We won’t know the exact figures until shortly before the November 25
Victorian election but with the smallest crowds since 1998, this year’s Formula One Grand Prix will almost certainly
post another record loss for taxpayers and next year’s
ban on tobacco advertising will probably cause another record loss in 2007.

The warm glow from the Commonwealth Games that still hovers around
Melbourne and the feast of other sport and politics to digest will
probably smother any possible debate about the deteriorating economics of the GP.

However, across all the papers this morning there is some talk of falling crowds and Foster’s dropping
its $5 million naming rights sponsorship deal after next season.
The spiralling losses over the past ten years have unfolded as follows:

Year Operating loss Parks Victoria subsidy
Pre-1996 $18.86m $1.31m
1996 $35.01m $1.76m
1997 $9.04m $1.76m
1998 $9.02m $1.76m
1999 $9.18m $1.76m
2000 $7.66m $3.02m
2001 $12.44m $3.02m
2002 $18.75m $4.01m
2003 $25.86m $4.01m
2004 $22.64m $4.01m
2005 $24.59m $3.95m
Total $184.03m $29.06m

Harry Hindsight probably thinks that John Brumby’s original idea as opposition leader was
right – the Grand Prix would have been much better around Docklands,
just as it was for the walking events at the Commonwealth Games.

Sadly, taxpayers are now spending $23 million each year erecting the
temporary track in the $526 million Albert Park, which is a hell of a lot of money to
spend for a two hour car race through a public park that still
infuriates and dislocates the locals.

At least the Commonwealth Games will leave some legacy assets, such as
the rebuilt MCG. The Grand Prix legacy is just some juicy contracts for
the likes of Halliburton and a couple of months work for a few hundred CFMEU
members. If both sides of politics are really committed to keeping the
GP in the longer term, then it is time to run the numbers over
investing $200 million on a permanent track.

Making a direct loss on an event is fine if you can demonstrate
marketing spin-offs or broader economic benefits. The NAB spent $20-25
million marketing itself throughout the Commonwealth Games and most
observers reckon it was a stunning success.

The problem with the Grand Prix – and many other major events – is that the
economic benefits are grossly exaggerated using dubious assumptions.
In the case of the Grand Prix, these have been designed to distract attention from Ron Walker’s original broken promise in
December 1993 – that the event would cost $5 million to establish and
then make a profit each year.

The Bracks Government’s own economics adviser, Peter Fitzgerald, was quoted as follows in The Age on Friday responding to claims the Commonwealth Games generated $1.5 billion in economic benefits and 13,000

I believe that’s an over estimation of benefits by threefold and an over
estimation of jobs by many thousands. We must get rid of the spin, the
counterfeit dollars, the exaggerated benefits, and the political fictions about
losses and costs and savings.

And that’s coming from the man who the government employed in 2004 to
review public private partnerships. At last, someone prepared to call
it as it is.

Unlike most major sporting events in Melbourne such as the Australian
Open tennis and the Spring Racing Carnival, the Grand Prix is a
financial lemon but we’re yet to see how much is too much for the
politicians when it comes to the financial loss each year. Surely a
budgeted loss of more than $30 million would raise questions about
exercising the five year option beyond 2010.

Ron Walker turns 67 this year and the future of the event is still very
much based on his relationship with colourful British billionaire
Bernie Ecclestone. “I speak to Bernie every second day, he’s one of my
closest friends,” Ron gloated yesterday.

Any why wouldn’t Bernie like Ron when he’s delivered bi-partisan
support for almost $300 million in secret taxpayer funded licence fees
to his companies since 1996.