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Joint Select Committee on Gambling Reform

FERRAR, Mr Ross, Chief Executive Officer, Gaming Technologies Association


CHAIR: I now welcome Mr Ross Ferrar from the Gaming Technologies Association. I invite you to make a brief opening statement before the committee proceeds to questions.

Mr Ferrar : Thank you. In recent hearings we have run out of time, so I am determined to keep my opening remarks as short as possible. Thank you on behalf of the Gaming Technologies Association and its members for the opportunity to provide input to this inquiry. As I have previously advised the committee, our members supply all the new poker machines in Australia and have supplied a large proportion of the 2.6 million casino-style gaming machines, as they are also known, around the world.

Our submission in October 2012 discussed the basis on which the bill appears to be predicated and its timeline for implementation, among other matters. It seems to me that our advice has often been ignored by some. In particular, we have advised that it is a myth that a player can spend $1,200 in an hour on a poker machine in Australia. It is equally a myth that any gaming machine in Australia can be played at the rate of 1,200 times in one hour. I invite committee members to go to a club, hotel or casino and find out for themselves. Another myth is that it is easy and cheap to change the software in all Australia's 200,000 poker machines to accommodate a $1 maximum bet and $500 maximum pay. This would require that the game software in every poker machine be redeveloped, reaccredited, reapproved and reinstalled. This is neither easy nor cheap, as we have previously advised. The only people who can change the software in Australia's poker machines are our association's members. This makes it very difficult for us to comprehend why our advice has occasionally fallen on deaf ears.

The explanatory memorandum states that the purpose of the bill is 'to limit the rate of loss to the users of such machines.' Yet this will not help a player if they regularly spend more than they can afford. The issue is affordability, not quantity. A person who can afford to spend $5 but regularly spends $10 will still experience difficulties. In that instance, the measures contained in the bill will not assist them. Our submission advises the committee that there are serious questions regarding the basis of the bill. Our advice now is that bill should be discarded. Thank you. I am pleased to answer any questions.

CHAIR: Thank you, Mr Ferrar. Like Dr Lattimore, you have also been very helpful to this committee. Thank you very much.

Senator THISTLETHWAITE: Typically, what is the cost to make a change like this to a machine?

Mr Ferrar : It varies according to the age of the machine. What we have said to the Productivity Commission, the committee, the government and the opposition is that where a machine is—as a rule of thumb—three years old or younger, it will be just a software update. We call that a game change. For example, when a current machine is running a game and the owner of that machine wants to run another game, they have to replace the software—hence the term 'game change'. The cost of that varies, but as a rule of thumb we are saying $5,000. Where a machine is between three and five years of age, there will be additional hardware upgrades required as well. Our technical committee has estimated that that would be on average about $9,000. Where a machine is older than five years, the machine would have to be replaced. The median cost of a new machine is about $25,000. We have been saying those figures for quite some time now, so I am a little bit nervous about them. They may be a little conservative.

Senator THISTLETHWAITE: Different states currently have bet limits. That is correct, isn't it?

Mr Ferrar : Sorry?

Senator THISTLETHWAITE: The states throughout the country have bet limits at the moment on poker machines.

Mr Ferrar : By state and territory, yes.

Senator THISTLETHWAITE: Yes, and they differ depending on where you are.

Mr Ferrar : They do.

Senator THISTLETHWAITE: If there were a nationally consistent approach, I cannot see how these figures in terms of change come into it if there are already limits to the bet that an individual can make. For the average machine, wouldn't that just be a case of reprogramming what that bet limit is?

Mr Ferrar : No. New South Wales has a $10 maximum bet, and basically if you want to change that you have to do at least a game change.

Senator THISTLETHWAITE: Which is a software update, is it?

Mr Ferrar : Yes.

Senator THISTLETHWAITE: And you are saying that is about $5,000.

Mr Ferrar : Yes.

Senator THISTLETHWAITE: Why is it so expensive?

