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					                   VERIFIED TRANSCRIPTS


                         PUBLIC ACCOUNTS AND ESTIMATES COMMITTEE

    Inquiry into review of the findings and recommendations of the Auditor-General’s reports: state
                                        investment in major events

                                        Melbourne — 25 November 2008




                                                      Members

                          Mr G. Barber                                    Mr G. Rich-Phillips
                          Mr R. Dalla-Riva                                Mr R. Scott
                          Ms J. Munt                                      Mr B. Stensholt
                          Mr W. Noonan                                    Dr W. Sykes
                          Mr M. Pakula                                    Mr K. Wells

                                             Chair: Mr B. Stensholt
                                           Deputy Chair: Mr K. Wells


                                                         Staff

                                        Executive Officer: Ms V. Cheong




                                                      Witnesses

   Mr H. Ronaldson, Secretary,

   Mr G. Hywood, Deputy Secretary, Tourism, Aviation and Communications,

   Ms D. Jepsen, Director, Strategic Planning and Ministerial Services, and

   Mr J. Dalton, Director, Policy and Strategy, Tourism Victoria, Department of Innovation, Industry and
   Regional Development; and

   Mr B. McClements, Chief Executive Officer, and

   Ms K. Dickson, Group Manager, Acquisitions and Development, Victorian Major Events Company.




25 November 2008                      Public Accounts and Estimates Committee                              1
         The CHAIR — I declare open the Public Accounts and Estimates Committee hearings on the review of
the Auditor-General’s audit findings and recommendations March–August 2007 addressing the following audit:
State Investment in Major Events.

I now call on Howard Ronaldson, Secretary of DIIRD; Greg Hywood, Deputy Secretary, Tourism, Aviation and
Communications, DIIRD; Deborrah Jepsen, Director, Strategic Planning and Ministerial Services, DIIRD; John
Dalton, Director, Policy and Strategy, Tourism Victoria, DIIRD; Brendan McClements, CEO of Victorian Major
Events Company; and Kelly Dickson, Group Manager, Acquisitions and Development, VMEC. Members of the
public and the media are also welcome.

In accordance with the guidelines for public hearings I remind members of the public that they cannot participate in
the committee’s proceedings. Only officers of the PAEC secretariat are to approach PAEC members. Departmental
officers can, at the request of the secretary and CEO, approach the table during the hearing. Members of the media
are also requested to observe the guidelines for filming or recording of proceedings in the Legislative Council
committee room.

All evidence taken by this committee is taken under the provisions of the Parliamentary Committees Act and is
protected from judicial review. However, any comments made outside the precincts of the hearing are not protected
by parliamentary privilege. There is no need for evidence to be sworn. All evidence given today is being recorded.
Witnesses will be provided with proof versions of the transcript to be verified and returned within two working
days of this hearing. In accordance with past practice, the transcripts and PowerPoint presentations will then be
placed on the committee’s website.

Following a presentation by the Secretary, committee members will ask questions relating to the audit findings and
recommendations. Generally the procedure followed is that relating to questions in the Legislative Assembly. I ask
that all mobile telephones be turned off.

I also note that in your letter to us there is an appendix, attachment B, and we are happy to take any questions on
that in camera. We propose to do that at the end of the hearing. I call on Mr Ronaldson to give a presentation of no
more than 10 minutes on the State Investment in Major Events audit.

Overheads shown.

         Mr RONALDSON — Thanks, Chair. The government says that major events in Victoria are equivalent
to Queensland’s Great Barrier Reef or Sydney’s Opera House. They deliver Victoria’s competitive advantage in the
global tourism market and are central to the state’s tourism success.

Melbourne hosts the four largest annual sporting events in Australia — the Australian Open tennis, the AFL grand
final week, the Australian Formula One Grand Prix and the Spring Racing Carnival. In 2007–08 there were
20 major events funded through the cap, representing four sector groups — sports, arts, cultural industry and
regional. In 2007 Victoria attracted over 329 000 international visitors to major events, and these visitors stayed a
total of 12.4 million nights. This generated an estimated $1 billion in economic activity in metropolitan and
regional Victoria — or $3.3 million per day. Of the total number of event visitors to Australia, 44 per cent visit
Victoria. The major events industry employs 3350 Victorians representing $1.6 billion of assets under management
in infrastructure. Some of these include the MCG, Olympic Park, the Rod Laver Arena, the Melbourne Sports and
Aquatic Centre, the National Gallery of Victoria, the Melbourne Museum and so on.

