2019

Estimate of the economic impact of the Mary Valley Rattler on the local economy of the Gympie Region

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Table of Contents Introduction ............................................................................................................................................ 2

Inputs into the economy.id model ...................................................................................................... 3

Model limitations and use of outputs ................................................................................................. 3

Construction Phase ............................................................................................................................. 3

Operational Phase ............................................................................................................................... 4

CAPEX of $0.3m each year .................................................................................................................. 5

Additional Expenditure by Visitors to the MVR .................................................................................. 5

Overall Impact ......................................................................................................................................... 6

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Introduction The Mary Valley Rattler (MVR) has budgeted ticket sales of 34,800 for 2019/20, with this capturing approximately 0.31% of the visitors to the Sunshine Coast, which is comparable to the participation rate Australia-wide (0.38%). This analysis estimates the economic impact of the Mary Valley Rattler using the economy.id modelling of economic impact. The impacts cover both the construction and operational phases (per annum) of the Rattler.

Figure 1: Participation on Tourist Trains and Visitation to the Valley Rattler

Construction benefits are modelled on economy.id’s modelling of the proportion of construction costs which are likely to be captured by the local area and residents of the Gympie Region. The impacts include:

• Output effects ($m) • Value-Add (additional production over and above the intermediate goods and services

used). • Jobs/FTE (jobs could be full-time or part-time, with FTE estimates therefore generally

lower)1

Three levels of impact are estimated:

1. Direct impacts – the direct increase in output due to the initial capital expenditure 2. Supply-chain impacts – demand for intermediate goods (‘industrial impact’) 3. Consumption impacts – additional expenditure due to the increase in wages and salaries

associated the direct and supply-chain output impacts (‘consumption impact’).

The impacts are provided for 3 different areas to capture the potential full impact:2

Gympie Regional Council economy Queensland and

1 Construction phase jobs are typically full-time, therefore only one impact table is required. 2 Note that broader geographical areas experience less leakage.

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Australia.

Inputs into the economy.id model The inputs used in the economy.id modelling are sourced from internal MVR data on construction costs and operating revenues as well as the associated number of FTE jobs. In addition, survey responses from approximately one quarter of the 4,170 past customers surveyed provided a range of data which was used to estimate the amount and type of expenditure within the Gympie Region in addition to spend at the MVR.

The key data inputs used to estimate the economic impact of the MVR on the local economy are as follows:

Capital costs of $17.5m across 1 year (2018/19)3 23 FTE jobs associated with operating revenues of $2.3m budgeted for 2019/204 On-going capital costs of $0.3m each year, reduced by 50% to avoid double-counting5 Additional spend of $2.9m within the Gympie region over and above expenditure at the

MVR itself.

Model limitations and use of outputs Economy.id economic impact modelling is based on input-output analysis for the relevant areas and is therefore subject to several qualifications based on the restrictive assumptions which underpin it. Notwithstanding such qualifications, the modelling is widely used by the public sector nationally and has been for an extended period, suggesting that it is a reasonably reliable tool for assessing impact. Depending on one’s confidence with this approach, it is possible to focus on certain impacts when making decisions about an investment or evaluating the effectiveness of a previous investment. For example, the low end of the range would be the direct impacts and the high end of the range would be the total impacts including supply-chain and consumption effects with the least leakage. The economy.id impact summary tables below provide each of the impacts separately, which together would combine to provide an estimate of the overall impact. All values in the economy.id tables are expressed in $2017/18, while the discussion of these outputs uses these values escalated $2019/20 for consistency with the model inputs.6

Construction Phase The total value of non-residential building construction in the Gympie region is $110m (2.3% of total regional output), with a value-added component of this equal to $38.3m (1.8% of total value-add). The $17.5m of construction costs resulted in $11.86m of value-add within the Gympie region, accounting for approximately 68% of the total value-add. This activity created 92 local jobs for the regional economy, accounting for two thirds of the total 139 jobs (FTE) created, of which 71 (50%)

3 Note that it is assumed the expenditure occurs over one year, whereas in fact it occurred over two

years, with roughly 70% in 2017/18 and 30% in 2018/19. 4 Note that the operational revenues for the period 6 October 2018 to 30 June 2019 amounted to

approximately $1.592m. This figure was extrapolated to a full-year figure ($1.725m) and then escalated to provide a budgeted figure for 2019/20 of $2.3m.

5 These are reduced by 50% to exclude the labour component ($150,000) to avoid double-counting the impact associated with the 23 jobs (FTE) related to operations.

6 CPI is provided for capital cities. Brisbane CPI is used for the purposes of this analysis.

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were filled by Gympie Regional Council residents. Note that these jobs are short-term in nature, as construction expenditure occurs for a short period.

Table 1 – Impact of construction expenditure ($2017/18)

Operational Phase The total value Heritage Activities in the Gympie region is $18.17m (0.38% of total regional output), with a value-added component of this equal to $11.31m (0.54% of total value-add). To total number of jobs associated with the budgeted operational revenue of $2.3m for the MVR for 2018/19 was 23 (FTE). The activity results in $2.77m of value-add within the Gympie region, accounting for approximately 79% of the total value-add of $3.51m. Within the Gympie Region, this activity creates 34 jobs (FTE, rounded), which accounts for 85% of the total increase of 40 (FTE) Australia-wide.