Mr Ferrar : Because you have to go back, redevelop the game and go through the whole testing and approval process again and then install it in the field. It is an incredibly complex process, and in fact our submission had a game supply diagram, which I hope helps to explain that. To be blunt with you, with a new machine costing $25,000 for what these machines do, I would not characterise that as expensive compared to a device like an ATM, which is generally much more expensive than that.

Senator THISTLETHWAITE: The Productivity Commission appeared earlier, and they were advocating that the change should occur gradually. In other words, for new machines the technology should be installed, and gradually we get to a point in time where most of the machines have that, and there is a cut-off date by which all machines have to have the technology. Obviously that is a better way to do it. The costs in that scenario would be minimised for organisations, wouldn't they?

Mr Ferrar : Definitely. The incremental cost of incorporating changes like changes in maximum bet into new equipment from the date of manufacture is incrementally almost zero.

Senator THISTLETHWAITE: So that is an approach that your organisation would support.

Mr Ferrar : Absolutely.

Senator THISTLETHWAITE: All right, thanks.

Senator XENOPHON: Mr Ferrar, welcome back.

Mr Ferrar : Thank you. It is a pleasure to be here.

Senator XENOPHON: We should stop meeting like this!

CHAIR: Mr Ferrar, it is a serious offence to say something to mislead the committee. Is it really a pleasure?

Senator XENOPHON: Isn't it misleading to say in your submission, 'The actual average hourly revenue of gaming machines in Australia is around $10.91 or less than one per cent of $1,200,' in the context of hourly losses, when that would include machines that are not operating because of statutory shutdowns, machines that are not being used and the like? Wouldn't it be more realistic to refer to what the average rate of loss is as people are actually playing machines and also the maximum potential losses on machines if you are playing a machine at maximum bets at maximum intensity?

Mr Ferrar : The first question was: do I think it is misleading? No, I do not.

Senator XENOPHON: Yes, but—

Mr Ferrar : In the context of the discussion, we are talking about $1,200, which we think is highly misleading. So we have put—

Senator XENOPHON: Apart from playing the machine in a testing facility or at Aristocrat, I think, do you have any other research to back up your assertion that—

Mr Ferrar : In my opening remarks I invited committee members to go to a club, a hotel or a casino and find out. I can play a machine at 17 times a minute. That is the best I can do.

Senator DI NATALE: But the Productivity Commission have done that and have made that claim of $1,200. They have done exactly what you have asked them to do: they have gone and got observational data. They have done it themselves, and they came up with that figure. So they have taken your advice. Why do you dispute that?

Mr Ferrar : As I have said to the committee before, the Productivity Commission's hypothesis is exactly that. It is not possible—

Senator DI NATALE: No, we heard in evidence that they have actually taken your advice. They have gone in, they have observed and they have done exactly what you have suggested and played machines, and they came up with that figure based on your advice just before.

Mr Ferrar : The reality is that you cannot play a gaming machine 1,200 times in an hour. That is a fact, and no-one can—

Senator DI NATALE: They are not saying that; they are saying $1,200 losses.

Mr FRYDENBERG: They are saying that on the current bets that you can put—not on a dollar bet—

Mr Ferrar : Well, you cannot. I dispute that, because it is a fact that you cannot put 1,200—

Mr FRYDENBERG: But if you were playing higher than dollar bets, as you currently can, then can't you lose more than $295 an hour? That is what they are effectively saying.

Senator DI NATALE: Absolutely.

Mr FRYDENBERG: So what they are saying is that under the current system you can potentially lose up to $1,200 an hour, and what you are saying is something quite different about $295 an hour.

Mr Ferrar : Our submission clearly articulates our calculations.

Mr FRYDENBERG: But if you were betting $10 a go then you can bet more than 30 bets in an hour, so theoretically it is not correct to say it is just $295 an hour.

Mr Ferrar : It is correct.


Mr Ferrar : What both the Productivity Commission and we are talking about is expenditure, not turnover. What you are referring to now is turnover. You can bet $10 a time.

Mr FRYDENBERG: But they could lose 30 hands in a row, surely.