In 2006 DIIRD was given overall responsibility for the management and coordination of major events. This
included the administrative responsibility for the grant to and secretariat support for VMEC, contract management
of AGPC, administration and reporting of the major events cap to government, policy and strategy development,
and pre-event assessment and post-event evaluations.

In 2007 the government created the portfolio of tourism and major events, and all relevant responsibility was
consolidated in this portfolio. Previously VMEC and the AGPC reported through the Premier and had
administrative responsibilities to the tourism minister. As part of the transfer to DIIRD of major events the
government requested the department to review the overall coordination of major events; to identify opportunities
to enhance the processes and information that inform decision making, general management and coordination
across government; and to conduct event evaluations.


25 November 2008                      Public Accounts and Estimates Committee                                          2
In 2006 the government also endorsed the major events evaluation project, which is designed to review the major
events assessment statement, develop a program of event evaluation and develop a set of evaluation methodologies
with particular emphasis on the economic analysis of major events. This was later expanded to include taking into
consideration the recommendations of the Auditor-General.

Turning to the Auditor-General’s recommendations themselves, and without going through each one in great detail,
recommendations 1.1, 1.2 and 1.3, which deal with the updating of the MEAS statement, have been completed by
the department. Recommendation 1.4 and, similarly, recommendations 1.11 and 1.12 and 1.8 deal with methods of
economic evaluation of events, and they are subject to cabinet decision going forward — that is, they are scheduled
to be considered by a cabinet subcommittee.

In relation to recommendation 1.5, certainly triple-bottom-line data — I am happy to explain this further going
on — has been gathered as part of the revised MEAS. Recommendation 1.6, which deals with risk management,
has certainly been worked into the revised MEAS. I think that leaves 1.9, where DIIRD is certainly working with
various agencies in relation to their risk profiling of events. Considerable work has been undertaken in consultation
with DTF, but also DPC, VMEC and other stakeholders, to develop options that satisfy transparency and
robustness requirements for post-event evaluations. Throughout 2008 various options have been trialled and are
currently being analysed to provide government with a recommended approach.

The key objectives of the work being undertaken are to ensure: that the approach is robust and transparent; that the
methodology and application can cater for the diversity of events funded through the major events cap; that it
incorporates a triple-bottom-line assessment; and that the approach is cost efficient and relative to the size of the
event. It is important to note that a majority of the events funded through the major events count for under
$2 million, so it is important to ensure a cost-efficient method of evaluations.

In summary, a majority of the Auditor-General’s recommendations have been implemented as part of the revised
MEAS, and significant progress has been made in relation to the areas of economic impact assessment, guidelines
and reporting approaches, however, these are still subject to cabinet decision. Thank you very much, Chair.

        The CHAIR — Thanks very much for that. Do you want to give something on major events as well?

           Mr McCLEMENTS — It is an interesting business, and it is worth spending a couple of minutes on it to
assist the committee to understand the work that we do. The first thing we would say is that we were established in
1991, and we are a company limited by guarantee. Our role is to play in a very specific space in major events —
that is, identifying bidding and securing events for Victoria. Importantly we do that on time and on budget.

If I look back on the history of VMEC, one of the important things is the level of bipartisan support that we have
had. We existed under one government, and we have operated under both colours of government and have operated
very well. It has been an important part of VMEC’s success.

Once we actually win an event the process within government is that we transfer that to a contract manager within a
particular department. Again, VMEC plays in the winning and bidding space rather than in the operations area.

The nature of our business is that it is intensively competitive. If I reflect back five or six years ago at the key
industry summit, an event called Sport Accord, Melbourne was the only city represented. I went to that event this
year and there were 50 cities and 150 delegates represented from around the world who are seeking to copy
Melbourne’s success in this space. It is a very competitive space.

I noted your comments earlier, Chair, about the MEAS statement appendix. Certainly it is a strong view of the
VMEC that is a very commercially sensitive document. It reflects our thinking and I appreciate your taking that in
camera later on.

         The CHAIR — Thank you very much for that. The next time I see Joan Kirner I will congratulate her for
establishing the company.

        Mr RICH-PHILLIPS — She has to get credit for something, I suppose.

        The CHAIR — You mentioned $2 million. Is that in terms of the government’s money?

