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Reserve Bank eyes economic effects of Rugby World Cup; 'High NZ$, international debt levels concerning, so let's hope more Aussies come'

Posted in Currencies

A high New Zealand dollar against currencies other than the Aussie, and high levels of private debt in the developed world have the Reserve Bank wondering about the impact the Rugby World Cup will have on New Zealand's economy when we host it during September and October.

In a paper released on its website today, Reserve Bank economist Adam Richardson said the Reserve Bank's main interest in the event was how it affected domestic economic activity, capacity pressures and the national accounts.

"The tournament is expected to attract a total of 95,000 overseas visitors, with these visitors forecast to spend NZ$700 million in New Zealand. Domestic spending on the tournament is also likely to be significant, although some of this will be at the expense of spending on other items," Richardson said.

"If incomes increase as a result of the domestic and international spending in New Zealand, that would increase domestic spending even further over time," he said.

But there were concerns a high New Zealand currency against the majority of those from key tourist markets, and high levels of private sector debt across the developed world might mitigate some of the expected benefits from the event.

Attractive for Aussies to come

A competitive exchange rate versus the Australian dollar meant it was still attractive for Aussies to come across the ditch for the tournament, although our Tasman cousins usually did not stay as long as tourists from farther afield.

"The exchange rate is an important factor in this regard. At the time of the 2003 tournament, the Australian dollar was only about 10 percent above its long-term average on a trade-weighted basis and the overall international economic environment was reasonably good," Richardson said.

"New Zealand s situation now is rather different. The New Zealand dollar Trade Weighted Index is about 20 percent above its long-term average, and is particularly high relative to the South African rand, the British pound and the US dollar, having appreciated significantly against these currencies since 2003 (figure 5)," he said.

"All else equal, an elevated currency makes New Zealand more expensive as a destination, potentially discouraging some visitors. In addition, visitors may be working to a fixed budget in their home currency while travelling. An appreciation of the New Zealand dollar erodes the value of that fixed budget and will lower the total amount of spending in New Zealand dollar terms."

"Of course, the New Zealand dollar is relatively low against the high Australian dollar at the moment, a factor that may encourage a higher proportion of Australian visitors as well as a higher average spend. However, New Zealand must still compete as a destination for Australian tourists during the Rugby World Cup," Richardson said.

"Economic activity has increased in all the key Rugby World Cup tourist markets since 2003. However, household debt relative to income or GDP has also built up significantly since then (figure 6)," he said.

"In a number of countries, high debt levels are among factors that have acted as a constraint on growth in consumer spending, as the international recession has prompted a degree of household caution. Apart from South Africa, growth in per capita consumption has been limited in key markets since the 2003 tournament (figure 7). Overall, high household debt might negatively affect visitor spending during the tournament," Richardson said.

 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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15 Comments

What are rugby

What are rugby injuries costing us tax slaves in terms of ACC  I wonder ?    it should be user pays for players and spectators-  why should those of us  who arent interested in 30 males running around after a bit of leather in an orgy of kicking and maiming pay for their fun ?

oh thats right - we need them to endorse products -  financial experts that they are -  Not !

Gonzo - I've never played

Gonzo -

I've never played rugby in my life, don't like the ethos, but have no trouble spreading the risk from sporting injuries, it just part of being part of a society.

You sure your nose isn't an old injury?

bring on Peak Rugby

bring on Peak Rugby

Yes I know what you mean. I

Yes I know what you mean. I run into an old school chum of mine once and was shocked when he told me he was gay. At high school he had so being into his rugby and had played in the 1st XV. I was even more shocked when he told me that he loved getting into rucks and scrums when he played rugby becuase he never knew where his hands were going to end up!

Yer, right. You obviously

Yer, right. You obviously know little about what one can and can't get away with in a game of footy. Think you might find any straying hands like that would get some hands in form of fist and it would knock the nose a bit sideways.

Was playing against the Fijians some years ago and they came with the tactic to make a play for the groin in the mauls.  We told the ref to sort it out or else or hell would break loose, ref called them in and told them in no uncertain terms

The 95,000 visitor figure is

The 95,000 visitor figure is very debatable, goes something like this. They took the number of tickets sold, divided it by three added a "factor", muliplied it by the number of games and voila; 95,000. Brilliant.

The Aussies had 65,000 overseas visitors, in better times and also closer to the main fans base UK, Europe and SAfrica. But we're going to get 50% more than them? 

I am sure our total tourist numbers will be down for the year as the regular visitors give the place a wide berth.

And there'll be a few of us

And there'll be a few of us getting the hell out while it's on. I'm hoping to have a riotous time in Hackney.

Just spiteful Mr Kelly...

Just spiteful Mr Kelly... suppose I should have the good grace to recommend my old local though. Hope the beer is off mind you....and the food over priced....

I think what they meant

I think what they meant Kiwidave is the locals attending will be gouged like visitors......in the interests of uniformity.

Hahaha! Better than food off

Hahaha! Better than food off and beer overpriced. I'll be by London Fields, so a short stroll to Vic Park. Thanks for the tip. Only in London one Sunday tho, so will miss out on the pub lunch.

Welllll.... If you can't be

Welllll.... If you can't be bothered with the walk...... Looks a bit dodgy these days, or, as my old neighbour puts it,  full of  "the new middle clarses".....full of people who "know that they are correct all of the time".....

Total spend for RWC = $700

Total spend for RWC = $700 mill = 2.5 weeks of current Govt borrowing...and when Govt reaches the end of it's borrowing binge, expect our economy to be less rosy...property will take a hammering.

Bah Humbug all you RWC

Bah Humbug all you RWC naysayers!

We have got our tickets and very much looking forward to the games. We're even off to quarter finals weekend in the big smoke of Auckland. Of course, thanks in part to a generous contribution from PDK, we will also enjoy World Cup footy in our magnificant new Dunedin Stadium. Good times!

Good going Shagger, but you

Good going Shagger, but you need to appreciate that being a small-minded naysayer is almost a qualification (some exceptions) to bother with this website, or probably for blogging and radio talk-back in general.

PS Did you play provincial rugby, if so who?

 

 

Alas me, the Canterbury

Alas me, the Canterbury selectors did not see the merit in my  talents dispite playing my fair share of senior footy. I have played abit of provincial cricket though and enjoy my sport in general. Im picking by your above comments that you have played rugby to a high level?

I have noted abit of negative comment on here regarding "rugby culture" of late when infact my experience both as a player and coach is that it does wonders for the  self esteem of young people. It also provides an important social focal point in rural communities in particular. Actually I believe increasingly so as people have become more disconnected with the professional game they have returned to the grass roots where it is still played for the passion. Thats seems to be certainly the case down here.