Tasmania’s Coordinator-General, John Perry, has made an extraordinary late-stage intervention in the stadium debate, publishing an opinion piece that seeks to reframe the $1.13 billion Macquarie Point project as an act of economic prudence rather than extravagance. It’s dressed in the language of analysis and investment logic, complete with ratios and returns, but beneath the surface it is something else entirely: a sales pitch masquerading as economic evidence.
At first glance, Mr Perry’s central claim is arresting. He argues that for every dollar Tasmania spends servicing debt for the stadium and the AFL club, around $44.5 million per year, the state will reap nearly $221 million in “new economic activity”. That’s a ratio of $4.97 of benefit for every $1 of cost. To the casual reader, it sounds irresistible. Yet on closer inspection, the calculation relies on faulty logic, selective inclusions, and a deliberate conflation of very different economic concepts. It’s the analytical equivalent of comparing apples with grand final medallions.
The first and most glaring error is to treat the interest repayment costs on stadium borrowings as the project’s cost base. He then compares that limited annual financing cost to his estimate of “economic activity”, a measure drawn from input-output multipliers (I-O) rather than a proper economic cost–benefit analysis (CBA). In other words, he measures an apple slice of cost against the whole fruit salad of benefit.
Infrastructure Australia and Treasury guidelines make this distinction crystal clear. A compliant CBA measures all resource costs – the total capital expenditure, operating and maintenance outlays, refurbishment, and the asset’s residual value – discounted to present terms. Interest payments are not a cost overall; they are a financial transfer between lenders and borrowers, in this case the government. The government may be worse off but the lender is better off so it doesn’t affect the BCA. What matters in public investment appraisal is not how it’s financed but the real resource cost – the actual labour, materials, and opportunity foregone in building and maintaining the project over its life. This is completely ignored.
Had he applied standard appraisal practice, he would have had to include full building costs, annual operating costs, major refurbishments after about 30 years, and depreciation. Stadia rarely last forever. The Sydney Football Stadium was demolished after 30 years. To leave out the loss of value over time is to suggest concrete, steel, and timber age like fine wine.
The next problem lies in Perry’s definition of “benefit”. The $221 million he claims is not new wealth created for Tasmanians. It’s a tally of gross turnover, money moving through the economy, much of it already happening or quickly leaking interstate. I-O modelling, the method he appears to use, was designed to estimate the short-term ripple effects of spending, not to determine whether society is better off. You could achieve the same “economic activity” by digging a hole and filling it back in. I-O multipliers almost always exaggerate benefits because they assume no crowding out, no inflation, and no resource constraints.
By contrast, a proper CBA, Infrastructure Australia’s gold standard, focuses on net welfare gain: the extra value to consumers and producers after accounting for opportunity costs and externalities after subtracting the local spending displaced or the leakage of profits to mainland chains and suppliers.
A cornerstone of every credible CBA is the base case – what happens if the project doesn’t proceed. Mr Perry never defines one. Macquarie Point was already slated for redevelopment; the real question is whether adding a stadium delivers more benefit than an alternative use of the site. Without that counterfactual, his analysis cannot tell us whether the stadium adds or subtracts value compared with, say, housing, health infrastructure, or a scaled-down events venue. As Infrastructure Australia repeatedly warns, “Without a base case, there is no benefit–cost ratio, only arithmetic.”
Perhaps the most extraordinary omission is the absence of any allowance for asset depreciation. In corporate analysis, depreciation is a fundamental cost. In government accounting, it’s a real expense that determines how much future taxpayers must spend on renewal or replacement. As a former airline financial analyst, surely Mr Perry knows that no board would buy an aircraft without estimating its residual value. Yet his model suggests the asset apparently never wears out.
Even if one were to accept these multipliers at face value, none of the “economic activity” he counts translates directly into State revenue. The government’s capacity to service the debt depends on its share of that activity, payroll tax, stamp duty, and GST allocations, not the total turnover of the hospitality sector. The latest Pre-Election Financial Outlook shows debt-servicing costs rising faster than revenue, leaving less for other services. More debt without matching income will compound that problem. Yet this fiscal reality is entirely side-stepped, claiming that the interest bill represents just “half of one per cent” of State revenue, as if that fraction, divorced from context, makes the debt benign.
Another flaw is the uncritical blending of multiple economic frameworks (CBA, CGE (computable general equilibrium) models, and I-O multipliers) into a single headline figure. These tools serve different purposes and cannot be aggregated. CGE models estimate macroeconomic shifts such as GDP or employment, while I-O models trace short-term output linkages. Neither provides a welfare metric equivalent to a CBA. Tossing them together without explanation turns rigorous methods into a statistical stew.
The timing of this intervention is as curious as its content. For the Coordinator-General, the official charged with attracting investment, to publish a glossy defence of a politically fraught project at this stage raises questions about process as much as economics. His claim to be offering a “simplified analysis” that cuts through the “claims and counter-claims” rings hollow when the simplification obscures more than it reveals.
A rigorous cost–benefit analysis, using Infrastructure Australia’s own parameters (4–7–10 per cent real discount rates, full life-cycle costs, realistic base case, sensitivity testing), would almost certainly deliver a BCR below one meaning the stadium wouldn’t create economic value at the State level even if it generated jobs and spending. Projects can stimulate the economy yet still make society poorer when costs exceed benefits. That is the central truth Mr Perry’s argument conceals.
Tasmania deserves transparent, evidence-based assessment of its biggest capital commitment in decades, not a glossy spreadsheet promising gold at the end of a very expensive rainbow.