On a Sunday morning in January, traffic in central Sydney ground to a halt. Filming for Universal’s latest blockbuster, The Fall Guy, closed the Harbour Bridge and its surrounding city roads for seven hours.
While never disclosed, the studio paid a rumoured A$1m to the New South Wales government for that day’s shoot. But that is a fraction of what Universal was paid by Australian governments to bring the Ryan Gosling movie to Australia: $30m in cash through the federal location incentive scheme, and a reputed $14.4m thrown in by the NSW government, to ensure The Fall Guy would shoot in Sydney, not Brisbane or Melbourne.
That’s $44.4m in cash grants, before accounting for the 16.5% tax rebate The Fall Guy is entitled to claim for its total budget spend in Australia under the location offset scheme. With a conservatively estimated budget of $150m, the Hollywood action film could consume an estimated $60m of Australian revenue in 2023.
But that is just a drop in the ocean. Over the past 15 years, successive federal governments have ploughed almost $4bn into the international screen industry in the form of tax rebates and cash subsidies designed to lure big-budget movies to shoot in Australia.
And after sustained lobbying by California, that 16.5% location offset rebate was almost doubled to 30% in the federal budget earlier this month.
It’s what Hollywood calls “soft money”. More than 40 jurisdictions around the world have some version of it and Australia is among the most generous. In 2021-22 a milestone was reached: foreign productions filmed in Australia outstripped local productions in expenditure for the first time.
Successive Australian governments have touted the benefits: more spending in local communities where film crews set up; a boost to tourism; and, most importantly, jobs. “These stories are going to be told, these movies are going to be made,” arts minister Tony Burke has said. “The jobs either live here or the jobs live overseas.”
But as a job creation scheme, it’s an expensive one. Conservative budget projections say the rebate increase will cost Australia an additional $112.3m in lost tax revenue over the next four years (if the current level of foreign productions is maintained or increased, that figure will be significantly higher).
Some industry insiders are questioning the policy’s broader benefits. Local film-makers who want to tell Australian stories now face more competition for resources, funding and studio space; the job figures being touted by governments and productions are mostly short-term positions; and the incentives themselves are shrouded in secrecy, facilitated by Australia’s stringent tax privacy laws.
As the chief executive of Screen Producers Australia, Matthew Deaner, puts it: “Just what are the cultural benefits to the nation?”
‘They’re making it harder for the local industry’
The doubling of the tax rebate coincides with the premature termination of the location incentive scheme, which is expected to exhaust its $540m budget later this year, four years earlier than expected.
Since 2019, that $540m – which comes in the form of cash grants distributed at the minister’s discretion – has funded 36 film and TV productions. Of the films, just one is classified as Australian: an American action film set in the Philippines called Land of the Band, starring Russell Crowe and Liam Hemsworth.
The vast bulk of that money went to international movies, such as the Marvel franchise’s Thor: Love and Thunder, which collected $24.1m in federal and NSW grants (Chris Hemsworth’s fee was reportedly $20m for the movie); the latest in Disney’s Planet of the Apes franchise; the Warner Bros monster film Godzilla vs Kong and its sequel; and three Universal productions: The Fall Guy, Ticket to Paradise and Woody Woodpecker 2.
Over the same four-year period, the former federal government gave $400m to the local screen industry funding body, Screen Australia – significantly less than the $540m spent on the location incentive scheme mostly benefiting foreign productions. In comparison, over the next four years, Australia’s entire cultural policy will receive $300m in federal funding.
Much like the concluding location incentive scheme, the tax rebate overwhelmingly favours films from overseas. It is specifically tailored to attract “footloose” productions: films and shows that could be shot anywhere in the world.
Technically the offset can be accessed by Australian film-makers, but there is a catch: to qualify, a feature film must have a budget of at least $15m, which effectively locks out most of the local market. For example, one of the most acclaimed Australian-made films of 2022 was The Drover’s Wife, Leah Purcell’s postcolonial adaptation of whitewashed Australian folklore. But it spent just $7.2m, so didn’t qualify for the offset. Two Baz Luhrmann films, on the other hand, did: The Great Gatsby and Elvis, both homages to 20th century American culture.
Since its inception in 2008, the location offset has reimbursed international studios about $1.066bn in taxes.
A federal Office for the Arts spokesperson told the Guardian the rebate hike from 16.5% to 30% would allow Australia “to remain competitive with other jurisdictions internationally, which means more work and opportunities for local cast, crew and businesses”.
Others in the industry appear less upbeat, warning that paying Hollywood to play down under is having both short and long-term impacts on local screen production.
“While there are good elements to this – including consistent employment – these movies and television productions don’t tell Australian stories,” Deaner says, adding that Australian content quotas for streaming services need to be a vital part of any policy mix.
