Safe to punt on some reform

Safe to punt on some reform
Colin Kruger

He may abhor poker machines, but the Tasmanian MP Andrew Wilkie sure knows how to gamble.

Whatever is happening behind closed doors in Canberra, it is hard to imagine that the Prime Minister, Julia Gillard, will be able to just tear up the Wilkie agreement on gambling reform that allowed Labor to form government.

All indications to date suggest that reforms may be postponed, while trials are held to firm up the case for mandatory pre-commitment systems on poker machines, rather than legislation being hastily rushed through Parliament before May 8.


Wilkie set this artificial deadline to ensure reform was enacted while his support for the government was still critical to its survival, but his luck ran out last year when the government effectively increased its majority in the lower house.

Wilkie is now going to have to play a longer-term game, and this could go either way. On the one hand, a delay could draw some political heat out of the issue and let the government have a better run at gambling reform down the track. On the other, it could allow the poker machine industry, or the government, to white-ant the proposal.

Pokie industry interests do not appear to be counting on the latter scenario. Clubs Australia stayed in attack mode this week, criticising an Australia Institute report that suggests the cost of reforms could be between $171 million and $342 million, a fraction of its estimate of $5 billion.

Clubs' high figure may be considered a joke, but there is no doubting the fears of reform held by the recipients of poker machines' annual income of about $12 billion.

Mandatory pre-commitment, which essentially forces gamblers to determine how much they are prepared to lose, has its flaws.

While the pokie industry's estimates of the cost of reform border on the farcical, the smartcard system being proposed undoubtedly would cost a substantial amount of money.

The pre-commitment registration process would almost certainly put off some casual punters without a gambling problem.

No one knows for sure what the financial impact of pre-commitment laws would be, but some analysts appear to back Clubs Australia's forecast that mandatory pre-commitment could cut pokie revenue by as much as 40 per cent.

Pubs and clubs won't be the only ones affected. Deutsche Bank analysts forecast that the potential loss of earnings per share (EPS) in the listed gambling sector could range between 5 per cent and 36 per cent.

The biggest impact would be on Tabcorp's casino spin-off, Echo Entertainment Group, whose EPS could fall by as much as 36 per cent because of its reliance on income from poker machines, Deutsche says. By comparison, the fall in EPS for James Packer's Crown is expected to be as little as 12 per cent. Tabcorp and Tattersalls are almost completely removed from the picture because their monopoly on pokies in Victoria expires this year. However, this is all guesswork and ignores one of the most surprising criticisms that independent gambling experts have of mandatory pre-commitment : the paucity of research showing that pre-commitment actually curbs problem gambling.

In fact, some expert testimony to the joint Senate select committee on gambling reform, chaired by Wilkie, indicated that problem gamblers may gain little from pre-commitment legislation because these hopelessly addicted individuals get to set their own limits.

It appears that the promise of mandatory pre-commitment, if it works, is that it will help those in danger of addiction by setting limits when they are not in the thrall of their addiction.

If the Productivity Commission was correct in estimating that 40 per cent of the pokie industry's earnings are from problem gamblers, mandatory pre-commitment doesn't sound like such a bad deal for the industry after all.

If you want to consider a worse outcome, how about a long-term plan to phase out high-impact pokies for their low-impact counterparts over a time frame that reflects the normal replacement cycle for machines?

By low-impact we are talking maximum bets of $1 and maximum payouts of $500, exactly the kind of machines that would be exempt from mandatory pre-commitment under Wilkie's proposal.

While not foolproof in preventing gambling addiction, there is much empirical evidence to suggest this could be far more effective and far easier to implement.

If successful reform does slash earnings from poker machines, it won't be only the clubs, pubs and casinos that will feel the pain. NSW and Victoria rely on pokie revenues for more than 10 per cent of each states' income.

For Ted Baillieu's recently installed government in Victoria, the potential heartburn from pokie reform is compounded by a poisoned chalice inherited from the Labor government it deposed last year. When poker machine licences run out for Tatts and Tabcorp in August, the two companies are meant to receive a combined compensation bill of about $1 billion.

When the former premier John Brumby decided, in 2008, that, despite all evidence to the contrary, the government did not have to pay compensation for the loss of licences, all he did was ensure there would be a day of reckoning with two listed companies that are obliged to protect their shareholders' interests. Neither company has said much but their carefully worded statements make it clear legal action will be taken if Baillieu doesn't pay his predecessor's bill.



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