        Mr RONALDSON — That is contribution.
25 November 2008                       Public Accounts and Estimates Committee                                          3
        The CHAIR — Of course the $10 million was the benchmark which the Auditor-General talked about.
The audit starts off on page 2 — and you have mentioned it yourself:
  Major events have undoubtedly delivered economic value for Victoria.

You have given us a short summary of that. Can you elaborate on the benefit to Victoria of major events as seen by
the department and the organisation? It is pretty important.

          Mr HYWOOD — The secretary made the very important point that major events are seen as the
equivalent of the Opera House for Sydney and the Great Barrier Reef for Queensland. This is really because it was
very important that Melbourne establish competitive advantage in the enormously lucrative global tourism market.
Since the Second World War tourism globally has grown at something like 5 per cent a year, and Melbourne was
not seen — or Victoria was certainly not seen, nor saw itself — as a tourism destination. But the work that has been
over the last 10 or 15 years has established Melbourne as Australia’s most popular city. More money is spent by
tourists in this city than in Sydney. We lead the country, and we have improved our market share of the tourism
market. We have done that in a number of ways, and major events have been essentially a core part of that strategy.
By putting major events throughout the year and investing in them we have not only filled what the secretary
referred to as the $1.6 billion-worth of sporting and cultural assets that we have in this city, we have also brought in
something like 329 000 international tourists a year.

International tourists spend an enormous amount of money — much more than domestic tourists. They are the
most lucrative tourism market that we have. Eight per cent of our market is international tourists, but they spend
something like 32 per cent of the money. These numbers show that 20 per cent of international tourists come and
attend a major event in this city. Something like 20 per cent of all international tourists attend a major event in this
city.

You can see that in terms of a strategic benefit to the state — an economic development benefit — because not
only does major events employ directly over 3000 people, tourism in the state employs something like
165 000 people and is something like 5 per cent of the gross state product. We need a layered approach to major
events — our renowned night-life, our restaurants, our food and wine, our cultural activities, in terms of theatre but
also in terms of our major cultural institutions. It is part of a very layered tourism attraction that we provide. Quite
frankly major events is the centrepiece of that. That is why it is important. It does provide enormous economic
benefit to the people of Victoria for the reasons I have just outlined.

        The CHAIR — You have given a number of figures, but could you quantify that a little bit more in terms
of ‘Major events are worth $300 million a years to Victoria’, or — —

        Mr HYWOOD — The estimate is that in 2007 it was worth something of the order of $1 billion. That is
an accumulation of the evaluation of the major events that we do hold.

         The CHAIR — That is all the events throughout the year?

         Mr HYWOOD — All the events.

         The CHAIR — Of course they change from year to year as well.

      Mr WELLS — Thank you. My question is in relation to page 22, where it sets out the DTF
recommendations. Based on this the Auditor-General says the:
  … audit expected that the information included in the pre-event assessment would provide a detailed justification of the level of
  government funding for the event … and the estimated net benefits to Victoria. In the MEAS samples examined, this —

did not occur. Can you explain to the committee why there was a breach of the DTF guidelines?

         Mr HYWOOD — The answer to this question is actually on page 20 of the report, which says.
  The following pre-event assessments (MEAS) were examined in detail by the audit —

and it outlines the assessment of the Airshow, Melbourne Winter Masterpieces and Sail Melbourne. Those MEAS
statements were prepared in 2002. The DTF recommendations were not made until 2004.


25 November 2008                              Public Accounts and Estimates Committee                                                 4
        Mr WELLS — That is right; 2004.

         Mr HYWOOD — So there is no way that those 2004 recommendations were followed in 2002. But
having taken those DTF recommendations into consideration, the subsequent amendments to the MEAS dealt with
all those DTF issues.

        Mr WELLS — Okay, but that is not the question I am asking. In the samples that the Auditor-General
reviewed, the DTF guidelines had not been implemented. I am not talking about 2002.

         Mr HYWOOD — No, but he was looking at 2002 MEAS statements. The ones that he was actually
investigating had been prepared prior to the DTF recommendations. What he was saying was he was referring back
to the previously created MEAS statements and saying that those MEAS statements created in 2002 did not abide
by the recommendations created in 2004 and subsequent revisions to the MEAS statement have dealt with those
DTF issues.

        Mr WELLS — It was effective as of when?

        Mr HYWOOD — Effective as of 2006, I think.

         Mr PAKULA — Can I say then, Mr Hywood, that the audit could have been better worded because it is
not particularly clear. I can understand why Mr Wells came to the conclusion he did because in the
Auditor-General’s comments, he does not make it clear that he is examining MEAS samples from two years prior
to the recommendations.

