Socioeconomic Banditry: Poker Machines and Income Redistribution in Victoria
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Socioeconomic Banditry: Poker Machines and Income Redistribution in Victoria James Doughney Victoria University 1 Introduction Victoria introduced poker machine gambling in 1992. There were ostensible reasons, and there were reasons. Underlying the policy shift was the then state Labor government’s desire to widen its own taxation base. Underlying this were the Commonwealth’s fiscal restraints on the states, which had become more severe during the 1980s. Also important were the increasing demands from the state opposition and ‘the markets’, an entity at once diffuse and yet omnipotent, for balanced state budgets and reduced borrowing and debt. Underlying all of these reasons had been the victory of the markets’ ideological expression, neo-liberalism, at least in the English speaking world. By an unpleasant, though predictable, twist of fate the new pokies were ‘rolled out’ alongside the new Liberal-National Kennett Government. Victoria would be transported from the 1990-92 recession by a gambling led recovery, we were told. What the new Crown Casino would do for the city, poker machines would do for the suburbs and regional Victoria. There would be 30 000 machines: 2500 at Crown, a maximum of 80 per cent of the remaining 27 500 in metropolitan Melbourne and an even share distributed between pubs and ‘clubs’. A ‘duopoly’, Tattersall’s and Tabcorp, would operate the machines. The ‘industry’ would be regulated by the Victorian Casino and Gaming Authority, which would also have, thanks to the Kennett Government, the express mission to promote gambling in and for Victoria. The game was afoot: everyone would be a winner! Of course, the ‘everyone’s a winner’ phrase, used in advertising by one or another of the ‘industry players’, is nonsense. At best, when there is no ‘house’ and no transaction costs, some win and others lose. It is a net zero sum game. When there is a gambling industry the calculation is just a bit more complicated: some win, some lose and losses provide the industry its income. Such net losses, or ‘expenditure’ as it is known, in turn become the profits of the owners and operators, the wages of their staff and income for their suppliers. Net losses also give the state government significant Doughney, J. (2002), ‘Socioeconomic banditry: poker machines and income redistribution in Victoria’, T. Eardley and B. Bradbury, eds, Competing Visions: Refereed Proceedings of the National Social Policy Conference 2001, SPRC Report 1/02, Social Policy Research Centre, University of New South Wales, Sydney, 136- 154.
JAMES DOUGHNEY
taxation revenue. In Victoria this is set at 33 and one-third per cent of every net dollar
lost in clubs and 41 and two-thirds of every net dollar lost in pubs.1
Since 1992, net losses (henceforth losses) have grown enormously, both in their own
right and as a proportion of total gambling losses. The state government has also
become much more dependent on gambling taxes as a result. It is worth remarking
also that gambling losses overall have grown dramatically Australia wide. In the
financial year 1999-2000 gamblers lost a total of $13 341 554 000 000, or $13.34
billion, to the ‘industry’ in Australia. Of this $7.65 billion, or 57.37 per cent, was on
poker machines. Table 1 presents the raw gambling data for 1999-2000 of each type
of gambling in each state and Australia. Table 2 presents percentages for each type of
gambling to the state total and the Australian total. To put this into perspective,
$13.34 billion represents 3.5 per cent of total Australian household disposable
income.2
Figure 1 compares the trends in real gambling losses for Australia, NSW and Victoria
from the mid-1970s. Figure 2 presents this comparison in per capita terms.3 Both the
bars and the lines in Figure 1 are ordered: Australia, NSW and Victoria. The order
differs in Figure 2, which shows per capita losses. In this figure the broken lines
represent total gambling losses per capita for NSW, Victoria and Australia, while the
solid lines represent the poker machine gambling losses per capita of each. The
heavier lines show Victoria’s data. Both figures depict the acceleration in gambling
that occurred from the late 1980s onwards and the contribution of poker machine
gambling to it. The sharp increases in Victoria, especially in real per capita terms, and
their contribution to the national trends are also evident. Figure 3 presents the
proportionate contribution of poker machine gambling losses to the sum of all
gambling losses in NSW, Victoria and Australia. In each it is a growing proportion,
but in Victoria and Australia as a whole it has grown more because of legalisation in
the former and the spread of poker machines in Queensland and South Australia in the
1990s.
