I think it is a bad idea because it sets a bad precedent.
The government shouldn't be spending money on an event that is obviously exclusive. Only a certain group in society will reap the benefits. The catholics might say everyone is welcome, but the whole point is that only catholics would want to go. Its a bit like saying to a souths, or a norths fan that it doesn't matter that your teams were booted out because you can always support the roosters or manly. It doesn't work like that.
So of course people are going to be left out and it just creates a precedent for other religions to say - hey you gave all this money to the catholics, what are you going to do for us. What possible reason could we give to deny a group of muslims, or jews, or hindus, money for a similar religious event. We are a secular state and government shouldn't get involved in religion.
The whole arguement that goes - "oh but you funded the olympics" is flawed because the olympics was universal in appeal (few Australians, or sydneysiders at the least) wouldn't have been captivated by the olympics. It had clear and proven tourism advantages, and above all was not exclusive. It was inclusive.