Australia taking precautions against hangover

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Sydney: A carnival atmosphere has swept Sydney in the past two weeks, but some investors are worried about the hangover at the end of it.

The closing ceremony for the Olympic Games on Sunday will mark the end of 17 days of partying, shopping and dining out by locals and a massive influx of tourists.

What then?

A mild downturn in spending is on the cards as life gets back to normal, but analysts believe there is little chance of a wider economic slowdown attributable to a post-Olympics malaise.

Part of this is due to careful planning. The state government spread the construction of the Games venues over several years, and plans a huge capital works programme for the next four years that will actually exceed spending in the past four by 17 percent.

More important for the pace of growth is the impact of high oil prices, the low dollar and a possible downturn in housing.

"We think strategies put in place both before and for after the Games will avoid a major downturn in activity," said Nomura Australia senior economist Louise Pollard.

She noted the construction of Olympics sites began as soon as the Games were given to Sydney in 1993, and most venues have been in use for at least 12 months.

That means that with no surge in spending in the year before the Games, the fall afterwards will be limited.

No slowdown in capital works

The New South Wales state government's capital spending plan includes rail links, new roads, schools and hospitals to fill the gap left by the completion of Olympics projects.

"The experience of other host cities suggests a post-games hangover can be avoided, plus the world and domestic economies are both in good shape," Pollard said.

As for consumer spending, the timing of domestic spending may have been more concentrated around the Olympics.

Millions of dollars of sports tickets have been put on credit cards over the past year, but the official statistics will record the total A$500 million in ticket sales in September.

Overseas tourists are expected to spend A$450 million on tickets and other items during September, and another A$50 million on airfares.

But at the same time, plenty of locals have taken advantage of cheap backfill fares to travel overseas and avoid the whole fuss.

And while many who stayed behind spent hundreds on Olympics tickets, others simply watched events on TV.

"People will pull back in some other areas of discretionary spending through to the end of the year, but I don't think we will have a significant downturn in spending," said SG Australia chief economist Glenn Maguire.

"As we lead up to the Christmas period, fundamentals are still supportive of strong consumption spending," he said.



(c) Reuters Limited.