Mr Ferrar : Over a period of time as long as an hour, the theoretical return to player will increase the likelihood that the return to player will be 90 per cent or thereabouts.

Mr FRYDENBERG: I do not want to get into semantics here, but the point here is that you could potentially lose much more than $295 an hour—you could potentially. They are not saying you will, but potentially you can lose much more than $295 an hour.

Mr Ferrar : We do not agree with that.

Senator DI NATALE: You do not agree with the mathematics? You are disputing the mathematics?

Mr Ferrar : We do not agree that you can potentially lose much more than that. Our calculations are very specific.

Senator DI NATALE: But that is a mathematical fact. You have $10 a spin. You put that into a machine 30 times a minute, with 60 minutes in an hour.

Mr Ferrar : Sorry. That is a spin every two seconds, you are saying.

Senator DI NATALE: You can potentially put in $300—let us say 2½ or three seconds.

Mr Ferrar : You cannot.

Senator DI NATALE: What is the legislated spin rate?

Mr Ferrar : The legislated spin rate in some jurisdictions is three seconds, but the actual spin rate is slower than that. The fastest you can play a gaming machine in Australia is not 20 times a minute; it is less than that.

Senator DI NATALE: Let us accept 4½ seconds, which was the advice of the Productivity Commission. Let us also accept that there are machines where you can put in $50 per spin in a casino.

Mr Ferrar : You are talking about multi-terminal gaming machines?

Senator DI NATALE: I am talking about with the loyalty card. There are some machines where you can put in $50 a spin.

Mr Ferrar : The poker machines that we are talking about are $10 or $5 maximum bet.

Senator DI NATALE: Okay, let us look at $10 maximum bets as well. We can cut this up whichever way we like. The fact is that you can lose more than $1,200 an hour. I agree that the probability of that occurring diminishes with the increase in losses, but it is a mathematical fact that you are potentially able to lose $1,200 an hour, and I do not see how you can dispute the mathematics of that.

Mr Ferrar : Our members make these games. They understand the mathematics. The possibility of losing more than $1,200 an hour is extremely remote.

Senator DI NATALE: Now you are saying it is extremely remote. That is very different from saying it is not possible.

Mr Ferrar : What you can expect—

Senator DI NATALE: Extremely remote and not possible are two different statements of fact.

Mr Ferrar : Chair, with respect, what we are talking about here is semantics. We are saying that the key issue here is the speed with which you can play a poker machine. You cannot play a poker machine 1,200 times in an hour.

Senator DI NATALE: No-one is suggesting that. That is not the proposition. The proposition is that you can lose $1,200 an hour—not that you can play it 1,200 times an hour but that you can lose $1,200 an hour.

Mr Ferrar : But one goes with the other.

Senator DI NATALE: No, that is simply not true.

Mr FRYDENBERG: They are saying that, if you have $1,200, at $10 a spin and 120 spins in an hour—

CHAIR: We are not saying 1,200 spins in an hour; it is actually only 120 spins.

Senator DI NATALE: If it is a $10 machine and you lost—admittedly it is exceedingly unlikely—every single spin, you would lose $1,200.

Mr Ferrar : Now we are all talking about what is likely and what is not. What is likely is that the theoretical return to player will become the actual return to player.

Mr FRYDENBERG: We can have that debate. I think we can move on from this, but the point is that the word 'potential' means that you can lose more than $295. I do not think we should be caught up on that. You can potentially lose up to $1,200, but we can debate the point that your chances of getting a return do improve.

Mr Ferrar : What you can expect is what we have articulated in our submission: $295—that is for a $5 maximum bet, which half the machines are. For a $10 maximum bet, it will be double that.

Mr FRYDENBERG: You can argue that.

CHAIR: We might just draw a line under that, but, in drawing a line, I just want to make a point. Our first witness today, Dr Harrigan from the University of Waterloo in Canada, modelled it with a machine or computer. He did not model $10, but he simulated 1,000 players each making 600 spins at $5 per spin, with a return to player of 92.5 per cent. He had 11 players lose more than $1,000.

