IER was commissioned by Racing Australia to undertake a study into the size and scope of the thoroughbred racing industry in Australia.
PURPOSE OF THE STUDY
This study aims to quantify the economic, employment and social contribution that the thoroughbred racing industry generates nationally as well as within each of the states and territories. Additionally, the report seeks to measure the specific outcomes within metropolitan and regional parts of the economy. The key focus of the study was to investigate the following outcomes attributable to the thoroughbred racing industry:
+ The full-time equivalent employment generated by racing industry activities nationally and within each state and territory
+ The number of participants (i.e. trainers, breeders etc.) in the industry
+ The total direct expenditure contribution that the industry makes, in its current form, to the national and state and territory economies
+ The value added contribution that the industry generates nationally and within each state and territory
+ The social and community importance of thoroughbred racing – particularly in regional areas
In assessing the size and scope of the racing industry, the study takes into account a number of the traditional measures adopted by the racing industry (such as breeding and training activities, attendance and wagering) as well as calculating a number of economic measures. For the purpose of this study, the racing industry is defined as covering the full spectrum of activities associated with the conduct of thoroughbred racing throughout Australia. This includes racing activity at both TAB and Non-TAB racing clubs and the operations of wagering service providers insofar as they are funded by thoroughbred racing activity.
The data that underpins this study has been gathered from a number of sources. These are outlined below:
+ The Australian Stud Book provided breeding related data
+ Racing Australia provided participant registration data, animal related and racing related data
+ The Australian Racing Fact Book provided various data points relating to racing and wagering aspects of the industry Additionally, some insights and data were sourced from previous studies, undertaken by IER, in each jurisdiction over the last 5 years.
The breeding and training sectors are critically important parts of the racing industry. A key aspect of the development of the industry expenditure model, is the accurate valuation of the expenditure incurred in breeding and training racehorses.
In developing the economic model relating to the breeding and training sectors, IER has utilised source data from more than 150 in-depth interviews conducted over the last 5 years with thoroughbred owners and breeders. These interviews were aimed at understanding the detailed cost structure of training and breeding at the various life-cycle stages of the animal. These averages have been combined with the most recent breeding and training statistics to inform this component of the analysis. It is also important to note that this report, for the first time, also includes the operating expenditure incurred by non TAB wagering service providers where it is funded by thoroughbred racing wagering activity. Throughout the report, data has been presented at a national, state and regional (metro vs non-metro) level. It is important to note that whilst this report builds on previous studies of a similar nature, in some instances direct comparisons should be made with caution for the following reasons:
1 Over the last 10 years, there has been significant improvements in record keeping across various parts of the industry, which has meant less reliance on considered estimates
2 Changes in macroeconomic conditions both broadly and specifically within the racing industry
3 There have been some large-scale and material shifts in the industry structure in Australia, particularly with the changing landscape around wagering and service providers
The development of an economic model of the thoroughbred racing industry requires a strong understanding of the internal and external flows of money. Through the model, duplicate expenditures have been identified within this monetary framework and excluded from the total expenditure calculations. In this regard, the key is to identify the final expenditures - ensuring not to count the same expenditures as they flow between internal racing industry transactions. An example of this relates to the training of racehorses. Owners pay a training fee to trainers to prepare their racehorses (owners also incur expenses outside the training fees of their own). Trainers, in turn spend money into the economy on goods and services related to their training activity. If both of these expenditures were counted within the model, this would constitute an overstating of impacts due to the fact that same money has been counted twice. This study measures the economic contribution made by the thoroughbred racing industry nationally and in each state and territory. The final expenditure profile of the thoroughbred racing industry is based on the following key inputs:
+ breeding activity– the expenditure made by breeders in the process of producing foals and caring for broodmares and stallions
+ training activity – the expenditure made by owners in the preparation of their racehorses for racing. This includes spending on training services as well as other non-training related expenses such as major veterinary, transport etc.
+ racing & wagering activity – the expenditure made by racing’s customers in the following areas:
+ Raceday products and services
+ Non-raceday functions
+ Other racing club operated activities (i.e. gaming)
+ Off-track spending related to attendance at the races (i.e. fashion)
+ Sponsorship and membership products
+ Broadcast fees
Whilst racing and wagering are separate components of the industry, they are inextricably linked within the industry financial model and are therefore assessed together (ensuring that monies are not counted more than once within the inter-industry transactions).
The economic model used within this study follows three key steps:
1 Gathering Industry Expenditure This has been explained in more detail previously; however, this is the most important step as a failure to accurately generate the expenditure profile of the industry only leads to a multiplication of this error throughout the latter parts of the economic methodology.
2 Categorisation of industry expenditure into ANZSIC classifications The ‘racing industry’ does not exist within the Australian and New Zealand Standard Industry Classification (ANZSIC) structure. For modelling purposes, it is necessary to allocate direct expenditures to the appropriate industry sectors. The majority of expenditures are classified within their relevant ANZSIC codes.
A number of horse racing activities are contained within ANZSIC classification R – Arts and Recreation Services, specifically within the following sectors:
a. R9114 - Sport and Physical Recreation Administration,
b. R9121 - Horse and Dog Racing Activities,
c. R9129 - Training and Racing Activities,
d. R9209 - Other Gambling (Racing).
3 Economic modelling IER has utilised an input-output methodology for the calculation of economic impacts associated with the racing industry in Australia. The input-output model provides direct and indirect impacts in relation to value added, income and employment. Please note some totals may not add due to rounding.