        Mr HYWOOD — I can understand that.

        Mr PAKULA — I think that is an important clarification.

        The CHAIR — In fact the Auditor-General is agreeing with DTF.

        Ms MUNT — I refer you to page 56 of the report where one of the recommendations from the
Auditor-General is:
  That post-event assessments address the effectiveness of risk management and continuous improvement arrangements.

I am just wondering what ‘continuous improvement arrangements’ actually means. Do you have some sort of view
on how that can be implemented or thought of or framed? What is a continuous improvement arrangement?

         Mr HYWOOD — Ultimately it involves looking at the evaluations and making sure that they are further
taking into account post-event evaluations, looking at how the event performed in relation to pre-event
expectations, and having the event organisers use that information to make sure that there is continuous
improvement of both the quality of the event and also the quality of the information gathering.

         Ms JEPSEN — I can provide an example for you. Evaluating how much waste an event generates and the
percentage of that which is recycled will give us a target for the next time that that event is run, and we would
expect that the recycled percentage would increase. That is a continuous improvement example for an event.

         Ms MUNT — So that would be factored into guidelines for future events on how to manage those
particular instances that arise?

        Ms JEPSEN — Yes.

         Mr RONALDSON — Yes, that is true. I am sure it can be talked on further, but one of the issues is that
the recognition of risks in terms of the bidding process occurs a long time before the events actually take place.
Whilst it is true of history and you can learn from it, there are still considerable time gaps between when you bid
again and the event may occur. The world changes. I presume there are a range of financial risks around the
promotion of certain projects today that people were not aware of, say, two years ago, even twelve months ago.

        Ms MUNT — Three months ago!



25 November 2008                           Public Accounts and Estimates Committee                                    5
         Mr RONALDSON — It is possible that continuous improvement processes be applied, but they are
limited by the fact that the world does not stand still. I guess that does not mean you do not try. Certainly, the
promoters of events are very good at certain risks which the government generally would not intrude into, like
operational risks at the Grand Prix. That is a matter for highly skilled experts. But I think the broader risks that the
Auditor-General is talking about are things like financial risks and crowd attendance risk and all the factors that go
into making up demand and those sorts of things.

        Ms MUNT — Thank you very much.

         Mr RICH-PHILLIPS — I would like to ask about the slide in Mr Ronaldson’s presentation that makes
reference to 329 000 international visitors to major events and $1 billion in economic activity. Can I get a sense of
the basis for those two claims? With respect to $1 billion, can we assume that gross state product is $1 billion
higher than it would have been in 2007 but for those events? Is that correct?

         Mr HYWOOD — It is a measure of economic activity. The dominant measurement device around those
events was input-output measurements which measure unconstrained economic activity. That is the basis of that
$1 billion. The 329 000 figure comes from IVS — that is, international visitor statistics — which are compiled by
the Australian Bureau of Statistics and provided on a regular basis.

        Mr RICH-PHILLIPS — But how do you attribute those to major events?

        Mr HYWOOD — They are measured through the IVS by the ABS. The ABS provides that.

        Mr RICH-PHILLIPS — This is the incoming passenger card data? Is that what it is based on?

         Mr HYWOOD — It is survey data that the ABS collects, presumably from outbound travellers in terms
of what they did while they were attending and why they were in the state.

        Mr RICH-PHILLIPS — You specifically tick the box ‘I am in Melbourne for a major event’.?

        Mr HYWOOD — Yes, it is specifically tick-the-box information.

        Mr RICH-PHILLIPS — On the issue of $1 billion, you said it is unconstrained economic activity, but
the Auditor-General’s office this morning suggested that is not a very appropriate measure for impact because it is
not unconstrained?

        Mr HYWOOD — This is the number that has been commonly used to this point. Any further modelling
decisions are really, as the Secretary said, a matter of cabinet decision-making.

        Mr RICH-PHILLIPS — What is the source of this $1 billion figure? How is that being generated?

        Mr HYWOOD — It is an accumulation of input-output analysis.

        Mr RICH-PHILLIPS — By who?

         Mr HYWOOD — By a range of companies. I think Ernst and Young has provided probably the majority
of those analyses at this stage, but there are a number of other providers.

        Mr RICH-PHILLIPS — And an aggregate of the individual events in Melbourne or in Victoria in 2007?

        Mr HYWOOD — Yes.