“Local production companies will now have more hoops to jump through than international productions to access the same level of Australian government money – that needs to be fixed.”
The Australian TV producer Nick Murray (Gruen, House of Hancock) is also sceptical. “I can’t think of any other industry where the Australian government is funding big foreign multinational companies to come here and make it harder for the local industry to work,” he says. “It’s not a sustainable industry if governments have to keep chucking buckets of cash at the foreign players.”
In 2022 the Disney corporation posted profits of US$28.74bn. Paramount posted $10.3bn, Warner Bros $13.4bn and Universal $4.2bn.
“Hollywood studios aren’t exactly on the bare bones of their arse,” Murray said. “Australia is prostituting itself. They’re only here because of the money and because we’re cheap.”
‘Is this the best use of scarce cultural funding?’
While the budget of The Fall Guy was undisclosed, it could be conservatively estimated to have cost $150m to make. Based on that figure, the film could receive an estimated $60m in Australian tax rebates and cash subsidies.
“There’s no logic to this,” says Jo Caust, a cultural policy academic at the University of Melbourne.
“We’re effectively giving away to one film half of what we give to Australian producers in a year.” Screen Australia received $111.4m in funding last financial year.
Caust says the Australian government is showing “support and generosity to foreign film-makers and commercial television interests, but it seems less inclined to demonstrate similar largesse to its own creators”.
Ben Eltham, an arts policy commentator, agrees. “If it was all going to support the local film industry, then there might be a case for this,” he says. “But you’ve got to ask: is this the best use of scarce cultural funding?”
Deaner says that while he has no doubt Hollywood blockbusters feed back into the economy through local spending and job creation, he questions what they contribute to Australia’s cultural life.
“[These schemes] must be balanced out against the nation’s needs from the government’s cultural policy,” he says. “The holy grail here is to get both economic and cultural impact from government investments.”
Thrown into the mix are two further tax incentives: a 30% rebate for any production that spends $500,000 in Australia on post-production; and a 40% producer offset, available to any company that contracts an Australian company to provide production services (this is the only rebate to require some Australian content to qualify).
Because of Australia’s tax secrecy laws, there is no way to ascertain precisely which companies are getting these rebates and how much. All we know is that between their inception in 2008 until January this year, the location, post-production and producer offsets have amounted to $3.466bn in lost tax revenue.
Caust, who analysed global film incentives in 2020, says most other countries have a range of criteria that must be met in terms of national and cultural benefits – such as a minimum number of local people employed or tourism benefits. Foreign crews shooting in London, for example, must include shots of prominent landmarks; in Singapore, foreign film-makers must sign an agreement promising to show the city-state in a positive light.
But Australia’s location offset has comparatively few criteria. In fact, Caust says, “many of the productions shot in Australia are made to look like the setting is America”.
Or Bali, as was the case in Ticket to Paradise, which was shot in Queensland with $6.4m of Australian government money. Or, in the case of Thor and Planet of the Apes, another timeline or reality altogether.
‘Rubbery’ numbers to justify big spending
While the explosive growth in foreign productions in Australaia can be partly attributed to low Covid rates and a favourable exchange rate, experts believe the most compelling lure has been the incentives.
Federal and state governments consistently claim these cash grants and tax rebates pay economic dividends – but the numbers they are using have been described as “rubbery” at best.
In 2020, the Morrison government announced a $400m top-up to the $140m location incentive scheme. And by February 2022, it predicted that by the end of the scheme’s life the foreign screen industry would have injected more than $4.3bn into the economy and created an estimated 108,800 jobs. But only 43,500 of those were likely to be full-time equivalent; and in an industry notorious for job insecurity and temporary contracts, those full-time equivalent positions are likely to last only between a few weeks and a few months.
Guardian Australia spoke to a former public servant who spent several years administering the tax rebate schemes, which were introduced in 2008.
“When we were doing [the groundwork], they’d [the government] hired a consultant and they basically just tweaked the multiplier to make it look good,” the former government employee said.
“It would be fair to say the figures were rubbery at best. I would treat the jobs figures with as much credibility as when you heard governments saying how much the [Sydney] Olympics was going to bring in to the economy.” (In 2002, the NSW auditor general assessed the Sydney Olympics loss at more than $1bn.)
The source continued: “They kept saying ‘think about all the jobs’, and I’d be thinking, well, we could build a factory if we wanted to create jobs. Those guys should’ve been talking about the bloody culture … the film industry is not just some job creation scheme.
“If it’s just an economic argument, then is there a cost-benefit analysis showing if we spent, say, $400m on something else, would we have got a better return on the investment?”
