Crisis in the New Zealand Racing industry

Business News

Winston Peters, Deputy Prime Minister and Minister of Racing, recently presented the Messara Report, to the New Zealand Racing Industry(NZRB).

The report made 17 recommendations. Many of these recommendations are not new. But the failure to implement them has been a failure of previous governments to pass the appropriate legislation and make the appropriate changes within the TAB structure, according to Crowe Horwath’s Head of Corporate Agribusiness Hayden Dillon.

Since the release of the report, most of the industry seems very enthusiastic to have the recommendations implemented. But those clubs that find themselves on the list for closure, will need to consider the terminal issue that the industry faces if changes are not made. So the next step that everyone is waiting for is for the government to act upon this report.

“Most of the New Zealand public including most politicians have little idea how the NZ racing industry is structured, let alone its value to our economy and our people. Mainstream media have been focused on the ‘government subsidising a rich man’s sport’, when the reality could not be further from the truth,” reports Dillon

The racing industry contributes $1.633 billion to the NZ economy. 67% through the Thoroughbred code. With 10,000 full time roles. “This make the racing industry one of New Zealand’s most important employers and one of our largest industries. Up there with our wine and seafood industries. Deserving of the government attention simply on the economic impacts alone,” Dillon explains.

Since the 1950’s the government have owned the industry through its legislated monopoly of all the wagering. Under the current act, NZRB has the obligation to maximise profit, regulate, and improve the racing industry. None of the other major industries in New Zealand have such direct control and management of their industry by a government controlled monopoly, meaning free market has not been able to prevail.

Brian de Lore stated “10 years ago, we had assets of $106 million which included $70 million in cash – that has been spent and the NZRB in a recent statement of financial position was projected to be $24 million in August this year.”

De Lore also points out the forecasted debt figure of $24 million after the 2018/2019 season. This debt, assuming they achieve $14 million profit, needs to be serviced by an industry with a net income of $100 million. “This poor performance needs to sit fairly and squarely with the owners being the government through its monopoly the NZRB. It’s only right that the government now steps up to make the necessary decisions,” comments Dillon

The recommendations focus on legislative changes that return the industries own money back to its codes. They look to enshrine the value in the industry, with clarity on who the club beneficiates are, and financially open up wagering, the key driver of revenue and hence stakes, to the international market which has significantly more expertise.

One of the key recommendations was the proposal for the amalgamation of club assets to invest in a better-quality product, including 3 wet weather tracks.

These updates and changes are paid for through rationalising of the industry code assets. Such as the sale of Avondale club. To ensure these funds are indeed applied to the industry that has built the asset, the government is being asked to ensure the Racing Act of 2003 is updated to make that clear.

“For New Zealand to retain our position as one of the world’s best racing and breeding nations, the government’s absolute support for the Messara recommendations is critical, towards rebuilding the industry,” states Dillon.

“The TAB is government owned and has a legislated monopoly, therefore the government has an obligation to provide the necessary changes to the Racing Act to support the industry, for which it has extracted so much from over the last 70 odd years.” Dillon concludes. This is an industry that has a significant economic impact and based on Australia’s experience, one that has a lot more to give.