1 Hotels are taxed an additional eight and one-third per cent to contribute to the Community
Support Fund. Disbursement of this fund’s revenues has been an issue of concern, but that is a
subject for another paper.
2 All data in this paragraph are from Australian Gambling Statistics 1974-75 to 1999-2000
(Tasmanian Gaming Commission (TGC), 2001).
3 Real data are used in these charts. That is, the data are deflated to remove the effects of changes
in the general price level (inflation). This means that the charts focus exclusively on changes in
the magnitude of gambling. All data are again from TGC (2001).
138.Table 1: Net Australian Gambling Losses by State and Type: 1999-2000 ($million)
NSW Victoria Queens- SA WA Tasmania ACT NT Australia
land
Racing 654.420 458.483 250.900 106.555 159.486 28.285 19.304 22.465 1,699.898
Lottery 42.067 5.185 1.320 - - 0.347 0.925 0.782 50.626
Lotto 286.176 283.345 205.560 72.588 148.736 16.305 12.492 11.722 1,036.924
Instant lottery 66.418 25.614 101.051 10.165 33.425 2.368 2.469 1.517 243.027
Pools 4.151 1.101 1.807 0.282 0.779 0.078 0.096 0.031 8.325
Casino 486.400 823.869 530.700 75.831 288.560 77.070 17.700 62.385 2362.515
Minor gaming - - - 22.758 24.312 9.017 - - 56.087
Keno 91.450 6.783 54.160 15.611 - 15.176 - - 183.180
Gaming machines 3882.199 2170.560 871.303 485.987 - 60.773 156.835 26.474 7654.131
Interactive gaming - - - - - - - 5.387 5.387
Sports betting 12.397 7.881 2.300 0.767 1.229 0.190 0.000 16.689 41.453
Total gambling 5525.678 3782.821 2019.101 790.544 656.527 209.609 209.821 147.452 13341.554
Source: Australian Gambling Statistics 1974-75 to 1999-2000 (Tasmanian Gaming Commission, 2001)Table 2: Net Australian Gambling Losses by State and Type: 1999-2000 (% of column totals)
NSW Victoria Queens- SA WA Tasmania ACT NT Australia
land
Racing 11.84 12.12 12.43 13.48 24.29 13.49 9.20 15.24 12.74
Lottery 0.76 0.14 0.07 0.00 0.00 0.17 0.44 0.53 0.38
Lotto 5.18 7.49 10.18 9.18 22.65 7.78 5.95 7.95 7.77
Instant lottery 1.20 0.68 5.00 1.29 5.09 1.13 1.18 1.03 1.82
Pools 0.08 0.03 0.09 0.04 0.12 0.04 0.05 0.02 0.06
Casino 8.80 21.78 26.28 9.59 43.95 36.77 8.44 42.31 17.71
Minor gaming 0.00 0.00 0.00 2.88 3.70 4.30 0.00 0.00 0.42
Keno 1.66 0.18 2.68 1.97 0.00 7.24 0.00 0.00 1.37
Gaming machines 70.26 57.38 43.15 61.48 0.00 28.99 74.75 17.95 57.37
Interactive gaming 0.00 0.00 0.00 0.00 0.00 0.00 0.00 3.65 0.04
Sports betting 0.22 0.21 0.11 0.10 0.19 0.09 0.00 11.32 0.31
Total gambling 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00
Source: Australian Gambling Statistics 1974-75 to 1999-2000 (Tasmanian Gaming Commission, 2001)Figure 1: Real Gambling and Poker Machine Losses: Australia, NSW and Victoria: 1974-75 to 1999-2000
16,000
14,000
Lines: Real net poker machine losses
12,000 Bars: Real net total gambling losses
(In order of size, highest to lowest: Australia,
NSW, Victoria)
10,000
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YEARSFigure 2: Real per Capita Gambling and Poker Machine Losses, Australia, NSW and Victoria: 1974-75 to 1999-2000
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NSW poker machine Australia total gambling
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Victoria poker machine
Australia poker machine
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YEARSPOKER MACHINES AND INCOME DISTRIBUTION IN VICTORIA
Governments are now correspondingly more dependent on poker machine taxes. The
factors presented in the first paragraph are the fundamental cause. All governments
have endeavoured to give business lower taxes. The Commonwealth squeezed the
states and, inter alia, introduced a GST. The states themselves competed to lower the
supposed ‘business tax burden’ and to reduce borrowing and repay debt. As the
community lost more on poker machines, correspondingly higher pokie tax revenues
were locked in to state budgets. Victoria’s accelerated integration into the pokie
partnership makes its dependency appear all the more stark. Indeed the combination
of a high rate of pokie tax and reduced state revenues from other sources means it is
now the state government most dependent on gambling taxes
