Strategic Cost Reduction and Revelation – Free Samples to Students

The Commonwealth Game 2018 will be hosted by the City of Gold Coast, Brisbane, Townsville, and Cairns starting from April 4, 2018. Evidently, the twenty-first CG 2018 will be the largest multi-sport event in Australia (Business.qld.gov.au, 2017). In the meanwhile, for the first time, the country is going to host the mega event in a regional city. Such world-class sporting event partnering the Government of Australia, Gold Coast City, Queensland Government, and the Gold Coast Commonwealth Games Corporation will be organised for the first time in the country in the current decade. However, the large-scale Gold Coast 2018 Commonwealth Game will offer once-in-a-generation opportunities to the social population living in the target area.

According to the estimated statistics, the Gold Coast 2018 Commonwealth Game will be visited by around 100,000 visitors coming from all across the globe including domestic spectators. Apart from the visiting population, 6,600 athletes and officials for international teams coming from 70 nations will attend the mega event. Precisely, to volunteer the spectacular mega event, over 15,000 sports volunteers will be recruited (Bell, 2015). Worldwide the CG2018 will be viewed by 1.5 million TV audiences whereas the event will attract 1.5 million sport-loving spectators in the venues of the event. Since 2006, Australia has never experienced such an international mega-event hosting athletes coming from 70 countries. Clearly, the infrastructure provided to the sportsmen in the games village must be a focal point. Hence, the trade partners of the event will be expected to invest massive capital for successfully completing the multi-sport event.

In terms of economic benefits, the Gold Coast 2018 Commonwealth Games has already brought significant economic benefits to the target region. Due to the mega-event, the City of Gold Coast has already signed a contract with the Papua New Guinea Government that will increase the trade of the region with the country. Evidently, such foreign partnership will foster significant economic growth in the upcoming years. In order to accommodate the visiting team members, officials, and international sport media, the City of Gold Coast needs to deliver proper infrastructure (Goldcoast.qld.gov.au, 2017). Therefore, a huge amount of money invested by the partners of the CG2018 will be utilised to restructure the infrastructure of the games village. Furthermore, such infrastructural development will create job opportunities for the people living in the target area. Apart from the employment of the social community, to organise the CG2018, 15,000 sports volunteers will be hired. Therefore, the local employment statistics will be boosted.

Clearly, the investment by the partners as well as Australian government will deliver positive externalities as social population of the City of Gold Coast will be directly benefited (Bhaskar and Sadler, 2016). The government investment to develop infrastructure will be utilised to expand public goods such as stadium, roads, and transportation system. Clearly, the investment of the Australian government will generate considerable positive externalities in the City of Gold Coast.

By developing infrastructure for the CG2018, positive production externality takes place as the third party i.e. social people benefits from the development. As shown in the above figure, the marginal social cost (MSC) is lower than the marginal production cost (MPC). Therefore, it marks positive externalities. However, at point Q1, the social efficiency is achieved where marginal social cost is equal to marginal social benefit.

Economic Cost to be incurred by Gold Coast

In order to understand the economic cost of the largest sports event in the decade, it is important to consider the opportunity cost that is to be incurred by the local, state and national government to host the 2018 Commonwealth Games. Additionally, the externalities that will be caused by the event must also be considered to analyse the opportunity cost that the Gold Coast Government has to incur for hosting such as large event (Jin, 2011). For instance, it is expected that the event will cost the Queenslander tax payers around $300,000 per athlete for hosting the 2018 Commonwealth Games. The event will be hosted for 12 days and 6500 athletes will compete in the event, which is budgeted to cost around $2 billion (Stolz, 2012). Moreover, the government needs to incur a cost of around $1.075 billion to run the event and more $917 million to spent as a capital investment that include the Games Village of $640 million and other sporting facilities (Stolz, 2012). Hence, the total estimated cost of conducting the event is forecasted to be more than $2 billion, which will lead Queensland to a debt higher than any other states in Australia.

Furthermore, it is expected that the forecasted construction activity for the development of the infrastructure will lead the systems to be strained to the breaking point that will result in a negative publicity of the Gold Coast region over the global platform. Moreover, the residents living in the region will be highly affected by the new construction project and influx of tourist during the event. Additionally, the construction work and the event will restrict the ease of movement of the local residents that will result in a reduction in the workers’ productivity. On the other hand, the game village built for the event will be of no use after the completion of the event. In other words, the huge expenditure incurred for building the game village will go to vein after the completion of the 2018 Commonwealth Games (Berg, 2011). The village will use as a attraction for tourists, which will not provide much benefit to the tourism industry of the Gold Coast as compared to its costs. However, in terms of environment, the event will cause several serious externalities such as degradation of soil that will occur due to the construction work in the coastline area, noise pollution during the event and air pollution (Cost-Benefit Analysis of The GC2018 Commonwealth Games, 2016). Hence, it can be seen that the 2018 Commonwealth Games will lead to several negative externalities that will increase the marginal social costs over marginal production cost. A diagram has been presented herein below for better understanding:

It can be seen from the above figure that some of the activities of Commonwealth Games will lead to a higher quantity of production at Q, where the MSC is higher than MPC = MSB (Batabyal and Nijkamp, 2014). Hence, the event makes the Gold Coast Government incur several external costs that cannot be estimated in terms of money such as problems for the local residents, soil degradation, air pollution and noise pollution.

