A report by Big 4 consultants EY was used to justify the case for the Commonwealth Games. Another report by EY was used to justify the business case for the Melbourne Grand Prix. Callum Foote reports on experts.
Big 4 consultants EY – formerly known as Ernst & Young – delivered the Victorian government the business case for hosting the Commonwealth Games in 2026. The original cost was mooted at $2.6b.
Yet the Dan Andrews government set off a political storm on Tuesday the week when when it abandoned the 12-day event, saying costs had blown out from $2.6 billion to $7 billion. The Games were to be held in 2026 at regional hubs including Bendigo, Ballarat, Shepparton, Gippsland and Geelong. Andrews’ decision was based, he said, on new costings by Victorian Treasury.
The saga has also suddenly turned up the media glare on the role of consultants – and government use of consultants for political purposes – at a time when the PwC scandal is enveloping federal politics.
Ironically, it was EY which also provided a report on the business case for the Melbourne Grand Prix, analysis still relied upon by Victoria’s government for holding that event. Ironically, both reports have been hidden, although anti-Grand Prix activists have managed to find a copy of the EY report.
According to a story in the AFR about the Games, “The Victorian government said it planned to release the original business case undertaken by EY, but an EY spokeswoman emphasised that “EY did not provide the advice that the cost of the games would top $6.2 billion”. But what did it say, and can it e relied upon?
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While Victorian Premier Dan Andrew’s cops flack for cancelling the 2026 Commonwealth Games over concerns about ballooning expenses, community groups are urging the state government to take another look at the Melbourne Grand Prix which may be costing taxpayers billions.
According to Joan Logan, FOI officer for Save Albert Park, a group dedicated to stopping the race in Melbourne’s Albert Park, “there is no evidence to suggest the Grand Prix is positive for the economy of Victoria despite government claims and a report from EY”.
The total taxpayer subsidy for the event sits at $537.5 million over the last decade.
Logan says that the annual race costs taxpayers far more than it brings in.
The Grand Prix Corporation’s annual reports show that in 2022 the Victorian government tipped in $78.1 million to cover a financial hole given revenue from the event itself makes up less than half the $153.2 million it cost to put on.
This was up by almost a third from 2019, when the state put up $60 million to hold the event. The total taxpayer subsidy for the event sits at $537.5 million over the last decade.
Yet, the government remains adamant that the event presents a broader economic benefit to the economy.
According to Minister for Tourism, Sport and Major Events Steve Dimopoulos “a study by Ernst & Young estimated the 2022 event directly injected $92 million into Victoria’s economy and increased Victoria’s Gross State Product by $171 million.”
However, the source of these figures and successive Victorian government’s reluctance to conduct a thorough investigation into their claims has been a source of controversy.
To date, the only public cost-benefit analysis of the race was conducted in 2007 when the Victorian Auditor General Des Pearson’s review of the race found the GP is a net loser for Victoria and his office found there is no evidence of extra tourists coming to Melbourne.
Pearson recommended an annual, follow-up cost-benefit analysis be done. The Auditor General said an economic impact study “cannot address the issue of whether a project is worth proceeding with; hence the need for a CBA approach.”
Successive Victorian governments have failed to uphold these recommendations. Instead, governments have periodically hired consultancy firm EY to produce just what the Auditor-General didn’t want; economic impact studies, says Joan Logan. The first was commissioned by the 2011 Liberal government, while Pearson remained Auditor-General.
Economic impact studies, unlike cost-benefit analyses, are not required to factor in taxpayer and other expenses incurred in putting on the races.
A 2013 update of the Auditor-General’s cost-benefit analysis was undertaken by the independent Economists at Large Pty Ltd. The analysis was done by the now research director at the Australia Institute Rod Cambell. They found the 2011 GP caused a net economic loss to Victoria of $51.7 million, the 2012 event was worse, with a $60.5 million loss and the 2013 event caused a $54.3 million loss to the Victorian economy.
This means for every taxpayer dollar spent on the GP losses, this causes a net one-dollar loss to the Victorian economy.
EY report hard to find
EY’s most recent Victorian government-commissioned economic impact report, produced in 2022 and released under FOI, was remarkably short on the assumptions which underlined the analysis. A previous 2011 economic impact report produced by the consultancy giant, also released under FOI, provides more detail.
The previous report assumed Victorians would be three times more likely to travel to an interstate grand prix than other Australians currently travel to Victoria for the GP.
On top of this, a patronage figure 56% greater than that indicated by the Australian Grand Prix Corporation audited ticket sales figures were used as the key multiplier.
This year, EY used ticket sales from Ticketmaster for audience attendance figures.
EY themselves were very clear about the conclusions which could be drawn from their analysis “the scope of the Assessment is limited to an economic impact analysis, and as such, it is difficult to make judgements as to whether the event leaves Victoria “better (or worse) off” from a welfare perspective” the report reads.
It continues “to understand whether the Grand Prix delivers net welfare improvements to Victoria, a full cost benefit analysis would need to be prepared…. A cost benefit analysis is outside the scope of the Assessment.”
The Victorian government have thus far resisted calls from critics of the Australian Grand Prix to commit to an updated and annual cost-benefit analysis of the race.
When the Andrews government does lift the veil of secrecy on the Games report by EY, it is sure to be controversial.
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Callum Foote was a reporter for Michael West Media for four years.