Before moving on to discuss this result let us, first, restate what we already know
about poker machine losses and, second, introduce an apparently small but significant
finding from other recent research. Two important facts have already emerged from
independent research: machines are concentrated in municipalities that have a lower
than average socio-economic status; and average losses per adult are concentrated in
these municipalities. Figure 4 shows how losses are distributed across metropolitan
Melbourne’s local government areas (LGAs), which are ranked from lowest to highest
by socioeconomic status.4 The Productivity Commission referred extensively to the
relationship depicted in the figure in its Draft Report: Australia’s Gambling
Industries (PC, 1999). It noted:
It remains the case that, in Victoria at least, gaming machine
densities are higher in socially and/or economically
disadvantaged areas and that, in turn, this is likely to mean
that people in those areas spend [i.e. lose] more on gaming
machines than people in other areas ...
Whatever the reasons, where socially and economically
disadvantaged areas do have a high density of gaming
machines, there will be implications for the local community
...
Further, it is possible that, in communities that already suffer
from significant socio-economic disadvantage, overlaying an
additional source of socio-economic stress
4 Socioeconomic status here is defined by the Australian Bureau of Statistics (ABS)
socioeconomic indexes for areas (SEIFA) index of disadvantage (DIS). This index is based on a
number of variables related to the economic and social characteristics of families and
households, as well as personal education qualifications and occupation. High status areas
obtain high index numbers and vice versa. Rankings for the Melbourne metropolitan LGAs
range from Maribyrnong at 887.680 to Boroondara at 1133.77. The SEIFA(DIS) average for
Melbourne is 1024.839. It should be noted that we have defined Melbourne here and in all
subsequent data to exclude the City of Melbourne proper. This eliminates the distorting effects
of venues in the Central Business District. Charles Livingstone was the first to draw attention to
the association represented in Figure 1.
143Table 3: Government Own Account Tax Revenues, Victoria, NSW and Australia: 1999-2000
$million % of column total
Victoria NSW Total all states Victoria NSW Total all states
Payroll taxes 2,356 3,769 8,942 24.27 24.81 23.64
Property taxes 500 924 2,427 5.15 6.08 6.42
Financial transactions 611 924 2,237 6.29 6.08 5.91
Stamp duties etc. 1,759 3,269 7,420 18.12 21.52 19.62
Gambling taxes 0.00 0.00 0.00
Lotteries 291 293 964 3.00 1.93 2.55
Poker machines 933 955 2,463 9.61 6.29 6.51
Casino 155 126 497 1.60 0.83 1.31
Racing 137 191 486 1.41 1.26 1.29
Other 4 5 10 0.04 0.03 0.03
Total gambling taxes 1,520 1,570 4,420 15.66 10.34 11.69
Insurance (fire) 189 287 540 1.95 1.89 1.43
Third party 80 17 180 0.82 0.11 0.48
Other insurance taxes 310 598 1,418 3.19 3.94 3.75
Motor vehicle taxes 863 1,468 3,900 8.89 9.66 10.31
Fuel taxes 528 614 1,631 5.44 4.04 4.31
Tobacco taxes 727 1,083 3,318 7.49 7.13 8.77
Liquor taxes 226 323 973 2.33 2.13 2.57
All other 39 345 414 0.40 2.27 1.09
Total 9,708 15,191 37,820 100.00 100.00 100.00
Source: Australian Bureau of Statistics 2001, Taxation Revenue (Cat. No. 5506.0), released 12 June 2001.Figure 3: Poker Machine Losses as a Proportion of Total Gambling Losses: 1974-75 to 1999-2000
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YEARS
NSW Victoria AustraliaFigure 4: Poker Machine Losses per Adult in Metropolitan LGAs Ranked by SEIFA Index of Socioeconomic
Disadvantage: 1998-99
25.00
Maribyrnong
20.00
Greater Dandenong Whittlesea Wyndham
$ Per Adult (18+) Per Week
Knox
Darebin Moonee Valley Monash
15.00 Glen Eira
Hume Kingston
Casey
Brimbank
Maroondah
Hobsons Bay Frankston
Banyule Manningham
Moreland Yarra
10.00
Whitehorse
Port Phillip
Stonnington
5.00 Bayside
Boroondara
0.00
0 5 10 15 20 25 30
SEIFA Ranking (most disadvantaged to least disadvantaged)JAMES DOUGHNEY
may have significant community-wide impacts. That is, social
and economic stresses may have compounding impacts ...
