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Socioeconomic banditry: poker machines and income redistribution in Victoria. Prepared for the National Social Policy Conference, University of New South Wales, Sydney, 4-6 July 2001.



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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.

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

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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).

. Table 1: Net Australian Gambling Losses by State and Type: 1999-2000 ( $million )

NSW Victoria Queens-

land

SA WA Tasmania ACT NT Australia 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-

land

SA WA Tasmania ACT NT Australia

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

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1 97 4 - 7 5 1 97 5 - 7 6 1 97 6 - 7 7 1 97 7 - 7 8

1 97 8 - 7 9 1 97 9 - 8 0 1 98 0 - 8 1 1 98 1 - 8 2

1 98 2 - 8 3 1 98 3 - 8 4 1 98 4 - 8 5 1 98 5 - 8 6

1 98 6 - 8 7 1 98 7 - 8 8 1 98 8 - 8 9 1 98 9 - 9 0

1 99 0 - 9 1 1 99 1 - 9 2 1 99 2 - 9 3 1 99 3 - 9 4

1 99 4 - 9 5 1 99 5 - 9 6 1 99 6 - 9 7 1 99 7 - 9 8

1 99 8 - 9 9 1 99 9 - 0 0

YEARS

$ MILLION

Lines: Real net poker machine losses Bars: Real net total gambling losses (In order of size, highest to lowest: Australia, NSW, Victoria)

Figure 2: Real per Capita Gambling and Poker Machine Losses, Australia, NSW and Victoria: 1974-75 to 1999-2000

0

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400

600

800

1,000

1,200

19 7 4- 7 5 19 7 5- 7 6 19 7 6- 7 7 19 7 7- 7 8

19 7 8- 7 9 19 7 9- 8 0 19 8 0- 8 1 19 8 1- 8 2

19 8 2- 8 3 19 8 3- 8 4 19 8 4- 8 5 19 8 5- 8 6

19 8 6- 8 7 19 8 7- 8 8 19 8 8- 8 9 19 8 9- 9 0

19 9 0- 9 1 19 9 1- 9 2 19 9 2- 9 3 19 9 3- 9 4

19 9 4- 9 5 19 9 5- 9 6 19 9 6- 9 7 19 9 7- 9 8

19 9 8- 9 9 19 9 9- 0 0

YEARS

$

NSW total gambling

NSW poker machine

A ustralia total gambling

Victoria total gambling

Australia poker machine

Victoria poker machine

POKER MACHINES AND INCOME DISTRIBUTION IN VICTORIA

143

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.

Table 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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10

20

30

40

50

60

70

80

1 9 7 4 - 7 5

1 9 7 5 - 7 6

1 9 7 6 - 7 7

1 9 7 7 - 7 8

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1 9 7 9 - 8 0

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1 9 8 1 - 8 2

1 9 8 2 - 8 3

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1 9 9 9 - 0 0

YEARS

%

NSW

Victoria

Australia

Figure 4: Poker Machine Losses per Adult in Metropolitan LGAs Ranked by SEIFA Index of Socioeconomic Disadvantage: 1998-99

Maribyrnong

Greater Dandenong

Darebin

Brimbank

Moreland

Hume

Hobsons Bay

Whittlesea

Yarra

Frankston

Moonee Valley

Casey Kingston

Wyndham

Port Phillip

Monash Knox

Banyule

Maroondah

Glen Eira

Whitehorse

Manningham

Stonnington Bayside

Boroondara

0.00

5.00

10.00

15.00

20.00

25.00

0 5 10 15 20 25 30

SEIFA Ranking (most disadvantaged to least disadvantaged)

$ Per Adult (18+) Per Week

JAMES DOUGHNEY

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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

Figure 5: Poker Machine Losses per Adult in Rural and Regional LGAs by SEIFA Index of Socioeconomic Disadvantage: 1998-99

La Trobe Bass Coast

East Gippsland

Mildura

Hepburn

Glenelg

Greater Shepparton

Swan Hill

Greater Geelong

Ballarat

Greater Bendigo

Colac-Otway

Warrnambool

Wodonga

Northern Grampians

Mitchell

Wellington

Delatite

Campaspe

Wangaratta

Baw Baw

Horsham

South Gippsland

Macedon Ranges

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

0 5 10 15 20 25 30

SEIFA Ranking(most disadvantaged to least disadvantaged)

$ per Adult (18+) per week

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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.

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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.

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Figure 6: Poker Machine Losses per Adult by SEIFA Index of Socioeconomic Disadvantage: 1998-99 (at ABS CD +/- 10 level)

0

5

10

15

20

25

800 900 1000 1100 1200

SEIFA (most to least disadvantaged)

$ Loss per Adult per Year

Melbourne SEIFA average (approx. 1025)

Venue CD +/- 10 average (approx.

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.

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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?

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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.

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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.