Table 2 – Impact of number of jobs (FTE) associated with operational revenue ($2017/18)

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CAPEX of $0.3m each year Approximately $0.3m of capital expenditure is spent on an on-going basis. This includes:

• Materials GRC Region - Sleepers local milling $85,000 - Ballast local quarry $15,000 - Contract plant hire (local) $30,000

• Labour Local employees $150,000 • Materials (specialist) Brisbane $20,000

The impact of this expenditure (on-going until 2028) is reduced by 50% based on half of this expenditure relating to labour costs. These are excluded to avoid double-counting some of the estimated impact based on 23 jobs (FTE) associated with the MVR’s operations. Therefore, the summary table halves the impacts shown in the following table.

Table 3 – Impact of expenditure associated with annual CAPEX spend ($2017/18)

Additional Expenditure by Visitors to the MVR A survey was sent to all customers of the MVR with the intent of finding out how much and where they spent within the Gympie Region. Respondents could choose which questions they provided a response to. The key facts to emerge from this survey were that for 75% of the respondents, their main purpose for visiting the Gympie Region was to visit the MVR. Table 4 lists the percentage of tickets by the size of the party to estimate the total number of parties and their additional expenditure within the region.

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Table 4 – Party-size of visitors to MVR

From the survey data, for the party sizes 1 to 5 people inclusive, the average expenditure outside of the MVR was $245. However, because those travelling in the larger groups declined to add a dollar amount for the total expenditure by the party, it is assumed that they also spend this amount per party.7 According to the survey responses, this is spent across the following four categories as follows:

Table 5 – Expenditure within the Gympie Region outside of the MVR ($2019/20)

This additional $2.9m of visitor expenditure within the Gympie region included an estimated value-add of $2.21m within the Gympie Region and $0.88m outside of the region. This translates to an additional 39 jobs within the Gympie region, as well as an additional 8 jobs outside of the region.

Overall Impact Figure 2 captures the impact of each type of expenditure within and outside of the Gympie Region. Modelling outputs have been escalated to $2019/2020 for consistency with the model inputs. Including all activity since the initial investment, the $17.59m investment has led to a value-add of

7 The expenditure by party size is relatively similar for most size groups, supporting the use of this

average expenditure across all parties.

Number of ticketsa

2019-20Party Size Proportion

Estimated Number

Number of parties

Average spend per party

Total Expenditure including

accommodation1 2.7% 940 940 $230,202.002 34.9% 12,128 6064 $1,485,655.503 16.2% 5,631 1877 $459,835.604 20.8% 7,221 1805 $442,286.255 8.4% 2,923 585 $143,236.80

other (average 12) 17.1% 5,958 496 $121,637.60100.0% 34,800 11767 2,882,854

a Based on the amount of operational revenue budgetted for ticket sales. Sourced from internal data of MVR.

34,800 $245

Survey Data around Party-size and Additional Expenditure by Party

Expenditure Type Percentage Amount

Accommodation in the Gympie area, hotels, motels, cabins, B&B, rentals, campground fees 28% $792,927

Food and beverages in the Gympie area, restaurants and bars (excluding Platform No. 1 Cafe), groceries 32% $918,487

Transport fuel, gas and oil, other auto expenses (parking, repairs, tolls, etc), rail (excluding ticket cost of Mary Valley Rattler), bus, taxi, car

rental...24% $700,221

Other expenses and spending in the Gympie area, recreation and entertainment fees (excluding the Mary Valley Rattler), sporting goods,

clothing, other goods (film, books,...), other services (haircuts, etc.)16% $471,219

TOTAL 100% $2,882,854

Types of expenditure by visitors to the MVR

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$16.94m within the region, and $24.11m in total. The construction expenditure has created an estimated value-add of $17.36m, supporting approximately 92 regional jobs, as well as 47 jobs outside of the region during this phase (i.e. one-off impacts).

The additional value-add associated with the operational revenues (including the on-going CAPEX) is $3.66m. This supports approximately 35 on-going jobs within the region, while an additional 6 jobs are supported outside of the region. Finally, the value-add created by the additional expenditure of visitors to the MVR (over and above their expenditure while at the MVR) is estimated at $2.21m within the region and $880,000 outside the region, supporting a total of 47 jobs. The cumulative estimated impacts on value-add and jobs suggests that the initial investments by Council ($10.59m) and the State Government ($7m) have had, and will continue to have, a desirable and worthwhile economic impact on Gympie’s regional economy.

Figure 2 – Overall Economic Impact - (model outputs escalated to $2019/20)

Comparisons with the previous estimates of likely economic impacts in 2020 undertaken in 2014 are made difficult due to the different methodology used. The earlier estimates were based on the relationships between direct and indirect expenditures using the TRA’s Tourism Satellite Accounts for Queensland. In contrast, the above estimates are based on the regional relationships between inputs and outputs for the Gympie Region based on economy.id’s impact assessment modelling. The former results in much larger estimates of the level of indirect expenditures (flow-on effects) and as such, appears to have over-estimated both the level of indirect expenditure within the region and the number of indirect jobs. Secondly, the 2014 study did not incorporate the impacts associated with the $17.5m of construction expenditure undertaken during 2017/18 and 2018/19 which have been included in this report.

Notwithstanding these important differences, an analysis of the impacts estimated for 2011 and the estimates in this report suggests that direct expenditures and direct jobs have grown at an average annual rate (CAGR) of 4.6%pa and 4.7%pa respectively. This is relatively strong growth, especially considered against the CAGR for the number of visitors and visitor nights associated with the activity of visiting tourist train attractions for Queensland and Australia. For the five years to 2018, the visitor numbers fell by 3.6%pa for Queensland, while they rose by 2.9%pa for Australia. In terms of visitor nights, Queensland and Australia both experienced declines of 0.3%pa and 3.1%pa

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respectively. Combined with the estimates presented above, this would suggest that the MVR has had a positive contribution on attracting visitors to the region, and in turn, has had a positive impact on the economy.