         Mr RICH-PHILLIPS — To do that I assume they would have to have been assessed on a comparable
basis, though — the Grand Prix, the Airshow et cetera?

         Mr HYWOOD — I think many of them were quite comparable. There were a number which use
basically similar input-output models. There might be some minor variation.

         Mr PAKULA — I will probably also direct this to Mr Hywood, following on from some of the questions
that Mr Rich-Phillips asked, but also following up on discussions we had this morning with the Auditor-General’s
office, DPC and DTF. It goes to this issue of tourism and in particular the disagreement that appears to exist

25 November 2008                        Public Accounts and Estimates Committee                                            6
between the Auditor-General’s office and DPC about induced tourism. Those disagreements were laid out in the
Auditor-General’s report.

This morning when we had people from the Auditor-General’s office in, they tended to suggest that whilst they did
not discount the notion of induced tourism, they could not measure it — they did not know how to measure it. DTF
was also indicating that they were not sure if there were any particular models. Mr Hywood, I was wondering
whether your particular area of the department has been able to do any reliable studies on this notion of induced
tourism. Intuitively, you would imagine that it must be a genuine phenomenon — people who see the Melbourne
sign when they are watching the Formula One Grand Prix or whatever. But are there any reliable studies either here
or internationally that go that issue in particular?

         Mr HYWOOD — I think you could make the judgement that common sense will tell you that there is an
impact. Mr Pakula, I think you are exactly right. People are struggling to find a robust measurement of that. For
instance, when you provide branding of an event, the only thing you can really measure is not the impact of that
branding on whether or not somebody is going to visit you or not, but whether there is an economic value and a
media value in that brand. Therefore, induced tourism is one of those difficult areas. John, do you have any further
information on that?

         Mr DALTON — No, other than we regularly measure awareness of tourism on key locations. We think
that higher awareness of Melbourne is one of the key factors, particularly for events such as the tennis and the
Grand Prix that are branded. So we work very hard to increase that branding, as does of course the Victorian Major
Events Company itself.

         Mr HYWOOD — One of the major measurements that we have in Tourism Victoria is a brand health
survey, where Roy Morgan Research puts out a survey around Australia about various attributes relating to
tourism. We regularly win a range of those, including the city that best puts on major events, the city with the best
food and wine, the best cultural experience et cetera, and we relate those back to how we market the state and the
city and how well we are performing against those. So we try to cut it down, not so much in just the generalised
tourism focus, but in terms of what specific experiences tourists want and whether or not we are measuring up
against their expectations.

         Mr PAKULA — Are you able to measure, for instance, repeat tourists, people who might come out for,
say, the Spring Racing Carnival, and then come back three months later because they liked what they saw; or
people who might come out for the Australian Open tennis but then stay an extra week after it is over, and that sort
of thing?

        Mr HYWOOD — Not as far as I know in terms of the Spring Racing Carnival, no.

        The CHAIR — Just to follow up on one point, the Department of Premier and Cabinet talked about
research being undertaken elsewhere in the world regarding positive economic benefits for induced tourism. Do
you have any information on that?

        Mr HYWOOD — I can seek the information out and get it back to the committee. It is no problem; I do
not have any specific information for you here.

         The CHAIR — It is an issue that has come up which is difficult to deal with, but if there are some other
indications, and the Secretary of Premier and Cabinet said the expectation is a common-sense one, as you have
pointed out, it would be useful for us to have that information.

         Dr SYKES — I wanted to ask a specific question. I just want to clarify an expression. In one of your
slides you mentioned that the major events industries employed 3350 Victorians. Is that full time and each year,
year in year out?

        Mr HYWOOD — That is direct employment, yes; that is full-time equivalent, yes.

        Dr SYKES — So it is not just a surge for the Grand Prix; that is full-time equivalent, year in year out?

        Mr HYWOOD — Yes.


25 November 2008                       Public Accounts and Estimates Committee                                          7
         Dr SYKES — I have a second point of clarification. I think in the introductory remarks it was said that the
majority of the recommendations have been implemented. As I read them, there are 12 recommendations, and 8
have been implemented, so that is correct. But three quite major ones — or four — have not been subject to cabinet
decision, and some of those are quite significant. So whilst in a numbers sense the majority may have been
implemented, I would raise the question of whether in fact in terms of content the majority have been implemented,
because 1.4 and 1.8 in particular are quite significant.

