The high-pitched squeal of F1 engines and lanyard-wearing, flag-waving fans have melted away in Melbourne to be replaced by what is becoming an annual debate in the Victorian capital – do we really want or need the Australian Grand Prix?

An impending sense of doom hung over this year’s race, to the extent that lone Australian F1 driver Daniel Ricciardo – later stripped of second place – was splashed across the Herald Sun newspaper pleading for it to remain in Melbourne.

The community group Save Albert Park, which wants the race moved from the leafy environs of South Melbourne, has gained traction, repeatedly questioning the amount of taxpayers’ money handed to the F1 curtain-raiser.

The contract for the Australian GP at Albert Park expires after next year’s race and, despite confident noises from the Victorian government, it is unclear whether it will continue in the long term. A short, two-year deal may be more likely.

So what does the F1 bring to Victoria, other than Ferrari fans, parking woes and the thrill of high-octane motorsport?

Figures for the weekend’s race are still being tabulated, but the level of state government subsidy is clear. The Grand Prix’s latest annual report shows a recurrent government contribution of $56.64m for the 2013 race, with a non-recurrent payment of $1.16m on top of that.

What Victoria gains from shovelling the best part of $58m of taxpayers’ money into the touring F1 circus goes to the heart of the debate over whether the race should continue at Albert Park.

The government’s view is clear – the race provides significant tangible and less visible benefits to Victoria and is worth the money. It claims the annual economic impact of the race is between $32m and $39m, with visitors flocking from across Australia, and from overseas, to sleep on Victorian linen and patronise Melbourne’s finest restaurants.

An Ernst and Young report from 2011 shows that 9,000 tourists came from overseas for the race, with 25,000 coming from other Australian states. Last year’s race was attended by an estimated 323,000 people across four days, the largest crowd since 2005. Hotel firms Accor and Crown reported bumper room bookings, while sponsors such as Rolex, Qantas and Swisse backed proceedings.

The race is screened in 187 countries, providing, the government argues, great exposure for Victoria, which attracts investment and return visits by tourists.

But it is not exactly an immediate money-spinner. Last year’s race had a net profit of $4.26m. Take out the government subsidy and the situation is much less rosy. Work by Economists at Large for Save Albert Park estimates that the 2012 Grand Prix resulted in a net economic loss to Victoria of between $48.8m and $66.7m, with a mid-range estimate of $60.55m.

The report includes not just financial losses but also non-market values such as noise and the loss of Albert Park as a public amenity.

According to Economists at Large, which was paid for its work in 2011 but then did a 2012 follow-up without charge, the losses are mounting. In 2007, the state suffered a net loss of $6.7m, according to the Victorian auditor-general’s office. These losses have multiplied by a factor of 10 since then.

“The wider benefits and costs of the Grand Prix are pretty small beer and cancel each other out,” report author Roderick Campbell told Guardian Australia. “The real cost is the taxpayer contribution to the race.

“The net benefit that accrues to a small number of tourism businesses is around $6m, which is nowhere near the subsidy the race gets.”

The idea that the race boosts Victorian tourism is “completely unsupported by the evidence”, Campbell says. “If you look at Sydney tourism numbers, they grew slower than the rest of Australia after the 2000 Olympics,” he says. “There’s no evidence these big events boost tourism in the long-term.

“The subsidy is completely unjustified. As an economist, a branding benefit has no meaning until someone spends dollars here. Even if you gave $50m to schools, hospitals or a community sporting organisation, you’d get a better return than this.”

A Victorian government source told Guardian Australia the public loved the race and that it would continue as long as it “doesn’t cost the state oodles of money”.

For Campbell, the justification of the cost is almost as irksome as the outlay itself.

“I don’t care if people like F1 or not, but let’s stop pretending it’s about the economy,” he says. “People have a go at me and say ‘well, we subsidise the opera’. Well yes, we probably do, but the difference is the opera doesn’t claim it is in the best economic interests of Australia.

“The sooner we admit we just really like fast cars, and we want to spend our money on them, the better. Clearly, no political party sees any votes in calling it off.”

In a statement, Louise Asher, Victoria’s minister for tourism, said this year’s four-day event attracted 314,000 people and “continued the success of previous years”.



“The event generates significant economic, social and cultural benefits including job creation, industry development, inward investment, tourism, infrastructure development and community involvement,” she said.

“Negotiations are continuing regarding the event’s future in Victoria but the current contract runs up to and includes the 2015 race so the government is of the view that there is ample time to complete negotiations.”