In the Commission’s view, the potential for disadvantaged
communities to suffer more adverse social problems from
expansions in gambling has important implications for
government policy. (PC, 1999, paras, 9.38-9.41)
A similar pattern exists in regional Victoria. Indeed three of the most disadvantaged
local government areas (LGAs), Bass Coast, La Trobe, and East Gippsland, have the
highest numbers of poker machines per adult. Not surprisingly Bass Coast and La
Trobe also have the highest losses per head of the major regional LGAs. Other above-
average losers are East Gippsland, Mildura, Greater Shepparton, Greater Geelong,
Ballarat, Greater Bendigo, and Warrnambool, all of which are in the lower half of the
SEIFA rankings for regional Victoria. Figure 5 shows the regional distribution of
losses, with the trend line once again clearly demonstrating that the less well off
regional areas bear the heaviest burden.
As is also true in metropolitan Melbourne, the better off areas have the lowest number
of machines per head and, consequently, the lowest average losses per head.
However, there is a difference. The average SEIFA ranking for Melbourne LGAs is
about 1025, whereas in regional Victoria the average ranking is much lower, at about
993 for the LGAs shown in Figure 5 (the larger regional LGAs with poker machines).
Only one of these, Macedon Ranges, has a higher ranking than the Melbourne average
(1061.82). It is hardly surprising that it is among the lowest three losers and has the
lowest number of machines per head. It has barely more than one-third of the losses
per head in La Trobe and Bass Coast. Moreover only the metropolitan cities of
Maribyrnong, Greater Dandenong, Darebin, Brimbank, and Moreland have lower
socio-economic rankings than La Trobe, Bass Coast, East Gippsland, Mildura, and
Hepburn. Of these only Hepburn has below average pokie losses for regional Victoria.
That the high-loss areas are those in which people can least afford to lose also violates
an important principle expressed by John Maynard Keynes many years ago. Keynes
emphasised that gambling was fine if it were ‘frivolous’. By this he meant that losses
should be small relative to a person’s budget. Keynes’s main objection to gambling
practices in the 1930s in Britain
… was that they led to losses of large amounts of money. Its
‘evil’, he said, lay not in the hope of obtaining unearned
money, but ‘in the fact that the indulgence of this hope will
cause you to lose a great deal of money’
Gambling always results in financial losses for the great
majority of gamblers, the only beneficiaries being the small
number of winners and the gambling industry. If the financial
losses to individuals are small and outweighed by the
enjoyment obtained, gamblers derive
147Figure 5: Poker Machine Losses per Adult in Rural and Regional LGAs by SEIFA Index of Socioeconomic
Disadvantage: 1998-99
18.00
16.00
Bass Coast
La Trobe
14.00
Ballarat Warrnambool
Greater Geelong
12.00
$ per Adult (18+) per week
East Gippsland Greater Shepparton
Wellington Horsham
Greater Bendigo
10.00 Mildura Mitchell
Northern Grampians
8.00
Glenelg Swan Hill Colac-Otway Delatite Wangaratta
Wodonga
Baw Baw South Gippsland
6.00
Hepburn Macedon Ranges
Campaspe
4.00
2.00
0.00
0 5 10 15 20 25 30
SEIFA Ranking(most disadvantaged to least disadvantaged)JAMES DOUGHNEY
net benefits. If the losses are large, however, the situation is
reversed. The financial damage is considerable, psychic
income falls and probably becomes negative, and the gambler
faces a double misfortune. (O’Donnell, 1999: 13; citing
Keynes’s evidence to the 1932 Royal Commission on Lotteries
and Betting, Keynes, 1982: 404)
The second preliminary point that is important to introduce comes from the most
recent VCGA community impact study (KPMG, 2000). It supported what many
researchers into gambling have suspected: the seemingly trivial finding that most
people who use pokies do so close to where they live. In fact it said that most play
within 2.5 kilometres of their homes. While prima facie this might seem insignificant,
or even obvious, it does suggest that research should also focus on the immediate
vicinity of a venue and not only on the much larger LGA catchment. We will do this
below by analysing the socio-economic statuses of smaller areas surrounding all
Melbourne venues. In this way we test the hypothesis that poker machines are located
in areas of lower socio-economic status than had been demonstrated previously using
crude LGA-level indexes.
