Monday, September 10, 2007

Gambling in Australia & the pokies

This is an expanded repost of an earlier post. Four Corners has a show on gambling in Australia tonight and I thought I would gather my thoughts and knowledge together before it goes to air. This show mainly targets the pokies and presumably mainly NSW where there are 100,000 of them - more than all other states combined.

Australian Gambling Statistics 2006 (not available online, why!) is prepared by the Queensland Treasury and provides the most comprehensive aggregate picture of gambling in Australia. It provides consistent time series data covering the period 1979-80 to 2004-o5. Gambling expenditure measures total losses while gambling turnover measures the total amount wagered. The figures for 2004-05 are surprising:

1. In 2004-05 Australians overall gambled $142 billion in turnover of which 72% was on gambling machines (pokies). In NSW gambling on pokies is about 88% of total wagering of around $61 billion ,in Victoria it is around 64.5% of total gambling of $37 billion and in Queensland it is 62% of total gambling of $23 billion.

2. The biggest gamblers on average in terms of turnover are in NSW ($11,880 per head), Victoria ($9,627) and Queensland ($7,846). But never fear Queenslanders - your gambling turnover is increasing faster than any state at 10.4% with 18% growth in pokie turnover.

3. Total gambling expenditure in Australia is about $16 billion with the average NSW citizen losing about $1336 annually, average Victorian losing $1133 and average Queenslander $1003. The majority of losses are on pokies - in NSW these comprise 71% of all losses and in Victoria and Queensland about 55%. Again Queensland, take heart, your losses are growing strongly - again mainly from pokies.

4. Racing, Lotto and Casinos are fairly static or declining markets. They are small fry. The big area and the big growth area is pokies. Gambling expenditure on racing in 2004-05 was $2.2 billion or about 12.7% of total gambling expenditure. Gambling in casinos was $2.6 billion or about 15.6%. Gambling on Lotto, Keno, Pools and Instant lotteries were around $4.4 billion or around 24.7 % of total gambling expenditure.

5. There is an interesting situation in Western Australia where pokies are restricted to the Burswood Casino or to non-coin dispensing non-profit machines in hotels. As I wrote in an earlier post:

'According to the WA Government the number of machines in WA is 1 for 1000 of population which is 12X lower than the national average. The level of gambling expenditure relative to income is also claimed to be the lowest in Australia.

.…WA has the lowest per capita expenditure on gambling of any Australian state. In 2004-05 it was $520 per head compared to the national average of $1097. That there is not widespread of availability of pokies has not lead to a substitution towards other forms of gambling. For example total expenditure on horse race betting per head in WA is $145 which is lower than the figure for NSW and Victoria.

This seems to me powerful evidence for restricting the supply of poker machines if you believe they cause social damage. Restricting supply reduces losses overall as people do not substitute alternative forms of gambling and do not seem to search out distant machines.

The same point has been mooted in Melbourne and elsewhere and is the basis for restricting the supply of pokies in poorer areas of Melbourne – further restrictions of this type are mooted in today’s Age.

People tend not to drive across town to play the pokies – an explanation could be that playing them is partly cue-related - so if they are not around you are more likely to forget about them or don't think about playing them. So you can deal with pokie –induced social problems in a particular area of social disadvantage by limiting the supply of pokies in that area.

The pokies offer low expected loss gambles but provide the basis for rapidly-repeating plays and therefore a rapid accumulation of losses. Playing the pokies has a hypnotic effect on gamblers that creates ‘within session’ self-control problems.'

BTW, other posts I have made on gambling recently include a primer on the industrial economics of gambling regulation, a piece arguing that the psychological responses to gambling losses may be more muted than we think because of rationalization propensities, a piece showing the huge profits remaining for machine owners even after government taxes, evidence of strong public support in Victoria for cutting pokie numbers and some national polling here, a number of posts on the very dubious politics being played out in Victoria in awarding gambling deals to monopolists with friends in the Labor Party (also see here), a critique of the Becker-Posner proposal to liberalise on line gambling and some exaggerated claims on problem pokie players. Also a post on the ‘libertarian-conservative’ defence of the case for policy interventions in this setting.

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