Pokies: the Rise of the Machines

by Michael West | Sep 10, 2018 | Business

There is a mass transfer of wealth afoot, a transfer of wealth from the poorer city suburbs and rural regions to the wealthier parts of Sydney.

Analysis of poker machine and local council data across the state shows a saturation of poker machines in poorer, less educated areas. Further, losses per machine are far higher for local government areas whose residents can least afford them, suburbs more reliant on social security and assistance from charities.

The highest poker machine losses, on a per household basis, were in Murray River, Fairfield and Federation. Murray River council shows a loss per household of $8,865 dollars. The second largest losses fall to Fairfield in Sydney’s western suburbs at $5,668 per household. These figures are for the 2016-2017 year.

In comparison, losses were lowest in the wealthiest suburbs in the state, mostly in Sydney. Ku-ring-gai on Sydney’s leafy North Shore showed a loss of just $22.50 per household. Repeating these figures for emphasis: Ku-ring-gai households lost just $22.50 on average for the year while Fairfield households lost $5,668.

In the harbourside suburbs of Hunters Hill and Lane Cove, losses per household were only $48.30 while Woollahra recorded average household losses of just $81.90.

The research deployed data from the Australian Bureau of Statistics (ABS) and the Department of Liquor and Gaming for Local Government Areas (LGAs) and encompassed only poker machine information for clubs. Hotels are not included.

Australians are the biggest gamblers in the world. NSW is the biggest gambling state and poker machines in clubs are the biggest gambling segment. The 69,552 club poker machines tipped in $776 million in state gaming taxes last year.

The state take is up from $414 million in 2003 and despite the industry and government rhetoric about curbing problem gambling, the budget estimates forecast growth at 3 per cent.

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Other factor besides sheer poker machine saturation in poorer suburbs come into play. The councils along the border with Victoria all showed high losses. This is in part due to Victoria’s superior poker machine regulation – bets are capped at $5 rather than $10 – and the fact that NSW clubs were deliberately littered with poker machines from the 1990s onwards to attract gamblers from Victorian and South Australia.

Still, the over-riding message, the compelling message from this analysis is that poorer suburbs are taxed far more heavily than richer suburbs.

Cumberland in Western Sydney, which boasts many of the biggest clubs in NSW, accounts for 2,379 machines which delivered a profit of $219 million in 2017 and $51.6 million in taxes for the state government.

Profit per machine was $100,452 in Cumberland, compared with profit per machine in Woollahra of just $18,343 and $13,343 in Hunters Hill. Tax per household in Woollahra was $3.60 compared with $680 per household in Canterbury Bankstown.

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Machine numbers per household also tell a disturbing story: there are less than one machine per household for Woollahra, Ku-ring-gai and Hunters Hill while Murray River had 16 machines per household, Fairfield 5 machines, Cumberland three machines and Canterbury Bankstown 3.3 machines.

In Campbellown, Woollongong, Blacktown, Shellharbour, Burwood Strathfield and Penrith, the numbers are high. In Sydney, Mosman North Sydney and the Blue Mountains the numbers are low.

That is, both the saturation of poker machines, poker machine losses and poker machine taxes. These taxes go to state government revenue and are spent according to state government policies. Therefore it is fair to say that, as state spending on hospitals, schools and roads, is spread fairly evenly, and there is a disproportionately high flow of taxes from poorer to more wealthly suburbs, that the poor are subsidising the rich.

Moreover, while there is a benefit to state government finances, the Commonwealth government and aid organisations pick up the tab for social security, social dislocation, and economic losses from problem gambling. They foot the clean-up bill if you like.

The federal government funds Centrelink, social security programs, mental health programs, and it subsidises a range of other programs and charities to assist the vulnerable.

The charities themselves operate tax free, their budgets are strained.

While the big Catholic clubs make more than $50 million a year in revenue each from pokies alone, Catholic charities such as Vinnies and Catholic Social Services pick up the tab for helping victims of problem gambling.

We avoided ethnic profiling in this analysis. We are all Australians. There are however some observations to be made as to age and education. Looking at Western Sydney versus Sydney’s North Shore and Eastern Suburbs, it appears the pokies are taking from the young and under-educated to give to the older and more educated.

In Fairfield, according to the ABS data, the median age is 36. In Cumberland it is 32 and in Canterbury 35. In Ku-ring-gai, median age is 41, while in Hunters Hill it is 36 and Woollahra 39.

The difference is more pronounced when it comes to education. In Ku-ring-gai, 47.9 per cent have a bachelor’s degree or above. For Hunters Hill the figure is 47.2 per cent and for Woollahra 48.9 per cent while, in Fairfield, some 11.3 per cent have a bachelor’s degree or above, and in Cumberland the figure is 22.2 per cent and in Canterbury 19.7 per cent.

Another interesting facet of the research was profit per machine.
Cumberland and Fairfield both came in at above $100,000 profit per machine while Hunters Hill, Ku-ring-gai and Woollahra all averaged below $20,000 per machine, less than 20 per cent of the return.

Sorry for the delay. I have some quotes below from David Kelly, Senior Operation Manager – Health, St Vincent de Paul Society NSW.

“Vinnies NSW come across those with problematic gambling every day and in a range of circumstances. Often people who are struggling with the harms related to their gambling will come to Vinnies for other reasons caused or exacerbated by their gambling – they need help with their finances, relationship breakdowns, job loss, mental health or emotional concerns or with homelessness or issues around alcohol and other drugs.

“Unlike harmful use of some drugs, problematic gambling often ‘creeps up’ on people. Gambling, particularly on the pokies, is socially acceptable and problematic use is often hidden or not well recognised early enough.

“Gambling, particularly on machines, is targeted at those who can least afford it and at those for whom it will cause the greatest harm. These are people who are coming to our professional services and who are supported by our members.

“We would certainly welcome research and investment into more effective, evidence-based and integrated treatments for gambling use and better campaigns to assist in understanding the impacts of gambling on individuals, families and communities.”

The main claim which the state government and the clubs industry rely on to justify the rapacious expansion of poker machine revenue is that clubs provide community service. They do, via funding for local education, social and sporting initiatives.

Yet, as demonstrated by our investigations into the sector the spending on community services is dwarfed by the income from poker machines.

An investigation of DOOLEYS’ financial statements shows losses per member from poker machines over a nine-year period were 38 times higher than the amount spent per member on “community services”.

This calculation based on the average size of the club’s membership in each year. In the year to June 2017, DOOLEYS spent $30 per member on community services and took in $967.70 per member in poker machine losses.

We are awaiting a response from the Archbishop of Sydney, who is DOOLEYS’ club patron.

The ratio of pokie revenue to community service is of similar dimension at other clubs. The bulk of spending is on building and construction programs. This begs the question, is the government of NSW prepared to address the gross inequity of preying on and taxing the poorer areas of the state by embarking on reform.

Holy Dooley, Catholic clubs make a killing from poker machines

Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.

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