This year’s papal visit to Australia is already sorely testing the country’s commitment to the virtues of peace and goodwill as politicians and the Roman Catholic Church wrangle over the cost to the taxpayer.

World Youth Day, the Catholic celebration that takes place every two or three years, is to be hosted in Sydney this year and is expected to culminate in a gathering of half a million pilgrims. An opposition politician demanded yesterday that the Church – Australia’s largest property owner – should underwrite the A$128 million (£61 million) public cost of holding the event.

The cost includes A$42 million in compensation to the horse racing industry because a local racecourse has been booked for an overnight vigil and Mass, to be celebrated by Benedict XVI on July 20. The New South Wales Government has also told Sydney-siders, who hosted the Olympic Games in 2000, that unprecedented levels of traffic jams, akin to “a week of New Year’s Eves”, were expected.

“The Catholic Church is the organisation that will gain the biggest benefit from this event, not the people of New South Wales,” Lee Rhiannon, a member of the state’s parliament, said. “It’s a clear promotional event and, therefore, they should be footing the main part of the bill.”

It is estimated that if the Catholic Church were a corporation it would rank among the top five in the country, with assets worth more than A$100 billion and A$16.2 billion in revenue in 2005.

A spokeswoman for World Youth Day said that the Church was already contributing A$150 million to the event. Morris Iemma, the Premier of New South Wales, welcomed the stimulus to the economy, which has trailed behind Australia’s fastest-growing states, saying that it would generate millions. “It’s a huge event and it will bring many benefits to the city,” he said.

The Pope’s first public appearance will be in a 13-vessel “boat-a-cade” in Sydney harbour. The Church has asked nuns around the country to pray for good weather. Catholics account for a quarter of Australia’s population of 21 million people.