Given that they relate to assessment of the projects, as I understand it, pre and post, part of that process is that you
make a judgement about what is going to happen; you review what has happened; and then normally the next step
is that you put in place measures that will ensure that the performance in future is better. A question I asked earlier
in the day was: given that the losses of the Grand Prix have risen from around $2 million a year to over $40 million
a year, in this management process has anything been put in place to control those losses?

         Mr RONALDSON — In relation to what I think is your first point, you will have picked up that there has
been a lot of discussion inside government about trying to fit optimum numbers to the sorts of major events that are
run in Victoria. There are a lot of factors here: size, costs and so on. At the moment the economic success or
otherwise of events is measured on an input-output model basis, and that continues. I can say so far as I am aware
most of the discussion within government has concluded about the applicability of a range of models to a range of
events, but the final decision is yet to be made by government.

       The CHAIR — And you have given us an answer in the quite extensive letter you have given the
committee.

         Mr NOONAN — I want to go to the issue of triple-bottom-line reporting, which you touched on in your
opening presentation. I think you have some more information to give the committee about that. Specifically the
Auditor-General’s report talks about social and environmental impacts. Of course some of those can be measured,
such as water or energy consumption for major events. Others are less easy to measure. I suppose it would be of
value to the committee to understand how that might proceed, and whether or not you have any benchmarks
outside of Victoria or internationally where this sort of reporting is part of the fabric of assessing these types of
major events.

         Mr HYWOOD — Just in a generalised sense — Deborrah might want to add to this in terms of specific
benchmarking — triple-bottom-line is a relatively new measurement both for companies and for major events.
Quite clearly it is an ongoing process, whereas financial measurement is highly technical and there is a lot of
background. Because this is quite new there is a variety of different ways of doing it.

There have been triple-bottom-line trials in a couple of events to test some procedures: to test social impact; what
the community response was in terms of pride; what accessibility issues arose; what health and wellbeing concerns
and what community concerns there were around inconvenience and dislocation and any visual impact; and
basically whether there were significant physical environmental impacts of having the major event. But also you
would have to look at land-use and planning issues, impact upon biodiversity, fauna, greenhouse emissions and use
of environment-friendly products.

As I said, this is an ongoing issue and the substance of exactly where the government wants to do it from the
criteria and the methodologies it uses is still the subject of a government decision. But trialling and background
work has been done on it, so we are at a point where an effective decision can be made.

        Mr NOONAN — And Ms Jepsen — in terms of benchmarking.

          Ms JEPSEN — Yes. The diversity of some of the events that are funded through the cap is quite
significant, which could be sporting events or cultural or social events. If there was something at the art gallery, for
example, we would look at how many people had never been to an art exhibition before. That would enable us to
benchmark that internationally as well as nationally and for future events to try to increase that exposure. In sport it
is participation, how many people were encouraged to start participating in that sport, so it is very diverse and it
will be tailored to each event, but it will enable us to do that benchmarking. That is the aim of it.

We learn as we look at each event and try to set up the assessment for that. That is one area that we will continually
revise in the MEAS as we become more sophisticated. We are consulting across jurisdictions and with other


25 November 2008                       Public Accounts and Estimates Committee                                          8
agencies and event providers around that to grow from that. But it is something that generally everybody in the
community and the event organiser are keen to expand and explore and share that knowledge.

             Ms MUNT — How do you find out if someone has been to their first art exhibition?

             Ms JEPSEN — We ask them.

             Ms MUNT — You exit poll, do you?

             Ms JEPSEN — We actually ask them. We ask: why did you come; is this the first time, and so on.

        Mr DALLA-RIVA — In the final paragraph of his foreword the Auditor-General made reference to the
concerns about the economic assessment models. The evidence taken this morning was quite stark in terms of the
Auditor-General office’s view. This is what the Auditor-General says in his foreword:
   To that end, this audit makes out a powerful case that the economic assessment models currently used now warrant concerted
   re-evaluation and further development.

That is related to the pre and post-event assessments. I am just curious about this, again following on from the
comments of Mr Rich-Phillips about the generation of an estimated $1 billion in economic activity. I refer you to
page 25, where the economic impact assessments appear to be part-based on a 1990 study if Melbourne had hosted
the Olympics, and the Auditor-General said:
   These estimates were questionable.

I guess what I am trying to get at is: are you still making estimations based on the now very dated suggestion that
we will eventually get the Olympics, or are you working on a different model? Or are you waiting for the new
MEAS model?