2 Analysis Using ABS Collection Districts
The Local Area Pokie Impact Software Tool (LAPIST) data allow researchers to
shrink the socio-demographic area of interest down to that of the Australian Bureau of
Statistics (ABS) census collection district (CCD or CD) in which a venue is located.
However, these districts contain only about 200 or so households. Therefore we will
look at a larger collection of CDs: the CD in which the venue is located plus the 10
closest CD numbers on either side (or the CD +/-10). LGAs in the Melbourne
metropolitan area, as defined here, have an average adult population of about 75 000
to 80 000. This means that we will be examining areas approximately between 10 and
15 per cent of an LGA.
Unfortunately it is not possible to obtain loss data for venues or for smaller
geographical units than a municipality. Even for a municipality itself we know only
how much is lost in total in its venues. To turn this into an estimate of how much is
lost by the LGA’s adult residents we have to assume that they gamble as much outside
the LGA as non-residents do within it. It is a reasonable assumption, especially in the
light of the community impact study finding that most people who use pokies do so
within 2.5 kilometres of their homes (KPMG, 2000). Therefore we will assume for
convenience here that the average loss prevailing in the municipality can be applied
uncontroversially to the smaller areas.5
When we make this assumption it is possible to create an additional best fit chart
similar to Figures 4 and 5. Figure 6 presents the relationship between losses per adult
per week and the weighted SEIFA indexes of disadvantage of the smaller areas
5 As it happens the assumption is conservative. If people gamble in venues that are closer to home
it is, therefore, reasonable to expect that losses in the areas closer to the venue would be higher
than average.
149POKER MACHINES AND INCOME REDISTRIBUTION IN VICTORIA
surrounding all Melbourne poker machine venues. It might help to imagine these
areas as spreading out around the CD of the venue, with about 10 000 people in each.6
The line in Figure 6 exhibits the downward slope of the lines in Figures 4 and 5,
demonstrating that losses are concentrated on average in less well off areas. The
scatter plot of the CD +/-10 trend is also shown.7 To help to understand the
relationship between this and the LGA level data it is useful to compare averages or
means. The mean of the SEIFA index of disadvantage for the Melbourne metropolitan
area, including surrounding growth areas such as Mornington Peninsula Shire, is
approximately 1025. The mean for the CD +/-10 area is about 1005. The decline is
statistically significant.8 Were we to have used LGA-level averages for each venue the
mean would have been 1012. The decline is again statistically significant. Given that
we were forced to apply the LGA level loss per adult data to each venue, the loss
levels shown have not changed. What has changed with the specific CD level data is
the positioning of the scatter points. They have shifted leftwards by comparison with
those in Figure 4. It is as if the shift of scatter points (representing venues) to lower
socioeconomic positions, ‘clustering’ on average in and around the 1000 SIEFA mark,
has caused the CD +/- 10 line to be pulled leftward.
This means that, on average, losses are higher in areas of lower socio-economic status
than of Melbourne as a whole and they are located also, on average, in areas of lower
socio-economic status than of their municipalities. However, it should be repeated that
this section so far has used only a ‘first approximation’ approach to identify the socio-
economic status of areas around poker machine venues in Melbourne and surrounding
growth areas. It is approximate because the surrounding collection districts were
chosen for their numerical proximity rather than their immediate geography.
A closer analysis is possible if we use ABS maps and identify the best-fit CDs within
a certain radius of a venue.9 This, however, is labour intensive, so a brief analysis of
poker machine numbers in the City of Yarra only is given here as an example. A one
kilometre diameter circle around each venue was used in this case study because of
the relatively high density residential structure of the area. The average population in
the two kilometre diameter areas is about 3125 people. In total they account for about.