Senator DI NATALE: That is at $5, and at $10 it doubles.

CHAIR: We might have to agree to disagree on the number of players who are going to lose, but I think it is fair to say that, the more you bet and the higher the jackpot, the more the average loss is going to be.

Senator DI NATALE: Arithmetic does not lie, Mr Ferrar.

Mr Ferrar : Thank you for that.

Senator XENOPHON: They were genuinely helpful interventions by Senator Di Natale and Mr Frydenberg. Can we just try to deal with this, because I am conscious of time. Dr Harrigan provided some tables and research. On notice, can you provide on behalf of your members any similar tables and research—

Mr Ferrar : I have not seen Dr Harrigan's tables, so I do not know what—

Senator XENOPHON: Perhaps we could provide a copy of Dr Harrigan's tables to you and, on notice, would you provide any similar research that the industry has in terms of loss rate?

Mr Ferrar : I will certainly attempt to, but, not knowing what they are, I can hardly commit.

Senator XENOPHON: I am asking you to take it on notice.

Mr Ferrar : Certainly.

Senator XENOPHON: If, on notice, you say you do not have any similar research, that is that. But please ask your members whether they have. A number of years ago the community affairs committee was looking at a similar bill. There was a discussion with that committee about providing the committee further data around probability accounting reports—the PAR sheets. We were unsuccessful in obtaining that material from you and you are familiar with the to-ing and fro-ing with that committee. Are you prepared to provide to this committee the material that you did not provide to the previous committee or, indeed, to the independent gambling authorities—research in South Australia that sought material from your industry that was not provided in 2005 or 2006?

Mr Ferrar : This is a well-travelled path.

Senator XENOPHON: It is, but—

Mr Ferrar : Our members have made what was requested available to legitimate researchers; those researchers have not taken up the offer.

Senator XENOPHON: We will hear from Dr Livingstone this afternoon, but my understanding is that what Dr Livingstone is saying is very different from what the industry is saying. You have continued to stall providing information to the Independent Gambling Authority and to another committee—the community affairs committee. Will you provide the material—

Mr Ferrar : Forgive me for interrupting—

Senator XENOPHON: No, I have not yet finished.

Mr Ferrar : As you said, you are conscious of time.

Senator XENOPHON: You are aware of the correspondence between another committee and you in relation to providing some key data and information that raises the issues that Mr Frydenberg and Senator Di Natale have, quite rightly, raised. Are you going to obfuscate and deny this committee the sort of material that previous committees and the Independent Gambling Authority in South Australia have previously requested of you and your industry?

Mr Ferrar : I am neither obfuscating or denying access to anything to this committee, to any of the other committees you have mentioned or to the academics who legitimately have research needs. Our members are perfectly comfortable for their intellectual property to be reviewed by legitimate researchers under controlled conditions. They are not prepared to give their intellectual property away. I would have thought that was self-evident. Our members routinely provide complete access to every aspect of what they do to regulatory authorities and game test laboratories, without which they do not get approval to sell anything to clubs, hotels and casinos. So our members are totally transparent—routinely so—to regulators, to test facilities and to academics who wish to research. We have made the offer on behalf of our members; it has not been taken up. The offer remains. If Dr Livingstone or anyone else wants to review our members' intellectual property, then I think it is reasonable for Dr Livingstone or anyone else to respect that intellectual property.

Senator XENOPHON: Chair, I make a formal request through you that we liaise with the community affairs committee in terms of the correspondence that existed between Mr Ferrar and that committee several years ago in relation to getting access to documents and also with the Independent Gambling Authority of South Australia in terms of any of their experiences in getting information from the industry.

Finally, Mr Ferrar, a constituent in Adelaide lost in the order of $14,000 over a day and a half of playing machines. I disclose that I am acting for her on an entirely pro bono basis against the venue and it is before the courts at the moment—proceedings have been filed. When you are next in Adelaide, would you be prepared to meet with her so she can explain to you how much money she was losing? She was losing $1,000 an hour on some occasions, and over a 15-or 16-hour period it worked out to about $14,000. Would you be able to sit down and have a cordial discussion with her so she can explain to you how she was losing that much money so quickly, which goes way beyond $295 an hour?

