Emergency Support for Racing
Emergency support for racing
“Out of the gate and going for the winning post”
Good afternoon.
Today we are making a Pre-Budget announcement on emergency support assistance for the New Zealand racing industry.
We knew from the beginning of the COVID-19 invasion that the racing industry was facing an unparalleled crisis in its history.
We immediately alerted the Minister of Finance, and our officials started working on a recovery plan.
Our response is driven by an attitude that with the right investment it can be a fast recovery.
Guiding government strategy are three steps – to respond, to recover, and rebuild – in the immediate term.
Today’s Pre-Budget announcement is the initial response – not only critical to racing but critical to our national interests.
The racing industry is seriously underestimated for its important contribution to our regions and our economy.
Past studies indicate it contributes $1.6 billion to the economy each year.
There are 15,000 full time racing industry jobs and nearly 60,000 indirect jobs participating in some form – from vets, to equipment suppliers, and owners.
There are 15,000 owners, 800 trainers, and 200 jockeys.
Not only is New Zealand bloodstock world class – it’s a significant export earner.
And all facing an unprecedented threat.
It is well documented the racing industry has experienced several years of financial under-performance.
It was partway through a reform programme.
Then COVID-19 arrived.
As one expert put it, this has created the perfect storm.
We can’t gild the lily.
It is taking the industry to the brink of insolvency.
It is a matter of urgency for the Government to provide support.
We have to protect what we have – and we have to rebuild for the future.
A 50 million dollar grant
For this reason the Government has approved an immediate $50 million dollar grant to be provided for the Racing Industry Transition Agency – RITA.
A good proportion of this money - $26 million dollars - will be used so that RITA can honour its outstanding supplier payments.
RITA, and the operation of the TAB, is cash reliant.
There has been a dramatic plunge in revenue while costs have remained fixed, and the bills have been backing up.
RITA’s lenders also advised they could no longer extend credit.
It means RITA has faced the risk of defaulting on it’s supplier commitments by this Friday.
It would have been devastating for many in the regions.
So $26 million of this initial grant will be directed to supplier commitments.
The rest allows RITA and each of the racing codes to maintain a baseline functionality and to resume racing activities.
As mentioned, this is the government’s initial response.
Treasury engaged PricewaterhouseCoopers to provide a financial assessment of RITA.
The PWC’s analysis underlined that RITA has a very weak equity position.
And that an immediate grant was the most effective means to prevent default.
PWC also advised close consideration should be given to recapitalising RITA.
This work will proceed over the next three months.
Our plan wants the industry to achieve value-add to the economy.
And we are calling upon the industry to deliver serious reform.
That is necessary for the government to be confident that any future investment is well directed.
Infrastructure spending – fast track with synthetic race tracks
The government is also creating momentum for two more synthetic race tracks.
Compelling arguments exist behind synthetic race tracks because they reduce the number of cancelled events due to weather or poor surfaces.
For example in the 2018 year there were 32 races abandoned which cost the industry millions of dollars.
In other words synthetic tracks offer consistency and reliability.
Synthetic tracks sustain a higher workload for both training and racing.
There are much fewer abandoned races days.
That translates to retaining income, and not losing it.
And they are safer for the horse.
The Messara review into our racing industry urged greater use of synthetic tracks.
Construction of a track in Cambridge is under way assisted with $6.5 million PFG funding.
But in the wake of COVID-19 the Government has approved up to $20 million dollars on a further two tracks.
The intention is to have one located at Awapuni in the Manawatu, and the other at Riccarton Park in Christchurch.
We not only want to save the industry we want it to have viable assets for the future.
The next step is for RITA and the Codes to consult with the local race clubs on the terms behind these projects, and the Clubs willingness to engage.
Fast track work on gambling revenue
The COVID-19 has also caused a funding slump for community and sports groups who normally receive a share of gambling revenue.
And more New Zealanders are turning to online gambling through offshore platforms.
Both trends are concerning.
For that reason government is fast tracking a programme of work to identify how we can mitigate these concerns.
It is our intention to regulate the off-shore online gambling sector, and reset the on-shore online gambling sector.
If there is going to be gambling by New Zealanders then it is our country that will benefit, not another.
And in doing so, we will be better able to address harm minimisation, and make sure our community benefits.
The industry leadership and the future
We are in this together.
The government is responding.
The industry also has to respond as well.
The management teams at RITA and the Codes have tightened their belts.
They also are managing difficult decisions on staffing levels.
Nothing is the same.
Now is the time to try different approaches.
And the industry is adapting.
Sadly, there has been some internal squabbling in racing circles.
Some blame the transition agency for the problems it inherited.
Look to be honest, we have had enough of mostly old men leaning against the rails scratching their derriere, and blaming everyone else.
Fortunately common sense is prevailing.
Most in the industry accept collaboration is the key to recovery.
That is good because, generally speaking, if you are in financial difficulty it’s a bad time to be rude to the bank manager.
So finally, let us thank the RITA Board and its management team for its responsive leadership.
Thank the racing codes management teams for focusing and moving quickly to achieve a resumption of racing.
And a note of appreciation for the departmental officials for their tireless work to date.
All of us know the hard work has only just begin,
In the long term, if we get all the steps correct, there is no reason why racing in this country cannot be a world class industry, stronger than ever.
We are out of the gate but we have distance to cover before we get to the home strait and the winning post.
That said, we are going to make racing great again.
Ends