In a globalised economy, cities compete with one another for income generating opportunities. In this environment, cities both look for a competitive edge and they market themselves. Many medium-sized cities that have lost industries like steel and shipbuilding try to find a new niche in one or more of knowledge industries, tourism, the arts and entertainment, events and conferences, and real estate development. Local government and business form partnerships to sell the city as an attractive place to live and work or visit.
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Newcastle’s decision to host the annual Supercars race should be understood within this context. The key task then is to evaluate the benefits and costs of such projects.
The ACT contracted to host the Supercars race for five years from 2000. After two years the ACT Auditor-General found that the race had failed to produce its promised economic benefits. He concluded that the ACT Cabinet’s decision to conduct the race in Canberra had been based on inaccurate information, generating a net cost to ACT taxpayers of $7.2million in the two years the race was run in the city. The ACT Department of Treasury endorsed the Auditor-General’s findings, and the incoming Stanhope government cancelled its contract with Supercars.
Reviewing the voluminous literature on the subject, the University of Adelaide economist John Wilson found that sports events (including the Sydney Olympics) rarely realise their predicted economic benefits. Indeed, these events usually cost host governments, and hence taxpayers, money.
In the light of this evidence, one has to question Destination NSW’s claim that the Supercars event will bring $57million to the Hunter over the next five years. We also need to ask why governments and local councils continue to support such events.
One reason is the lack of a strong urban planning tradition in Australia. With a few exceptions, most notably the original layouts of Canberra and the Melbourne and Adelaide CBDs, Australian cities have grown in an ad hoc way. As a result we have urban sprawl, traffic congestion and developer-driven ‘densification’ strategies.
Likewise, Australian governments have failed to develop a coherent approach to industry policy. Generally, the transition from one type of industry to another has been handled badly, at great cost to individuals and to the national economy.
In this context events like Supercars seem to offer a solution. And when they do not realise their promise, government and business often look for another quick fix. Think of how over the past five years decision-makers have successively promoted high-rise, cutting the rail, and now a car race as ways of generating new opportunities for Newcastle.
Externally generated initiatives like Supercars will compound rather than solve Newcastle’s urban planning and employment problems. New industries and lively cities are built by energetic entrepreneurs and courageous venture capitalists (as in Silicon Valley and Seattle), often assisted by long-term government support.
In Newcastle government and business leaders would be better employed supporting the many small enterprises springing up in the city, and the promising but capital-starved biomedical and alternate energy projects already underway in such places as the Hunter Medical Research Institute and the University of Newcastle’s Centre for Frontier Energy Technologies.