Four days before the 2022 election, the Morrison government claimed that the $30m it was spending on The Fall Guy would inject more than $244m into the Australian economy and employ more than 4,000 Australian workers.
But those numbers didn’t come from the government. In a statement, a spokesperson for the Office for the Arts confirmed that – as with all other recipients of the location incentives scheme – the benefits “were based on forecasts made by the production” and “are adjusted as productions are completed”.
The spokesperson said that when the location offset rebate is doubled to 30% from July, it will come with “new reporting requirements to capture data about the employment of Australian crew and use of Australian businesses”.
The rebates will also require that a production “meet minimum training obligations or contribute to the broader workforce and infrastructure capacity of the sector”.
A zero-sum game?
Incentives to woo Hollywood also happen within the US. By 2013, competition between states to lure the mega studios away from California had become so fierce that the former US labour secretary Robert Reich warned it had become “a race to the bottom”. By then, even the California government was offering tax breaks in a bid to keep Hollywood productions in Hollywood.
“These tax credits and tax incentives are a zero-sum game,” Reich told Variety in 2013. “They don’t create a single new job. They just move jobs around, and they rob the states of the money they need for education and infrastructure.”
Michael Thom, an associate professor of public policy at the University of Southern California, says it is “pretty close to a consensus” that these schemes have not been successful in the US.
“If you think government incentives will at least earn back what they spent, you’re wrong,” he says.
Michigan, North Carolina, Iowa and Indiana are among the states that have recently dropped all film industry incentives, after cost analyses showed they were losing money. “The fact that the incentives continue in some states is perplexing,” Thom says.
Only one such independent cost analysis has been conducted in Australia. In 2014, the then Queensland premier Campbell Newman commissioned the state’s competition authority to conduct an analysis of its government’s film incentive schemes, which are arguably the most generous – and the most secretive – in the country.
The findings were frank. It was recommended that the Queensland government should: stop providing incentives that would mostly be appropriated by international companies; focus production assistance instead on activities that delivered cultural benefits to Queensland; and ensure that any incentives are provided transparently.
The report was not delivered back to parliament until after the 2015 state election, in which the Newman government was defeated. Since then, the Palaszczuk government has funded 48 interstate and international films and television series. But it refused to disclose to the Guardian how much this has cost so far.
To give an idea of the secrecy involved, the Queensland government fought – and won – a three-year legal battle against its own information commissioner to prevent disclosure on how much was spent to lure the fifth Pirates of the Caribbean film. A reputed figure of $60m has never been confirmed or denied.
A Queensland government spokesperson said the state’s funding policy had contributed more than $1.33bn to the Queensland economy and created more than 14,300 jobs. Individual production investment was commercial in confidence, the spokesperson said.
“I can’t think of another country where this amount of secrecy happens,” says Thom, who began studying the Australian film incentive schemes after the Queensland court case made the news in Los Angeles. “This lack of transparency would not be seen in any state in America. Let’s just call Australia an outlier.”
The big guy v the little guy
The Albanese government’s decision to almost double the tax break for offshore productions has demonstrated just how effective lobbying has been by an organisation called the Australian New Zealand Screen Association (ANZSA).
Despite its name, ANZSA has little to do with Australian or New Zealand film-making. It is an organisation representing the six major Hollywood studios, as well as two Australian companies – Fetch and Roadshow – which are major purchasers of US content.
In February, ANZSA delivered an extensive industry-funded report to Canberra, warning that if the new Labor government failed to maintain, or indeed increase, the tax rebates and cash incentives in the May budget then Hollywood investors would walk away.
“Studio capacity is a concern [for investors],” the report said. “Uncertainties around the Location Offset and Incentive are contributing to the problem.”
With many Australian production companies straddling their business between local and international work, few insiders were prepared to speak on the record about the effects these incentives were having on the local industry. But Deaner says local producers are being affected in terms of costs and availability of studio spaces, and obtaining key crew amid labour shortages.
“To solve this we must lift the domestic sector and provide local productions greater resources to allow them to properly compete,” he says.
Brian Rosen, a NSW-based producer (Finding Nemo, Monsters Inc, The Incredibles), says thanks to Hollywood, local crewing companies have purchased more sophisticated gear, making Australia one of the most professional creative film environments in the world. But Hollywood productions have a downside too, he says.
“When they come in, they take up all the crews and the studios and they’re paying much more to the crews than I can afford,” Rosen says. “But really, you have to look at the whole ecosystem.”
The South Australian-based producer Lisa Scott (The Tourist, Janet King, Pine Gap) says another benefit is the upskilling of Australian film crews and its allied industries. When it comes to local and foreign productions, Scott believes it’s not an either-or scenario and there is room at the table for both. “The question is, are we underfunding the local industry?”
