Taxpayers will come dead last at the Brisbane Games

Jessica Fox. Leon Marchand. Katie Ledecky.

All great Olympic champions. All deserving of enormous recognition for their achievements over the past fortnight in Paris.

Jessica Fox is a gold medal winner. But taxpayers are always the losers from putting on a Games or building a nuclear power plant.Credit: AP

But I’d give a gold, a silver and bronze to anyone who can find a way to deliver an Olympic Games on budget.

We haven’t even seen the closing ceremony in the City of Light yet, and already new research has revealed seriously dire budget realities for the upcoming host cities of Los Angeles and Brisbane.

In late July, days before we all became experts on synchronised diving and the pommel horse, Oxford University’s Said Business School released a paper that examined the true cost of hosting the Olympic Games.

With huge overruns dating all the way back to the 1970s, and cities increasingly becoming more reluctant to put their hands up to hold the Games because of the cost, Paris has become a test case by the International Olympic Committee on how to host without breaking the bank. Cue footage of cardboard furniture and portable fans pushing hot air around in the athletes’ village in lieu of bed frames and air-conditioning units.

Yet even with these savvy cost-cutting initiatives, Paris is still on track to cost far more than predicted. The Said research revealed an overspend of 146 per cent — $US8.7 billion ($13.4 billion) — to what taxpayers were promised.

It should be no surprise. The report’s researchers, Alexander Budzier and Bent Flyvberg, noted that every Games since 1960 had cost more than promised, to the point that in 57 per cent of cases, the end cost had at least doubled what was originally estimated. The 2000 Sydney Games, for example, ultimately cost $US5.2 billion, which translated to a budget blowout of 108 per cent.

More worrying for Australians, the researchers found that Los Angeles, set to host in 2028, is already over budget by 28 per cent, while Brisbane’s expected costs are now 44 per cent up on the original forecast despite still being eight years away.

There are myriad reasons why these costs blow out. Governments have a political incentive to under-estimate so they can win taxpayers over to the idea. Requirements for sports change. Organisers ignore inflation risks. And they have strict deadlines, which means paying whatever it takes to get everything ready on time.

Of 200 nuclear plants built across the world over recent decades, the average cost blowout has been 120 per cent.Credit: Getty Images/iStockphoto

According to Budzier and Flyvberg, Los Angeles and Brisbane have made some of these mistakes, with research noting both city’s budgets are “based on optimistic assumptions of (a) low future inflation and (b) no further scope changes”. Assumptions, they note, “history does not support”.

This research should also be a huge warning to the Coalition and its optimistic figures around nuclear power which, if ultimately rolled out, will not come within a bull’s roar of the costings Peter Dutton will deliver to voters.

Last year, Flyvberg and Dan Gardner published a book, How Big Things Get Done — a text that should be mandatory reading for every politician and engineer.

Based on a global database covering 16,000 major projects (including Olympic Games) from around the world and their cost to taxpayers, and stripped of the usual political spin used by every government and political party to sell their projects, it shows the single largest cost overruns for major projects are for nuclear storage projects. In third place is nuclear power itself. Taking out the silver medal for cost overruns is hosting the Olympic Games.

Of note to Dutton should be that the average cost blowout for nuclear storage is 238 per cent, with just under half of all projects suffering an overrun of at least 50 per cent.

Then, there’s nuclear power itself, where the average cost overrun is 120 per cent (the research covers almost 200 separate power plants). In terms of dollars, that means those who think – and will potentially promise voters – the nuclear dream will cost $10 billion will actually wind up billing taxpayers about $22 billion.

Also worthy of note is that in 55 per cent of all nuclear power cases, the overrun is at least 50 per cent. Of that subset, the average blowout is 204 per cent. Again, in terms of dollars, that would mean the $10 billion nuclear program would actually cost a little over $30 billion.

The project with the lowest risk and lowest overall cost of overrun?

Solar power.

Ultimately, the choice is to believe the reality of 16,000 projects from around the world, or politicians who have every reason not to be upfront about the true cost of their various promises.

There’s just one winner in that race, and unlike the Olympics, nuclear blowouts can’t be fixed with a cardboard bed.

Shane Wright is a senior economics reporter and regular columnist.

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