A study colleagues and I did for UnitingCare Australia on the relationship between pokie losses and community benefits has generated a predictable response from the gambling lobby.

Our study found that, across the four Australian jurisdictions we examined (NSW, Victoria, Queensland and the ACT) about $9.7 billion was lost on pokies in 2010-11, and about $180 million was claimed by pokie operators as community benefit. That’s 1.9% of the total of losses.

In NSW, the ratio of losses to benefits was worst, at 1.3%. NSW pokie users spent just under $5 billion in 2010-11, and the clubs provided a claimed $63.5 million in benefits.

Our study also reinforced other research, which has shown pokies to be concentrated in areas of disadvantage. For example, in the federal electorate of Blaxland in south-west Sydney, pokie users lost over $177.5 million and claimed benefits amounted to just over $1.5 million — about 1.4%. More significant, however, was the relationship between this and the income of people living in the electorate. At $396 per week, median individual income in Blaxland was the lowest of the 41 federal electorates we examined. We were able to estimate the average expenditure per pokie user in the area because we know on average what proportion of the population actually use pokies, and average losses amounted to over $7000 per annum per user — more than a third of median income.

The opposite extreme was Kooyong in Victoria, where pokie users spent about $20 million in 2010-11 and received only $27,400 in benefits. But in Kooyong, median individual income is about $790 per week, and pokie users spend about 2.2% of that on the pokies.

So not only do pokies provide miniscule community benefits, they also take most money out of the pockets of those who can least afford it.

The pokie industry says our study failed to take account of the fact that pokie clubs are non-profit community organisations, and that therefore everything they do is a community benefit. There are a few problems with their argument, however.

The first of these is that pokie clubs are not generating any more economic activity than would otherwise occur. They’re simply diverting some of that (in some cases, a hefty proportion) into their poker machines. That means that other purposes are not being met — things such as rent, mortgage repayments, food, bills, clothes, schoolbooks and so on. Mundane as these purposes are, they provide real benefits to individuals and, particularly in the case of education, etc, also provide massive community-wide benefits.

So there’s a good argument that these prosaic purposes are much more economically beneficial than money put into a poker machine, the profits of which are used largely to run the club where they’re housed, and that in any event generally generate far fewer jobs than most of the alternative uses.

More broadly, why is a job in a pokie venue more valuable than that of the family-run restaurant down the road, which can’t compete with the pokie-subsidised meals on offer at the pokie venue? Pokie clubs or pubs are no more virtuous than any other business when it comes to economic activity.

Unlike other businesses, pokie clubs pay no company tax on their profits. Yes, they do pay a state government gambling tax — but in NSW that averages 20%. Hotels pay more (and do pay company tax) but clubs pay a lower rate and pay no company tax. As the Productivity Commission commented, this is hard to justify — especially for the massive casino-like clubs of NSW, where pokie venues operate automated casino-like table games as well as hundreds of pokies. They bear as much relationship to a community organisation as Barcelona FC does to your local kids’ soccer team.

A perhaps more important problem is that pokies are, for want of a better term, an addictive product. The Productivity Commission estimated very reasonably that 40% of the money that is lost on the pokies comes from people with a serious gambling problem, and another 20% from those with a moderate or developing problem.

Half the money pokie venues make thus comes from people who have little control over their gambling, and are spending money they certainly can’t afford to lose. The end result of such expenditure is the ruination of life and the entrenchment of poverty. The worst aspect of this is that those who suffer most are innocent family members, particularly children. If you wanted to find a way to transmit poverty between generations, the pokies would provide an excellent model.

Pokies are not magic puddings. They don’t generate economic activity that wouldn’t be there anyway, and they divert resources away from more productive alternative purposes. And they undoubtedly inflict massive harm on vulnerable communities.

Of course, all that money has its uses — like bludgeoning the federal government into submission when it sought to minimise pokie related harm using a precommitment system. The pokie lobby proudly proclaimed that it had $20 million on tap for that purpose. As we now know, it worked a treat.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey