Australia’s Commonwealth Games saga highlights more ills of embattled Big Four firms
- Australia backing out of hosting the Commonwealth Games allows it to redirect finances to its people but spotlights the ills of major consulting firms
- The Big Four in Australia are facing scrutiny for alleged corruption, conflicts of interests, and scheming off billions of dollars in government contracts
Not hosting the games means the state government will skip the now much-larger A$6-7 billion (US$4-4.8 billion) bill but put some A$3 billion saved from that bill towards housing and facilities. Initial costings were A$2.6 billion.
That’s not much, but it counts when Victoria’s debt – as well as all of Australia’s private and public debt – is soaring.
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Curiously, in press conferences with Victorian Premier Daniel Andrews and his team, few questions were asked about the impact of inflation on the decision, and in particular, rising construction costs. Most of the queries were about their numerical and political bungles.
A blown-out construction budget involving housing, buildings and stadiums is commonplace these days.
Everywhere in Australia, builders have lamented unrelenting surges in costs of raw materials, thanks to inflation and supply-chain disruptions. There have been cases of builders folding because they cannot honour fixed contracts as costs rise.
Housing builders say they are better off just sitting idle on a construction site, while private lenders say developers are begging for finance as they run out of cash.
It’s not hard to spot the problem when the supply of housing has slowed.
You just need to look at the A$20 (US$13.60) average takeaway to know the cost of everything is rising, although inflation – now at 7 per cent – is starting to fall.
The matter has become a political football. The Victorian government has been accused of turning Australia into an international laughingstock, and some commentators and political foes have called for Andrews’ resignation.
Wouldn’t courageously calling time on a project that would hurt inflation-fatigued taxpayers be the right thing to do?
Those supporting Andrews have also said on social media don’t see a problem shelving what was nothing more than “outdated colonial grandstanding”. A total of 54 countries and 18 territories previously colonised by the British Empire can compete.
Athletes who have trained hard for the event, of course, might disagree.
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In the background is the fact that one of the “external consultants” that had estimated the initial costs of the 2026 games was Big Four accounting firm EY that – along with its peers, KPMG, Deloitte and PwC – has been under fire in Australia.
PwC, at the heart of the scandal, has been accused of financial treason by leaking confidential Australian tax briefings to benefit its clients and plump up its top line.
A parliamentary inquiry triggered by the PwC scandal is now scrutinising all “consulting” firms, including global management consulting giants McKinsey and Boston Consulting Group.
Earlier this week, the inquiry saw Big Four CEOs defend pay cheques of up to A$3.5 million a year, as senators grilled them over the lack of salary transparency in their firms despite a significant portion of their revenues coming from taxpayers.
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Former KPMG partner-turned-whistle-blower Brendan Lyon outlined how his fellow partners held secret meetings to conceal his findings that the New South Wales state transport department’s accounts were misstated by billions of dollars. KPMG denied many of these claims.
The Commonwealth Games snafu has shone more light on the Big Four scandal. The upshot is potentially more savings for Australians as governments wind back further their cosy relationships with consulting firms.
We are now talking more than the A$4 billion saved from Victoria’s cancelling its hosting duties.
It’s a win-win and win.
Su-Lin Tan is a correspondent at the Post’s Asia desk.