Cost-benefit analysis

It is important to note that the event of 2018 Commonwealth Games in Gold Coast region will have several benefits as well as cost for the economy. However, the benefits provided by the event will overrule the costs. For instance, soil degradation can be overcome by beautification of the region through better infrastructure (Möhlmeier, Rusinowska and Tanimura, 2013). Additionally, the problems of air and noise pollution can be solved with proper monitoring of the issues and implementation of better environmental policy during and after the event. Furthermore, the restrictions created for the local residents before and during the event can be overruled by providing 30000 permanent jobs and better security through CCTV surveillance (Cost-Benefit Analysis of The GC2018 Commonwealth Games, 2016). Moreover, the cost of $2 billion invested in the project can be earned back as a better return through the promotion of tourism in the region during and after the event (Cost-Benefit Analysis of The GC2018 Commonwealth Games, 2016). The infrastructural development for the project will help the Gold Coast to attract more visitors after the event. Additionally, the commercial benefits earned by the event through sponsorship and advertisement will also help the Gold Coast Government to earn high revenue. Hence, it can be seen that the economic benefits of the 2018 Commonwealth Games overrules the economic costs that are incurred by the Gold Coast region.

Conclusion

By considering the above analysis, it can be seen that the upcoming event of 2018 Commonwealth Games has certain economic benefit as well as cost for the Gold Coast region. The arrangements made for the largest event in the decade will improve the infrastructure of the region and provide 30000 permanent jobs to the residents. On the other hand, the cost of negative externalities caused in the form of soil degradation, air pollution and noise pollution cannot be estimated in the term of monetary losses. However, the economic benefits for Gold Coast are expected to be more than the economic costs if the activities are conducted in a controlled manner. Conclusively, the economic costs incurred by Gold Coast to conduct the 2018 Commonwealth Games is lesser than the economic benefits that the region will received in the upcoming years.

References

Batabyal, A. and Nijkamp, P. (2014). Positive and Negative Externalities in Innovation, Trade, and Regional Economic Growth. Geographical Analysis, 46(1), pp.1-17.

Beattie, P. (2016). Commonwealth Games bring spotlight to Queensland. [online] The Sydney Morning Herald. Available at: https://www.smh.com.au/sport/commonwealth-games/peter-beattie-the-commonwealth-games-will-be-huge-for-queensland-20160530-gp7lhs.html [Accessed Aug. 2017].

Bell, A. (2015). How are the Commonwealth Games already boosting the Gold Coast economy?. [online] The Ray White Surfers Paradise Group. Available at: https://www.rwsp.net/news/how-are-the-commonwealth-games-already-boosting-the-gold-coast-economy [Accessed Aug. 2017].

Berg, C. (2011). Commonwealth Games bad news for the Gold Coast. [online] ABC News. Available at: https://www.abc.net.au/news/2011-11-16/berg---commonwealth-games-bad-news-for-the-gold-coast/3668140 [Accessed Aug. 2017].

Bhaskar, D. and Sadler, E. (2016). Resource Allocation with Positive Externalities. SSRN Electronic Journal.

Business.qld.gov.au. (2017). Gold Coast 2018 Commonwealth Games. [online] Available at: https://www.business.qld.gov.au/industries/commonwealth-games/about [Accessed Aug. 2017].

Cost-Benefit Analysis of The GC2018 Commonwealth Games. (2016). Gold Coast City Council, pp.1-12.

Goldcoast.qld.gov.au. (2017). City of Gold Coast GC2018 benefits. [online] Available at: https://www.goldcoast.qld.gov.au/thegoldcoast/commonwealth-games-benefits-24257.html [Accessed Aug. 2017].

Jin, J. (2011). Strategic Cost Reduction and Cost Revelation. German Economic Review, 2(2), pp.99-111.

Möhlmeier, P., Rusinowska, A. and Tanimura, E. (2013). A Degree-Distance-Based Connections Model with Negative and Positive Externalities. SSRN Electronic Journal.

Stolz, G. (2012). Games bill is $300k for every athlete. [online] Couriermail.com.au. Available at: https://www.couriermail.com.au/news/queensland/taxpayers-to-foot-mammoth-games-bill/news-story/029b859f2ecea59d377320e5b42db539?sv=1741a79750b96632a02515eba9d5bb54 [Accessed Aug. 2017].

Taylor, T., Stonebarger, T. and Leven, J. (2015). Economics. 3rd ed. Chantilly, VA: Teaching Co.