         Mr HYWOOD — Until there is a change in government policy, if at all, we currently use input-output.
That is generally used as the assessment approach. In all this modelling and the accumulation of data there has been
continuous improvement over the years; therefore, the accumulation of data which goes into that model has
developed and become more and more sophisticated over time. Therefore quite clearly the quality of assessment in
2007–08 is superior to what it would have been 15, 20 years ago.

       Mr DALLA-RIVA — Are you still making an assessment based on ‘if Melbourne had hosted the
Olympics’? Are you still doing economic models on that basis today?

             Mr HYWOOD — Not as far as I know, no.

             The CHAIR — This is in terms of estimates for induced tourism.

             Mr HYWOOD — Not as far as I am concerned. I am happy to get back to you on that. We are not aware
of it, no.

             The CHAIR — You have three people involved in managing the program.

             Ms JEPSEN — It was in the 2002 MEAS.

             Mr HYWOOD — I will get back to you, Mr Dalla-Riva, on that just to clarify it.

       The CHAIR — That is particularly about induced tourism; how big a part is induced tourism of any
assessment?

          Mr SCOTT — The question I would like to ask relates to the Auditor-General’s recommendation relating
to the risk management strategy. What do you consider — and I suppose Mr Hywood might be an appropriate
person for this — being contained in an appropriate risk management strategy prior to an event, how do you see
such a strategy being improved, and who do you see as a responsible authority to whom such a report must be
submitted?

         Mr HYWOOD — The way it works is that the organisation that intends to put on the event has to provide
a risk management strategy and a risk management analysis to VMEC in the determination of the MEAS. That
25 November 2008                             Public Accounts and Estimates Committee                                            9
then goes through the process. The MEAS then comes in to DIIRD. The people at tourism and major events, the
officers there, then look at that MEAS, look at the risk component of that and make a judgement about whether or
not that is adequate, and then it goes through into the cabinet process. The provider of the event is then required to
implement that risk management process in terms of developing a big event and, as the Secretary said, the depth
and breadth of that risk analysis is really dependent upon the nature of the event. So quite clearly for something like
the Grand Prix it is deep and broad and detailed, which is only reasonable. But if you are asking in terms of who the
gatekeeper is in the determination of this, that responsibility falls within our department.

           The CHAIR — I want to follow up on the foreword by the Auditor-General where in the third paragraph
he says:
  Importantly, there are also social and community benefits from participation both in the events themselves and in their related off-site
  events, such as street parades.

I assume this would not necessarily come into the billion dollars, but it is seen as an important benefit. Do you have
a view on the importance and the scope of such benefits?

          Mr HYWOOD — In terms of the benefits, that is exactly why the triple-bottom-line approach in terms of
evaluation is being dealt with. Our Treasury friends and colleagues were making the point that economic benefit
analysis only goes so far in terms of measuring the worth of an event. If new facilities are built as part of an event
coming to this city or to this state, quite clearly there are significant ongoing community benefits as a result of that,
and it is worth measuring on the basis that if the government was to spend money, it would cost that and it would
have to spend that money anyway. Quite clearly there is a range of benefits. We make that claim more generally for
tourism. With the towns that have a strong tourism industry, the tourists bring enormous community benefit in
terms of facilities and incomes and the generation of employment to those towns. The same goes, quite clearly, for
major events.

          Mr McCLEMENTS — Mr Chairman, if I could just add to that in terms of dealing with event owners,
that that is a very specific area that many event owners are interested in. It provides Victoria with the clear
advantage of being able to exploit that. If I could use by way of illustration some of the examples of that. We have
an arrangement with the gallery for the Melbourne Winter Masterpieces. One of the most successful part of that has
been the schools program that sits along with the Melbourne Winter Masterpieces to bring children in to expose
them to art from around the world, to let them see and be inspired by it and perhaps aspire to being a great artist.
That has been terrific. In terms of a stage show called Wicked, which is running at the moment, we work very
closely with the producers to build that into the schools curriculum to expose them to the English language and the
use of argument in that area. If I go to sport, our friends from Rugby Union or Rugby League see the opportunity to
use high-profile sport as a way of driving participation that is absolutely fundamental. That is where the TBL
evaluation that the department is driving becomes so important.

