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Govt backing of America’s Cup team pays dividends

21 August 2008 Media Statement

Govt backing of America’s Cup team pays dividends

The government’s $33.75 million investment in Emirates Team New Zealand boosted the New Zealand economy by around $2 for every dollar of public funding, Associate Finance Minister Trevor Mallard said today.

An independent report on the government's 2003 investment in the team’s challenge for the 2007 America’s Cup shows a significant impact on the New Zealand economy.

Just as importantly, the Market Economics report shows there were less tangible but significant benefits from the event in terms of New Zealand’s marine industry.

"The report shows the America’s Cup continued to provide an ideal opportunity to showcase New Zealand’s boat-building, sailing and design talent and it’s also good to know the projected return on the government’s investment was better than we expected," Trevor Mallard said.

The report shows the kiwi team’s cup preparation, which began in April 2003, and the subsequent race to be the challenger in August 2007, added an extra $62.2m-$74.4m to New Zealand’s gross domestic product (GDP).

The challenge for the America’s Cup meant 750-900 more full-time-equivalent jobs over the America’s Cup campaign nationwide.

The direct and total return to government in the form of additional tax revenue from the campaign was between $32.4 million and $39.4 million.

The return on the government’s investment in Emirates Team NZ was greater than a 2003 estimation of $35-$53m, partly because a greater share of the team’s funding ended up coming from overseas.

The report found the team’s 2007 campaign helped sustain the momentum of America’s Cup activity in the marine sector and meant expertise stayed in New Zealand instead of transferring to overseas syndicates.

A copy of the report can be found at www.tourismresearch.govt.nz/amcup

Q & A

How was the economic impact measured?
The economic impact measures the net additional contribution to New Zealand’s GDP from the extra expenditure in this country by Emirates Team NZ. It is measured in terms of additional expenditure, the value added component of that expenditure and the employment effects.

How was the taxation impact measured?
The taxation impact measures the net additional contribution to New Zealand’s tax revenue from the extra expenditure by Emirates Team NZ, including GST on goods and services consumed, Customs GST paid by the Team, GST on goods and services consumed by the crew community, the PAYE on syndicate wages and salaries, the ACC contribution by Emirates Team NZ, and the company tax generated from the additional turnover of businesses selling goods and services to Emirates Team NZ and from contractors earning income in New Zealand. In addition, as the Emirates Team NZ expenditure effects flow on through the economy, more tax of each type is generated.

Do these impacts relate solely to the government funding contribution?
No. Government funding was not the only source of funds for Emirates Team NZ but it was a critical key or trigger to attract other funding for the challenge. Therefore, the economic and tax effects arise from the total Emirates Team NZ expenditure, and are the combined effect of both government and sponsor funding.

What was the timeframe for the impact study?
The study measured impacts between April 2003 and August 2007.

What did the 2003 study into potential sponsorship impacts indicate?
The 2003 study estimated that the total value added arising from the Emirates Team NZ campaign would range between $35-$53m.

Why were the actual impacts, as outlined in the 2008 report, higher than than those predicted in 2003?

The 2008 report indicates total value added of $62-$74m. This is higher partly because a greater share of funding came from overseas than originally estimated. The key benefit of this is that, once overseas expenses are paid for, there is a greater amount of net additional offshore funding available for expenditure in the New Zealand economy.

ENDS


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