6 T he actual areas designated by numerical proximity to the CD number are rather
ragged at the edges and may be regarded more as being a reasonable first attempt. A
closer geographic proximity is obtained by using maps, as will be explained regarding
the City of Yarra case study below.
7 Note that the R-squared figures for these lines are low. It should be kept in mind that
the broad trends interest us here and that the variance about these trends would be
expected, even intuitively, to be high. This points to the need for closer and more
specific local area analysis. See footnote 6.
8 Using a single-sample t-test against the Melbourne average with both 95 per cent and
99 per cent confidence intervals.
9 It should be noted also that this ‘second approximation’ approach is also only an
estimate of the venue’s immediate catchment. If, by the latter, we mean the natural
location of users then a multiplicity of factors (roads, traffic flows, train lines, paths,
proximity to other venues etc.) needs to be assessed.
150JAMES DOUGHNEY
Figure 6: Poker Machine Losses per Adult by SEIFA Index of Socioeconomic
Disadvantage: 1998-99 (at ABS CD +/- 10 level)
25
Venue CD +/- 10 average (approx.
Melbourne SEIFA average (approx. 1025)
20
$ Loss per Adult per Year
15
10
5
0
800 900 1000 1100 1200
SEIFA (most to least disadvantaged)
half of Yarra’s population. The analysis illustrates the general proposition above that machine
locations target the poorer parts of the community
Yarra is a variegated inner city area comprising the suburbs of North Carlton, Fitzroy, Clifton
Hill, Abbotsford, Collingwood, Richmond and parts of Northcote. It contains both high
density housing estates and gentrified pockets of affluence. There are ten venues in Yarra: the
Albion Inn in Collingwood, the Baker’s Arms in Abbotsford, the Park View in North Fitzroy,
the Prince of Wales, Royal Oak, Vine, Vaucluse and Richmond Tavern in Richmond, the
Tankerville Arms in Fitzroy and the Collingwood Football Club at Victoria Park. The average
SEIFA ranking for the areas around these venues is 946, compared with that for Yarra as a
whole of 984.
A drop of 38 in SEIFA ranking from the LGA average of 984 to 946 is quite dramatic. Recall
also that the Melbourne metropolitan ranking is about 1025. Even more worrying is that four
of the venue areas with the lowest SEIFA rankings (the Albion with 912, the Baker’s Arms
with 725, the Prince of Wales with 769 and the Richmond Tavern with 774) also have four of
the highest populations within their one kilometre diameter circles (4084, 5320, 6532 and
3845). All are located near high density public housing estates. This is worrying first because
most people gamble close to home. It is unlikely that very large numbers of people travel
from outside Yarra or even from too far away within it to gamble at these venues. Second, as
Tabcorp representative Tricia Wunsch (1998) said in evidence to the Productivity
Commission gambling enquiry, the ‘industry’ regards poker machine gambling as being a
‘blue collar’ form of recreation.
151POKER MACHINES AND INCOME DISTRIBUTION IN VICTORIA
Put all of these factors together and we can obtain a clearer picture socio-economically of who
lost the sum of more than $33 million, or about $555 per adult, in Yarra’s pokies in 1999-
2000. That represented a 12.7 per cent increase over the previous year. Moreover it is
generally estimated that only about 40 per cent of adults use poker machines in any year. The
‘industry’ itself acknowledged, again in evidence to the Productivity Commission enquiry,
that 80 per cent of its revenues (net losses) come from 20 per cent of pokie gamblers. Thus it
is possible that heavy gamblers in Yarra might be losing as much as 10 times the average of
$555 per adult, or $5500 each in 1999-2000. More worrying still is that Yarra is a mid-range
loser among LGAs. Maribyrnong has more than double Yarra’s level of losses per adult.
Greater Dandenong, Brimbank, Hume and Darebin, for example, are other metropolitan
municipalities with high levels of disadvantage with higher levels of loss than Yarra’s. A
number of poor rural and regional LGAs are also in a similar position.