Mr Ferrar : I would welcome the opportunity.

Senator XENOPHON: I know, as always, you would be courteous with her. If we could arrange that, that would be very good.

Mr FRYDENBERG: Thank you, Mr Ferrar, for your testimony. I have a couple of quick questions. You say in your submission that the time line is clearly not possible by 1 January 2013. The Productivity Commission has said 2016 with exemptions for venues where there are fewer than 10 machines—they will have until 2018. Would that be a viable time line?

Mr Ferrar : Again, I hark back to the diagram on the last page of our submission. The lowest line of that has a time line which adds up to 11 months. That is an optimistic scenario for the first game to be redeveloped. There are roughly 25,000 game versions in Australia, so multiplying that by 25,000 boggles my mind in terms of an overall time frame, which is why we have consistently said a neater, cheaper option is to agree a date from which new games include whatever features are required. That is our reasoning behind taking that position.

Our members can provide whatever is required—in fact they can only provide whatever is required—in each of the states and territories because, as I said earlier, if it is not approved they cannot sell it. So, yes, agreeing on a date from which new features are incorporated into games and machines is a preferable way to move forward and, indeed, that is the way these things are done around the world.

Mr FRYDENBERG: And you have got 11 months.

Mr Ferrar : That is the first game

Mr FRYDENBERG: Secondly, you refer here to the rates of play and you also say that the maximum bet is lower than for almost all the other seven million gaming machines in operation elsewhere in the world. Just take me through that, because I have read elsewhere, for example, that in New Zealand there is a $2.50 limit on some machines and in Canada there is a $2.50 limit on machines outside casinos. So just explain to me how you came to that conclusion.

Mr Ferrar : Gaming machines are operated in more than 350 legalised jurisdictions around the world. The vast majority of those do not have limits on the maximum bet so it is a matter for industry to determine what the maximum bet is. Yes, New Zealand has a $2.50 maximum bet on machines in clubs and hotels. The casinos have an unlimited maximum bet in New Zealand. What the different legislative and regulatory frameworks require of our members varies enormously. I am thinking of a submission to one of the joint select committee inquiries two or three inquiries ago that included an appendix with a list of jurisdictions in the USA with what their actual limits were. I will resend that, if that is helpful. But typically, in the legal jurisdictions around the world there is no specific limit on the maximum bet.

Mr FRYDENBERG: Which other countries have limits—New Zealand, Canada—

Mr Ferrar : I would have to check, I am sorry. It is not so much countries as jurisdictions. As I said, all the states in the US have different approaches to this. There are some that have maximum bet limits but most of them do not.

Mr FRYDENBERG: We heard earlier from the Productivity Commission that they believe the industry has said that the impact of such a change to $1 bets would be dire on the industry. Their view was that it would have a significant impact on the industry particularly in terms of revenue. The previous witness said hundreds of millions of dollars and he also referred to the loss of jobs. What is your opinion on that?

Mr Ferrar : My first reaction is from the perspective of a supplier. It is an incredibly difficult thing to convert existing games. That is my first reaction. Provided it was done from a future point in time, the incremental cost, as I have said before, would be pretty well negligible. So from the supplier perspective, it is not much of a problem provided it is done over time.

From the operational perspective, I think—and I am speculating because it is some years since I have been working in an operational role—obviously there would certainly be many more people betting the maximum bet than currently bet the maximum bet, if you went from $10 to $1, for example.

I was thinking about this as I was driving here. My motor vehicle has 240 kilometres an hour written on its speedometer. If you legislated to reduce that by 50 per cent and it was 120 kilometres an hour maximum, I would not even know. But if you legislated to reduce it by 90 per cent to 24 kilometres an hour, the whole country would come to a standstill. It is that type of logic that leads me to believe that there would be a very significant diminution of revenue in clubs, hotels and casinos. But I am speculating.

