Inside Economics: Why big events like Taylor Swift concerts don’t really boost the economy

Thanks,

Ken Morison

Excellent point, Ken. The whole notion that relaxing regulations to allow more big events, or working harder to attract them, is economically spurious.

While events (or any domestic tourism) generate an economic boost for the region they’re held in, they inevitably displace spending from elsewhere.

So if we attract Taylor Swift to Eden Park (as the PM has suggested we should) there will be a significant spending increase in and around central Auckland for a few days either side of the concert.

He’s no Taylor Swift. Luke Combs at Eden Park. Photo / Corey Fleming

The Prime Minister and Tourism Minister announced plans to investigate changes to rules around Eden Park concert limits back in September.

“Last summer, Auckland’s economy received a boost of nearly $32 million from several big concerts. These events created jobs and had local hospitality businesses humming,” Tourism Minister Louise Upston said.

Of course, Upston didn’t mention the flow-on effect to towns outside Auckland.

Down in Hamilton (or any place where large numbers have travelled from to the Auckland concert), there will probably be a reduction in spending as fewer locals are in town.

There is also a displacement of spending across time.

So even Aucklanders who splash out on an expensive ticket and a few drinks before and after the show will likely balance up their spending by being more frugal in the weeks before and after.

We often see economic studies that calculate the economic boost from events with much more focus on the gross spending effect than the net effect.

In some cases, this is legitimate. For example, if Auckland Council is trying to bolster the city’s economy, it doesn’t have to worry about the downside in other parts of the country.

But it doesn’t make a lot of sense from a Tourism Minister.

Likewise, these events can be a great boost for specific industries – like the hospitality sector.

A study paid for by the hospitality industry will inevitably (and understandably) only be focused on potential gains for the sector.

But we should always look at these kinds of studies critically.

Multiplier effect

As you mention, most studies will use multiplier effects to amplify the figures and show a positive economic boost.

And you’re right. In reality, they ought to be offset against spending in other places, including multipliers.

For those wondering, a multiplier is a formula for trying to capture how an initial injection of spending flows through the economy.

So when someone spends $1 at an event, that dollar doesn’t just benefit the initial recipient – it gets re-spent multiple times as it circulates through the economy.

For example, some of it goes to the staff at the venue, and they spend more than they might otherwise have.

That spending boosts another business’s profit and so on …

How far you can take the multiplier effect is a contentious issue. If it is pushed too far, it becomes meaningless, and so too would the total spending figures produced.

Star of the show

There’s one person who will definitely make extra money from a big Taylor Swift concert – that’s Taylor Swift. So will her international concert promoters and Ticketmaster.

The hundreds of dollars that Kiwis spend on international concert tickets (and the annoying processing fees charged by ticketing companies) are imports.

So at a nationwide, macro-economic level, big events don’t create new wealth – they just shift it around.

I appreciate that you’ve just used events as one example and the same flaws can be applied to other economic plans that just shift economic activity from one place or time to another.

This comes up when we think about natural disasters like earthquakes.

The broken window fallacy

The way we measure growth means that sometimes after a disaster, such as an earthquake or flood, all the rebuilding activity can seem like a positive thing. We see a lift in GDP as building activity surges.

The 19th-century French economist, Frédéric Bastiat, first called out this fallacy with a parable about a baker whose son breaks a window, leading to an economic boost for the glazier.

It’s now known in economics as the broken window fallacy. Sometimes disasters happen at times when economies are already in the doldrums.

When that happens, the boost from increased spending can stimulate economic recovery.

More often than not, the myth that disasters create growth derives from the fact that we borrow to fund them or repair things afterwards.

Because the need suddenly seems urgent, we take on huge debts, as New Zealand did through the pandemic in 2020 and 2021.

But in doing so, we just displace the immediate costs of the bad event and spread them across time.

Sometimes after a disaster, insurance companies cover a lot of the immediate costs. But you can bet we eventually pay the price for that too, as premiums rise over time.

Meanwhile, what is far easier to see is that construction activity picks up and jobs are created.

GDP numbers for the economic quarter immediately after a disaster might show strong economic growth.

So, if you just looked at short-term data, you could be forgiven for thinking the disaster was good news.

The same logic can also apply to poor government spending, which is not disaster-related (but which can be an economic disaster).

Bastiat’s point, made in his essay “That Which We See and That Which We Do Not See”, was that we need to step back and look at the big picture.

We should try to look at the impact of policy on the whole economy over time.

Back to Taylor Swift …

I do want to be fair to the Prime Minister, and the Tourism Minister.

I think there is more to his Taylor Swift analogy; we just need to keep the numbers in perspective.

Having Taylor Swift come to New Zealand probably does mean fewer Kiwis going to Australia and spending thousands of dollars in Sydney.

It won’t be a hugely significant amount but it is spending that could have stayed in New Zealand.

It’s possible the event might even attract a few extra international tourists to Auckland.

Another argument for big events is that at various times in an economic cycle – I’d argue this is one of them – more spending can be a good thing for an economy.

There’s a lot of talk about how we get all that dairy export money to flow through the urban economy.