3 Victoria’s ‘Reforms’: Testimony to the Legacy of Neo-liberalism
The Victorian Government has recognised formally that socio-economic status is important in
poker machine gambling policy. Indeed, the best part of its new policy on ‘regional capping’
of poker machine numbers is the principle that the level of losses, numbers of machines and
socio-economic status must be considered in determining numbers. Despite this the policy
suffered dramatically in implementation: only five areas will be ‘capped’, and the cap will
only reduce the numbers of machines in these areas to the level in the 9th highest municipality
in the state. This level is 11 machines per 1000 people. There are 78 municipalities in
Victoria. Only 2.5 per cent or so of Victoria’s total non-casino poker machines will be
affected.
There are strong reasons to believe that, even in the capped areas, the policy will do nothing
to alleviate gambling problems and related socio-economic harm to communities. First it
applies to only five of the State’s heavy gambling areas and to a relatively small number of
machines in them. Indeed, the drawing of the areas around the city LGAs to be capped –
‘Maribyrnong plus’, ‘Greater Dandenong plus’ and ‘Darebin plus’10 – prima facie seemed to
be a harm minimisation policy for the pubs, clubs and the duopoly operators. ‘Darebin plus’
was rewarded with a ‘zero’ reduction. Second, the capping policy will be phased in over a
three year period. Third, Tattersall’s and Tabcorp may succeed in shifting the machines to
other low-income parts of the state outside the five designated areas. Fourth, they may reduce
machine numbers in smaller and lower performing venues, rather than bigger venues where
people lose more per machine, and try to shift the remaining machines in the areas towards
bigger, high-take venues. Fifth, they may work machines more intensively and/or reduce the
return to gamblers towards the current legislated minimum of 87 per cent.11
10 The non-metropolitan LGAs of Bass Coast and Latrobe are the remaining members of the
five.
11 That is a minimum of 87 per cent of turnover in Victoria must be returned to players on average.
Currently more is actually returned, and the gambling operators may have about 3-4 per cent leeway to
cushion the effect of the caps if they choose. It is always an option, of course, to opt for a perverse form
of utilitarianism: the greatest good for the greatest number of machines. Why tempt action against the
97.5 per cent of non-casino machines untouched by the caps by pushing the capped machines to the limit?
Of course, greed is its own reward: why worry about changes in government policy when it is clear that
the state is as hooked on pokie revenues as you are?
152JAMES DOUGHNEY
Therefore overall losses per head of population in the five regions may not fall. Only when
the operators are forced to make larger cuts in machine numbers in poorer high gambling
areas will we really see falls in per capita gambling. Only significant reductions in machine
numbers and severe limits on shifting machines to ‘green fields’ sites in areas of similar
socio-economic status (e.g. parts of Hume, Casey, Wyndham etc.) will reduce harm. Industry
representatives went through a mandatory process of perfunctory wailing, but ever revealing
Tabcorp spokeswoman Tricia Wunsch (1998) let the cat out of the bag when she said the
cutbacks would not be effective.
A question for the policy analysis is whether the Government’s approach is cynical or just
incompetent. It could, of course, be both. In fact I am inclined to think that there are elements
of blundering and sleight of hand in what the Government is doing. Surely it would be to their
advantage, electorally and to cement relations with the three independents, to be more
forthright on gambling policy? In fact, in a breathtaking volte face, the state opposition is
giving hints that it might use poker machine policy to campaign against the Government.
Perhaps the lead was shown when former Crown head Lloyd Williams made a public but
scarcely believable mea culpa about the harm caused by the spread of pokies throughout the
community. What is it that explains the Labor Government’s inaction and worse?