Senator DI NATALE: I suppose we do agree on one thing. I agree with you that it is not easy to get these changes through, but for entirely different reasons.

Mr Ferrar : Okay.

Senator DI NATALE: The issue I would like to focus on is the $2.5 billion cost. We heard earlier that the cost essentially ignores the fact that there are machines that are several years old, some quite a few years old—but you are assuming that all these machines are brand new and not taking into account depreciation when you come up with that figure. Why have you done that?

Mr Ferrar : In the same sense, harking back to my motor vehicle analogy, if you asked a major motor vehicle manufacturer what it would cost to put a fifth wheel on all motor vehicles, they would most likely, I would think, take the same approach. If you wanted to do it tomorrow, it would cost this much money because there will be this many cars that are this old and have to be replaced, there will be that many cars that could probably do it with just hanging a wheel off the back and there will be this many cars—do you see what I am saying?

Senator DI NATALE: To take that analogy even further, if I owned a motor vehicle that was reckoned to be worth $500 and the cost of replacing that vehicle were $20,000, what you are saying to me is that as the owner of that vehicle I would end up with a $20,000 asset that was no different from my previous asset.

Mr Ferrar : Well, it will have a fifth wheel and you will be able to use it, whereas your previous $500 motor vehicle, I would assume, would not be able to be used anymore.

Senator DI NATALE: The point is that the machine is of very little value to the owner of the machine, the cost of replacing that machine would be a cost that they would need to face in the next year or two years, and it is a cost that, essentially, they would be faced with anyway, regardless of what we do. You are ignoring that. My $500 machine is going to break down in the next few weeks and I am going to have to come up with a new machine. The fact that this machine has an extra wheel, even if it did increase the value of the car from $20,000 to $21,000, is not a $21,000 cost to me. It is the marginal cost and the difference between the two technologies—and you are completely ignoring that difference.

Mr Ferrar : It is true that we are ignoring that when you talk about the $2.5 billion. As I said, I think it is reasonable for suppliers to say, 'If you want to do that, it'll cost this.' But, as I said to Mr Frydenberg a moment ago, if you bring in changes from a future date with new equipment, then the incremental cost is negligible. So, no, we are not ignoring that. We are saying: here is a point-in-time scenario; yes, it is going to cost $2.5 billion if you want to do it now, theoretically.

Senator DI NATALE: So who suggested doing it now as a point-in-time scenario?

Mr Ferrar : It is an argument that goes as far back as the Productivity Commission inquiry in 2009-10. We had long discussions with them then—

Senator DI NATALE: You are saying the Productivity Commission suggested doing it as 'a point in time'?

Mr Ferrar : No, I am not saying that.

Senator DI NATALE: So who has suggested doing that?

Mr Ferrar : We have, because we were responding to a direct question, a simple question: what would it cost to implement this change?

Senator DI NATALE: My point is that there is a Productivity Commission report with a very specific proposal which does not include replacing all machines at once. There has been a proposal put forward, I think, by some of the people at this table, and that does not suggest that we replace all machines at once. So why would you present costings for a policy proposal that no-one is suggesting?

Mr Ferrar : We have presented costings that are consistent with costings that we have provided elsewhere. We have presented this committee with a range of information that is consistent with what we have provided elsewhere—in particular, to the Productivity Commission.

CHAIR: Gentlemen, can I just jump in here. For the sake of clarifying this, the Productivity Commission report, which came out in, I think, June 2010, said:

The Commission proposes that the capacity for low bet limits, including $1, be included in all new EGMs from 2012.

Presumably, that meant by the end of 2012, a couple of years later.

The $1 bet limit need not be activated immediately, but would need to be 'switched on' by 2016, at which time all EGMs would be required to operate at a $1 bet limit.

So the fact of the matter is they actually had a six-year time line.

Mr FRYDENBERG: That is what I said.


Senator DI NATALE: On that basis I just find it remarkable that you would cost an entirely different proposal.

Mr Ferrar : That was the discussion that we had with the Productivity Commission before the report was generated.