         The CHAIR — To what extent is your strategy for major events and tourism built around these other
ones? With the Commonwealth Games we had a whole lot of enormous arts festivals et cetera. Is this something
you try to build into — —

          Mr HYWOOD — These are broad community benefits, but I do not think there is any doubt that the
government sees both major events and tourism as part of an economic development strategy for the state. These
are real jobs with real economic benefit, as acknowledged by the Auditor-General and acknowledged by our
colleagues in the central agencies. The tourism department is attached to DIIRD, which is the state’s economic
development agency, and so is VMEC. So it is seen very much as a parcel of the broader economy and, as I
mentioned earlier — notwithstanding the current difficulties in the global marketplace — part of an ongoing boom
in travel in the world. And it is a boom that is only expected to continue as China, India — this region — move
from very basic economies to middle-class economies.

What we see is an enormous desire by people, once they get increased levels of disposable income, to travel. Major
events is part of a strategy to make sure that there is something to travel to. Therefore we make the case — and
particularly in recent years we have been trying to make the case across government and across the community —
that this is not about going to parties and balloons; this is about the development of an economic agenda for the
state which provides jobs and prosperity.



25 November 2008                              Public Accounts and Estimates Committee                                                        10
        Mr WELLS — I just want to clarify a point going back to my first question. Are you saying that the
Auditor-General did not audit the MEAS of the 2005 Grand Prix?

        Mr HYWOOD — That is my reading of this Auditor-General’s statement. That is my understanding of
what the Auditor-General was saying on about page 22, and it relates back to that. My point was — —

         Mr WELLS — I understand there was an issue of timing.

         Mr HYWOOD — It was not to do with the 2005 Grand Prix; my point was to do with his analysis of
those previous events.

         Mr WELLS — Probably, Chair, we need to go back to the Auditor-General to clarify that.

       The CHAIR — We can clarify that. I took it at the bottom of page 20. It is the three major events
examined in detail, which refer to the paragraphs above. But we can seek clarification — —

         Mr WELLS — To ensure that paragraphs 1 and 2 do not relate to the 2005 Grand Prix.

        The CHAIR — I do not know what you are saying. You and I have a slight difference in terms of the
scope of what it applies to.

          Mr WELLS — If I can move on: this morning we had the Auditor-General’s office discussing a number
of points with us. It is my recollection that they said that the Grand Prix licence was not made available to them. I
am wondering what process and who was the decision-maker in regards to not allowing the Auditor-General access
to the licence of the Grand Prix?

        Ms MUNT — Once again, Chair, I do not think that is exactly the way — I have to check the Hansard
record — that they framed it.

         The CHAIR — The Hansard record can — —

         Mr WELLS — My recollection — —

         Mr RICH-PHILLIPS — Commercial in confidence — they said that.

         Ms MUNT — I do not think they said ‘not allowed’ or ‘refused’ as per your question.

         Mr WELLS — The question I asked was ‘not made available to them’.

         Ms MUNT — Then you followed up by saying ‘not allowed’ and I do not think that is exactly what was
said.

         Mr WELLS — The question remains.

       Mr HYWOOD — My understanding is that that is a commercial-in-confidence arrangement between the
government and the provider of the event.

        Mr RONALDSON — I, too, would like to know what ‘not allowed’ or ‘not had access to’ means and
how it occurred. I do not know how it did.

        The CHAIR — Maybe you should take that one on notice, because it has been raised this morning. You
can read the Hansard record and the context in which it was raised and come back to us. That would be good.

         Mr PAKULA — This was put to DTF as well. Recommendation 7.2 was:
   That agencies, in consultation with the Department of Treasury and Finance and the Victorian Major Events Company, establish a
   panel of preferred contractors to undertake major economic assessments.

How do you see that panel of preferred contractors undertaking economic and cost benefit studies? Do you see that
the DTF strategic research panel is suitable for adaptation for that sort of role?



25 November 2008                             Public Accounts and Estimates Committee                                                11
        Mr HYWOOD — My understanding is that any decision around that will be in the context of decisions
around economic evaluation methodologies.

           Mr PAKULA — What you are saying is it will flow from whatever decisions are now currently before
cabinet.

           Mr HYWOOD — It would flow from whatever decision is made in relation to that.

        Mr DALLA-RIVA — I have a question for Mr Ronaldson in respect of the major events. What is the
current major events cap?

           Mr HYWOOD — It is a cabinet-in-confidence issue.

           Mr RONALDSON — That is a matter for the government, I think.

           The CHAIR — We might break here for a couple of minutes and we will come back for an in-camera
session.

Proceedings in camera follow.




25 November 2008                      Public Accounts and Estimates Committee                                 12

				
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