The answer goes deeper than mere electoral politics. We have seen from Table 3 that the
Victorian Government raises about one billion dollars each year in pokie tax. Sixteen or so
per cent of its own account revenues comprise gambling taxes. The pokie tax is the biggest
component of these by far. It is irrelevant that this is a regressive tax par excellence,
disproportionately paid by people on low incomes. Quite simply the Government is locked
into a neo-liberal agenda of tax reduction for business in the state, while receiving
circumscribed grants from a Commonwealth even more driven to do likewise while
simultaneously reducing PAYG taxes and factoring the GST into future budgets.12
This article has given data to support its original hypothesis that poker machines are located
in areas of lower socio-economic status than had been previously demonstrated. When venues
are located disproportionately in less well off areas the corollary is that less well off people
are frequenting them disproportionately and losing disproportionately. If these were
alternative recreational venues, cinemas say, then we might not think it important. Indeed we
might even be pleased. However, when the subject is poker machine gambling we must raise
an ethical question. Is it right for our society to license, literally, a form of institutional
banditry against those less well off? Why is it banditry? The answer is that there is no equality
of risk. This is not a game of ‘toss the coin’. Tattersall’s and Tabcorp’s are guaranteed
duopoly profits. The government is guaranteed a tax take equal to the operators’ profits (or
rents). These rents and taxes are regressive: more regressive than we had earlier been able to
establish. Income is effectively, very effectively, being redistributed away from low income
areas, and its flow back effects are at best marginal. (It is probably even wrong in the
aggregate to speak of poker machine ‘gambling’: there is no gamble when the ‘house’ bears
no risk and sets its winnings by computer program)
What is to be done? An even redistribution of poker machines – such that machines were
capped regionally at the statewide average per adult or thereabouts – would be a major
advance. However, it would only be half of the social policy remedy. If the redistribution does
12 There may be a lesson in the Victorian experience for a future Labor government. It is not so
easy to roll back indirect taxes while remaining faithful to the low-tax fundamentals of neo-
liberalism.
153POKER MACHINES AND INCOME DISTRIBUTION IN VICTORIA
not take account of the fact that a dollar lost in Toorak hurts less than a dollar lost in
Braybrook then poorer areas will remain disadvantaged. Equality in the proportion of the
average person’s budget in Balwyn and Springvale, as Keynes might have put it,13 must also
be a guiding principle. The redistribution therefore must be social not merely geographic,
taking into account both an area’s losses and its capacity to pay.
What else is to be done? Three additional issues must be discussed and worked on by
researchers, policy makers and the community. First, we now know that we must narrow the
focus so that we can understand the policy implications of the distribution of venues within
municipalities. That LGA-level data are a rougher approximation has to be acknowledged.
Yet even the sorts of finer data presented here are limited. Until the ‘commercial in
confidence’ veil of secrecy is lifted from venues, and the duopoly is forced to accept
independent research to answer the great unanswered question of ‘who gambles’, then we will
be left with first, second and third approximations regarding gambling socio-economics.
The second issue I will pose as questions. What are the ethical conditions that might allow
continued government taxation of an activity like poker machine gambling? Is the guaranteed
monopoly rent levied by Tattersall’s and Tabcorp justified in any sense at all? It might seem
strange, but the Victorian community has yet to debate these questions seriously.
Third, we must now raise a question that most parties to this debate, this author included,
have ducked, dodged or, in more academic language, eschewed. Policy hitherto has been
shaped with the limit of 27 500 non-casino machines taken for granted. It is about time – and
in the certain knowledge that this government will do little, short of an epiphany – that the
policy of reducing aggregate machine numbers is argued strongly as a matter of equitable
redistributive social justice.
References
Australian Bureau of Statistics, (ABS) (2001), Taxation Revenue, Cat. No. 5506.0, ABS,
Canberra,
Doughney, J. and T. Kelleher (1999), Preliminary Local Area Gambling Research –
Economic Effects, Workplace Studies Centre Victoria University, Melbourne.
Keynes, J.M. (1982), Social, Political and Literary Writings, Vol. 28 of The Collected
Writings of John Maynard Keynes, Macmillan, London.
KPMG Consulting (2000), Longitudinal Community Impact Study, Victorian Casino and
Gaming Authority, Melbourne.
O’Donnell, R.M. (1999), Keynes on Gambling, paper presented to the History of Economic
Thought Society of Australia Conference, ANU, Canberra, 15 July.
Productivity Commission (1999), Australia’s Gambling Industries, Part 1, Part 2, Productivity
Commission. Canberra.
Tasmanian Gaming Commission (2001), Australian Gambling Statistics 1974-75 to 1999-
2000, TGC, Hobart.
Wunsch, T. (1998), ‘Evidence to the Productivity Commission enquiry into Australia’s
Gambling Industries’, Productivity Commission, Canberra, http://www.pc.gov.au
13 Perhaps he might have spoken of the increasing marginal utility of income to the less well off.
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