Maybe getting Waikato folk for Eden Park concerts isn’t such a bad thing right now.

The PM has talked a lot about New Zealand getting its mojo back.

From what I’ve seen, he’s not talking so much in hard economic numbers when he talks about attracting Taylor Swift.

He’s kind of talking about the vibe of it all.

Confidence plays a big part in economic performance.

It can be the difference between getting up and out and making things happen or sitting back, hunkering down and hoping for the best.

So if more events can lift the Auckland economy out of its current rut, I suspect that will be a good thing for New Zealand.

To spend or not to spend?

While we’re on the topic of spending boosts (or the lack of them), there has been a run of data on the subject in the past few days.

Stats NZ released its monthly electronic data for September yesterday and it didn’t make for encouraging reading.

Spending in the retail industries decreased by 0.5% ($34 million) in September 2025 compared with August.

The largest category decreases were in motor vehicles (excluding fuel), down 2.6% ($5.2m), and apparel, which was down 1.4% ($4.8m).

Durables (things like home appliances) also fell, with spending falling 0.8% or $14m.

The consumables category fell by 0.5% (down $15m).

The only category within the month to report spending growth was hospitality, which recorded a rise of 1.5% (up $22m).

ANZ card data last week showed a 0.4% monthly increase and 3.4% annual rise in spending.

That looks a bit better but also reflected a bump in spending for hospitality, with things like durables and apparel still down.

Kiwibank figures (although a smaller subset) showed total dollars spent lifted 5.6% over the September quarter compared to last year’s levels.

However, the volume of transactions declined 5.2%.

Unfortunately, a good chunk of the increased spending by value is just due to price rises.

“Trips to the grocery store were up 5% over the September quarter compared to last year. But trolley carts are 11.2% more expensive,” wrote Kiwibank senior economist Mary Jo Vergara.

“We’re paying more for less. The value per transaction is up 5.1% compared to last year.”

The same was true at the butchers, with 16% more dollars spent compared to last year, while volumes lifted by a lesser magnitude.

“It’s not just food that’s eating into household budgets,” she said.

“So too are higher council rates and rising energy bills. Altogether, the dollars spent on household utilities have increased an eye-watering 19.3% compared to last year.”

ASB senior economist Jane Turner noted that the durables category is often the best indicator of economic health.

“We look to durables spending as a proxy for domestic demand (as overseas visitors are unlikely to be buying household items while here),” she said.

“Durables spending often moves with the housing construction cycle and house sales, and the fall in spending over [the third quarter] mirrors the recent decline in housing turnover.

“This suggests the recovery in household spending that was under way over the past year may have started to run out of steam.”

Ugh …

Where is the money going?

The Reserve Bank had already cut the Official Cash Rate (OCR) seven times before last Wednesday’s 50 basis point cut.

The Reserve Bank estimates about 40% of mortgage holders might still have a major mortgage refixing before them.

But that suggests about 60% of mortgages are now on lower rates and should have some more disposable income.

As I noted in my Sunday column, data from Stats NZ released last week show they actually do.

Household net disposable income increased 1.9% to $62.8 billion in the June 2025 quarter, while household spending increased 0.8% to $62b.

So we are saving more.

New Zealand household saving increased from $149 million in the March 2025 quarter to $804m in the June 2025 quarter, as household net disposable income increased more than the increase in household spending, Stats NZ said.

That’s a good thing long term, but not so good for busting us out of this gloomy economic cycle.

Perhaps we need a Taylor Swift concert to lift the vibe.

Brain drains all around

Q: Hi Liam,

I was in Melbourne in June and read an interesting article in the Australian re the numbers leaving Australia.

Over 70,000 left Australia in the first quarter this year a record for the country.

If we add three more quarters, that is a higher rate than New Zealand per head of population.

All the news discusses Kiwis going there not what’s happening in Australia. Are the post-Covid young people getting restless everywhere?

Thanks,

Terry C.

A: Cheers Terry. That’s an interesting reminder that New Zealand’s problems are often not as unique as we think they are.

I think I found the headline you are referring to (although the version I found was in the Sydney Morning Herald).

“People are leaving Australia in the highest numbers since the pandemic, easing population growth and signalling the end of a two-year migrant boom overseen by the Albanese government despite its pledges to curb immigration,” the SMH wrote.

Figures from the Australian Bureau of Statistics show that 70,000 people left Australia in the December quarter of last year, the highest departure figures since March 2020.

It followed departure numbers of 65,000 in September 2024 and 63,000 in June 2024, which were already the highest since the end of 2020.

It should be noted that Australia’s net migration gain remains a lot stronger than ours at 335,000 for the year to June.

That’s still historically quite high but, according to the Australian Treasury, it is declining.

For the record, our net migration gain to the end of August this year was just 10,000.

Regardless, it seems there is still plenty of concern across the Tasman about their young, talented people heading offshore.

Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003. To sign up to his weekly newsletter, click on your user profile at nzherald.co.nz and select “My newsletters”. For a step-by-step guide, click here. If you have a burning question about the quirks or intricacies of economics send it to liam.dann@nzherald.co.nz or leave a message in the comments section.