Friday, 15 September 2017

Federal Group's pokie haul


Back in 1996 the Federal Group’s leisure business comprised the two casinos. Its revenue in that year was $134 million, well over half coming from gaming activities including tables, pokies and Keno. Net profit after tax for the leisure business was $4.4 million. The Group’s freight business provided another $2.2 million in profit. Borrowings were $50 million. In 1996 there was no spare cash to pay dividends to shareholders.

All was soon to change. On the first of January 1997 poker machines were rolled out into the community. Over the next 20 year the Group bought 12 pubs, the 9/11 bottleshop chain, built the Saffire resort, bought the leasehold business known as the Henry Jones Art Hotel, and acquired the lease on the new Maq01 hotel on Hobart’s waterfront.  The cash tsunami was such there was enough left over to pay $238 million as dividends to shareholders over the period. At the end on the 2016 year borrowings were $123 million, an increase of only $73 million over the 20 year period. Cash from pokies funded the show.

Saturday, 26 August 2017

Federal Group stitches up a deal?


The Joint Select Committee inquiry into Future Gaming Markets recently received a joint proposal from the Tasmanian Hospitality Association and the Federal Group and heard evidence from the two parties.

The proposal highlights most of the economic and financial issues at stake for the inquiry. The following note was submitted to assist the Committee in its important deliberations.

The proposal will perpetuate existing bad public policy. Benefits will accrue to the few existing participants in proportion to the benefits they have already received over the last 20 years. As a way of assisting businesses to grow it is poorly targeted. Allocating perpetual licenses to existing venues for nil consideration will not only give a windfall gain to a privileged few with unsubstantiated  benefits for the wider community, but will tie the hand of future governments if ever they feel a need to make changes.

Wednesday, 31 May 2017

State Budget: Back to the barn


Put away the Prozac. There are now surpluses as far as the eye can see.

That is the message from this year’s State budget.

Friday, 26 May 2017

Budget pork


If it sounds too good to be true it probably is.

When a government announces in a Budget that it will spend extra on health next year, is that compared to

1.   what has been spent in the current year?; or

2.   what it intended to spend a year ago?

In the case of health the answer is 2.

In last year’s budget the Tasmanian Health Service THS spending was intended to be $1,368 million in 2016/17 and $1,362 million in 2017/18.

If one looks at the Policy and Parameter Statement in this year’s budget papers (Budget Paper 1 page 67) THS’s estimated outcome for 2016/17 shows an extra $106.7 million being spent (or estimated to be spent) for 2016/17. This suggests THS spending of $1,475 million for 2016/17.

Now looking at this year’s budget papers, intended spending by THS (Budget Paper 2 vol 2 page 109) for 2017/18 is $1,460 million.  That may be $98 million more than what was intended a year ago but it is less than what was actually spent in the current year 2016/17.

If the system is in crisis spending less is unlikely to fix the problem.

That’s what Building Tasmania’s Future means. The Mercury was quite correct in depicting the Treasurer in this morning’s edition as a snake oil salesman with a warning that the tonic being marketed may contain pork.

There’s an unreality about the budget. Let’s have a look at the overall Income Statement (Budget Paper 1 page 47), in particular the figures for employee expenses. To make it easy part of the relevant table is pasted below.




I’ve added the estimated outcome figures from page 191. It easy to see the increases in employee expenses are $29 million in 2017/18 then $30 million and $31 million in the next two years.

In % terms that’s a 1% increase in each of the next 3 years. Scarcely believable when the estimated outcome for the current year 2016/17 was $60 million above budget and the Treasurer had the place ticking over like a well oiled machine. Even less credible given wage increase are tracking at a rate higher than 1%, and employment in the health area is supposed to rise.

The coming election is sure to be a pork fest.

Wednesday, 17 May 2017

The bank competition myth


“Australian banks are upset. Their $30 billion per year gravy train of profits from the Australian people is finally being slowed down.

A levy on bank liabilities of 0.06% annually was announced as part of the 2017 Federal government budget, and is expected to raise about $1.5 billion per year, or 5% of bank profits.


To be clear, the banking system is a regulated cartel. Its primary function is to provide a public good in the form of the money supply of the country. As such, we would expect it to be uncompetitive, and use tight regulatory controls to ensure that the privileged position of private banks is not being abused.

In my book, Game of Mates, I explain that the result of this uncompetitiveness and lack of adequate regulation in Australia is that over half of the banks' profits can be considered economic rents, which could be taken back with better regulation and shared with the public at large.”


Read the full article on Cameron Murray’s blog.

Game of Mates


“This is the story of how Australia became one of the most unequal societies in the Western world while merely a generation ago it was one of the most equal. It is the story of how groups of ‘Mates’ have come to dominate our corporate and political sectors, and managed to rob us, the Australian majority, of over half our wealth.”

So begins a just released book by one of my favourite economists Cameron Murray, written with another Queenslander Paul Frijters.


Tuesday, 2 May 2017

A note on GST relativities


If you want to understand more about how the GST pool is split between States have a look at the following table.