Duopoly works just fine for Packer

OPINION

James Packer and his web of lobbyists must be laughing themselves silly over how easy it is. Within eight months of publicly floating his Barangaroo casino ambition, Packer has the Liberal and Labor Parties in his back pocket along with key media types and organs while the remnant of unseduced commentary has been suckered into playing by Crown’s house rules - lured into a skirmish instead of considering the war.

The big governance, ethical and financial question Packer has avoided isn’t whether the second casino vision he created should be put up for tender (and that should be a no-brainer anywhere outside corrupt banana republics and New South Wales), but what the optimum size of the casino industry should be in this state.

If logic was allowed into this structurally dubious situation, the arguments advanced by Packer for granting his Barangaroo licence would mean multiple new casinos should be permitted. If it’s all about plundering mug Chinese tourists, more and competing casinos would lure many more punters and provide a better product. Vegas and Macau haven’t become tourism centres because they have just two casinos.

(Singapore’s highly limited casino industry is different because, well, it’s Singapore – an exception for various geographical reasons that makes the rule.)

But in the great tradition of Australian capitalism, the last thing any big player wants is genuine competition. A monopoly is the ideal, but in field after field, it’s shown a cosy duopoly functions nicely.

My guess is that, given a choice of a rational casino policy and the existing monopoly, Packer would ditch his second licence idea in favour of the monopoly and one way or another come up with the readies to acquire Echo or its Star casino.

As argued here when the circus started back in February, our state governments suffer from gross hypocrisy on two levels when it comes to being “a little bit pregnant” with the casino industry. The result is a Corruption 101 lesson in governance risk.

Having decided that it is desirable to have a casino, there is no logic to artificially limiting the number of them. The role of government should be to determine its tax take, set the necessary probity standards and rigorously enforce them. The market then decides the viable number of operators. And all those glittering jobs and opportunities promised by Packer’s television ads can be multiplied.

Before the holy and righteous mount the barricades over such a suggestion, the bigger hypocrisy should be acknowledged: Sydney already has an army of casinos marching out through its heartland, we just chose to call them clubs, supported by the pokie-dependent pubs. The difference between a roulette wheel spun by a dealer and computerised roulette operated by a button is only a matter of aesthetics and operating expense.

New South Wales rejoices in being the state of the biggest losers in the nation of biggest losers.

Up-to-date statistics on our gambling addition are rather surprisingly don’t exist – the Australian Bureau of Statistics is missing in action on this front. The most recent reasonably reliable numbers are for the 2008-09 year when Australia’s gambling turnover was $161.2 billion. By way of comparison, that’s $34.5 billion more than the ATO collected in personal income tax that year.

Far and away our biggest means of losing money was gaming machines - $114.1 billion. Casinos accounted for $19.5 billion, racing $19.1 billion, Lotto $4 billion, sports betting $2.7 billion, sundry scratchies, keno, pools et al the rest.

(In the absence of hard information, I would suggest 2008-09 was not a good year for the gambling industry as the uncertainty of the GFC hit and our habit would have picked up faster than disposable income since then, particularly with the greater promotion of proliferation of sports betting, the impact of no-smoking areas wearing off and the bigger and flasher Lotto-style jackpots on offer - as we all troop off for our tickets in next week’s $100 million Oz Lotto gamble.)

In fairness to our capacity to throw money at the house, the bottom line loss isn’t as outrageously large – the pokies do spit out some encouraging coins along the way, some people do back the winner of the Cup.  Our gambling “expenditure” – bets minus wins – in 2008-09 was $19 billion – just $4 billion less than we spent on clothing and footwear, $7 billion more than we spent on alcoholic drinks.

That loss works out at about 3.1 per cent of household consumption expenditure. It may be one of the reasons why so many Australians think they are worse off despite being paid more money in both wages and social welfare. In constant 2008 dollars, we only lost $7 billion back in 1988-89 – our gambling habit has been steadily ripping more money out of our purses and wallets.

And we continue to delude ourselves. The nearest the ABS gets to counting gambling is the self-reported element in its household expenditure survey. We told the ABS we only blew $2.2 billion on gambling in the latest year. Adding my own rough estimate for the rise in disposable income to the 2008-09 figures, the reality was more like 10 times that figure.

We have collectively decided that there’s nothing wrong with any of that, politically bowing to the self-perpetuating club that is the clubs industry and ruling out any attempt to contain our pokie habit.

That’s the sort of a decision a society is free to make, but having made it, good government should be pursuing the optimum outcome from its gambling industry instead of bending over for billionaire mates and the clubs lobby. The failure of the NSW government and opposition to do so means we have a bunch of second-rate politicians putting minority interests ahead of the overall population.

We are a state that gambles more than our nation of gamblers. At least we should do it properly.

And when it comes to losing, casinos take more from ordinary punters. Those 2008-09 figures show the losing percentage of casino turnover was 17.8 per cent, following by 13.7 per cent on the races and 9.2 per cent on the pokies. But for the problem gamblers – typically the less educated and less intelligent – is that the loss ratio tends to be 100 per cent.

Something to think about as we enjoy what will be a record festival of the punt next Tuesday – the Melbourne Cup and Oz Lotto double.

Michael Pascoe is a BusinessDay contributing editor who intends to spend the Oz Lotto jackpot on …

smh.com.au

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