Senator DI NATALE: Can you take this on notice. Would you be able to cost the Productivity Commission proposal?

Mr Ferrar : Certainly.

Senator DI NATALE: Terrific—we might actually be getting somewhere. That is good news. On getting that costed, let us use the time line that is suggested by the Productivity Commission report but let us push everything forward from this point onwards. Obviously we cannot use the dates that have been suggested—

Mr Ferrar : No.

Senator DI NATALE: so we will need to push everything out from this point on. Another issue is about the cost. Does the $5 billion social cost affect your view at all about what the right figure would be before such a reform was considered palatable?

Mr Ferrar : Our role is to supply equipment. I think your question is better targeted at people in club, hotel and casino operations. Our members are required to provide, at the risk of repeating myself, a whole range of things associated with the software and hardware of poker machines in each of the jurisdictions and now federally as well. Our preoccupation is ensuring that that equipment is provided with complete integrity and operates reliably in the field. At a personal level, of course I care—if that is your question. Can I quantify that care? No, it is a personal issue.

Senator PRATT: Mr Ferrar, do you have an idea of the time line over which gaming machines currently pay for themselves in terms of that capital cost?

Mr Ferrar : Yes. It varies by state and territory, but in general terms I think it is fair to say that it exceeds 10 years.

Senator PRATT: What is the average cost of a machine?

Mr Ferrar : $25,000, as a rule of thumb.

Senator PRATT: What is the evidence base for exceeding 10 years?

Mr Ferrar : It is provided by each state and territory regulator. We have quite accurate figures, but on different bases from each regulator. For example, there is currently a discussion paper from South Australia that has a quite accurate picture of the ages of the machines. They range right up to when gaming machines were first permitted. I only had a look at this paper yesterday but my recollection is that more than half of the machines were older than eight years.

Senator PRATT: In a sense they pay for themselves over about 10 years, or a bit in excess of that, and that accounts for costs and profit quotients—

Mr Ferrar : That is an operational question. My understanding is that the return on investment from a new machine is over a period much less than 10 years, but I do not have accurate figures on that.

Senator PRATT: The reason I ask that question is that if you were to insist on a turnover of these machines then in a sense they would become less profitable in the future once they had these kinds of restrictions on them and your return on investment might take a longer period of time. But, clearly, there is a window period before implementation that could possibly see some of those costs recouped if those machines change over before the implementation date of such a policy.

Mr Ferrar : What you are saying seems reasonable, absolutely, but it is a complicated situation where you have a whole range of difference ages and requirements by jurisdiction and by venue.

Senator PRATT: Thank you.

Senator XENOPHON: I have just spoken to Dr Livingstone and he will perhaps explain this afternoon what offer was made from the industry regarding the material that was provided.

Mr Ferrar : Fine.

Senator XENOPHON: Chair, the committee might consider the previous correspondence from the committee about similar legislation and about the toing and froing between the industry and getting access to material.

CHAIR: Yes, that will be done.

Senator XENOPHON: Thank you.

CHAIR: Are we asking Mr Ferrar for more information today?

Senator XENOPHON: It is for the committee to make that decision based on the previous correspondence with the Community Affairs committee and with the Independent Gambling Authority about the difficulty they had in obtaining information.

CHAIR: Given that some of this information is, as you described, intellectual property and perhaps commercially sensitive, would it make things easier if it was provided to us on a confidential basis?

Mr Ferrar : I am having difficulty responding because our members must respond to that. The intellectual property is their asset. It will certainly be commercially sensitive. It is the basis upon which they operate. I have to defer to them and will respond to the question at a later time.

CHAIR: Okay, but at this stage we are not then actually asking for that information?

Senator XENOPHON: It is a decision for the committee to make given the previous correspondence.

CHAIR: All right, we may or may not get back to you on that, Mr Ferrar. There are no further questions. Mr Ferrar, it is always a spirited exchange when you front up but you always do front up, so good on you. Your testimony is always very helpful, even though not all members always agree with all aspects of it. Thank you very much.