Expected World Cup spend stays at $700m

The Cloud, part of the Rugby World Cup 2011 party central, is open for business - but how much business will come New Zealand's way during the Cup is unclear according to the Reserve Bank. Photo / APN

The strength of the New Zealand dollar means the expected $700 million spend by Rugby World Cup visitors has not been revised upwards despite estimated numbers rising from 85,000 to 95,000, the Reserve Bank says.

The RBNZ this morning published a paper on the macroeconomic impact of the Rugby World Cup in which it sets out the assumptions underpinning the estimate of $700 million in spending by visitors.

The Reserve Bank has used the 2003 Rugby World Cup in Australia as the benchmark for its economic modelling, "but economic developments since then will have an impact on the number of visitors in 2011 and the amount these tourists will spend in New Zealand'', author of the RBNZ paper Adam Richardson said.

"The exchange rate is an important factor in this regard.''

Mr Richardson noted the New Zealand dollar was currently about 20 per cent above its long term average value and was particularly high against the currencies of nations where many visitors would come from such as South Africa, the United Kingdom.

Mr Richardson said the elevated NZ currency made 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.''

Mr Richardson noted the NZ dollar was relatively low against its Australian counterpart "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.''

Mr Richardson concluded the $700 million spending by overseas visitors was equivalent in magnitude to 1.4 per cent of New Zealand's GDP but that spending would not be a direct boost to GDP.

Significant domestic spending during the tournament was also expected but it was unclear how much of a total boost that would provide.

The net impact of the tournament on both short and longer term economic measures "remains to be seen'', Mr Richardson said.