Salary Cap: How Australian clubs lose to overseas

Australia's A-League, just about to start its third season with eight foundation clubs, hopes to build a sustainable competition in a competitive sports market by using a player salary cap. According to Scott Lowe, the cap has two main purposes: "to keep costs down for clubs, and to ensure fair competition. On the first count, the cap hasn’t fared all that well in Australia. Sydney FC reportedly has suffered losses of up to A$ 6 million in two years, with the rest of the A-League clubs reporting losses of around A$ 10 million. This is coupled with the fact that the New Zealand Knights had their license revoked because of a financial crisis. On the second count, while there have only been two seasons, we have not seen any team dominate and most teams have had chances to do well and recruit good players."

However the salary cap has become an issue in Australia as clubs are finding it hard to recruit Australian players back from minor European leagues and even harder to hold onto their more talented players once they have made an impression on the league. "The case that brought the cap into focus was Fred. A Brazilian recruited by Melbourne Victory on a one-year contract worth around A$ 80,000 (US$ 63,000) he lit up the A-League with dazzling displays of skill and talent,. He became one of the leading players of the competition and helping Melbourne Victory to a 6-0 win in the A-League Grand Final. When it came time for the 27-year old to renew his contract, American side DC United swooped in with a reported offer of US$ 222,000 per year. Melbourne simply could not match this offer because of the restrictions of the salary cap. Fans were furious that because of ‘bureaucracy’, one of their star players had been lost."

Lowe told that while it was sad to see Fred go "his case is not the symbol of a major problem. The salary cap is just a part of an overall effort to make sure clubs survive the initial years of the new A-League. Clubs need to be established first and have the mainstream support of their community before they can start paying the sort of wages that will bring them to parity with Asian clubs."