 millon.
Source NZIER

National effects

At the national level, the impacts are smaller because there are some offsetting effects for non-tourism export industries due to a higher oxchange rate and less capital accumulation.

In total, national GDP rises by $53 million st the height of the construction and employment grows by 0.03-%, which creates an additional 120 jobs nationally, However, the investment in the NCC prevents investment that would otherwise have occurred in other sectors; consequently, they grow more slowly than might have been expected.

In addition to generating business for local service providers thc increased tourism causes the New Zealand currency to appreciate, which makes our non-tourism exports loss competitive overseas. The dairy industry, for instance, contracts by 0.02% by 2018. Nonetheless, greater tourism sees our overall export volumes rise by 0.06% overall lay 2018.

Over time the impact on employment subsides as real wages rise to meet the additional demand for labour but, by 2018, wages are 0.05% higher than they would otherwise have been vvithout the construction of the NCC. Output has risen similarly and GDP in 2018 is 0.02% greater than current forecasts, That is equivalent to an extra $47 million of GDP in 2018, The difference between the additional export revenue of $90 million and the GDP figure is due to the lost investment in other sectors retarding their growth and the loss of exports as a consequence of the currency's appreciation.

The extra income created by the additional tourism allows households to consume $14 million more goods and services by 2018. These benefits are primarily clue to the extra income generated by the induced tourism from the NCC. There is also a short term spike in consumption around 2013 as borrowing to fund the construction phase of the NCC puts more money in the pockets of 'those In the construction Industry.

[Full report - PDF: NZIER - National and regional impact of the National Convention Centre]

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