Saturday, 16 December 2017

Pokie reflections

By all accounts Labor’s policy to remove pokies from communities after 2023 was unexpected.

However the risks involved when the gaming monopoly expires has previously been discussed by both parties to the arrangement, the government and Federal Group.

Treasury head Don Challen  told a hearing of the Public Accounts Committee on 16th July 2003 which was looking at a premature extension of the original deal due to expire in 2009:

“I did say to Mr Farrell across the negotiating table a number of times that 'Come 1 January 2009 you don't have a business'.  I put a reasonableness test on the outcomes we get from the negotiations and if I didn't think they were reasonable in the interests of the Tasmanian community I would have kept pushing Mr Farrell until I got him to the point where I thought we had a reasonable outcome.  In the back of his head he knows that legal possibility of the licence coming to an end is there and that is a discipline on him to come to the negotiations with a realistic attitude.”

Quite clearly both parties negotiated the 2003 deed extension with a sunset clause in full knowledge the punch bowl may be removed in 2023. If Federal Group have a risk management strategy there’s little doubt what should be number one on the list.

The last bit of Mr Challen’s comment is significant:

:..... he (Mr Farrell) knows that legal possibility of the licence coming to an end is there and that is a discipline on him to come to the negotiations with a realistic attitude.”

That’s exactly what he failed to do this time.

It was crystal clear the government was looking for a market based solution to allocate future rights to operate gaming machines and provide network monitoring services. The aim was for the government to get a greater return from a government protected activity.

In addition there was widespread community concern about the adverse impacts of pokies in the community.

So what did Federal Group/THA do? Collectively they gave the government and the community the two fingered salute. Their joint submission to the parliamentary inquiry presented on the 18th August 2017 offered no concessions to either the government or players. A tender to allocate licenses, it was submitted, would be very costly and generate considerable uncertainty and massive disruption for all stakeholders. Just gift the licenses to us guys. We need certainty if we’re to invest, particularly in regional areas, something we’ve failed to do in the past but which we promise to do in the future. And while you’re at it make the licenses perpetual so that collectively we can receive a government guaranteed windfall gain of $150 million so that our properties will increase in value and we can borrow more to do all the things we should have done over the last 20 years.

It was a breathtaking greedy grab, hardly a realistic solution to all the community and government concerns.

Both the Federal Group and THA forgot about geese that lay golden eggs. Did they really imagine this goose would continue to lay as in the past and they could cream everything off for themselves?

THA didn’t need Federal Group. The other way around if anything. Next time Paul Lennon knocks on the door, don’t answer it. THA is badly advised if it believes the employment arguments for pokies in regional areas. Venues may benefit but communities don’t. How can the THA possibly believe that stemming the outflow of 80% of player losses to Network Gaming won’t benefit a town. You don’t need economic models. Common sense will suffice.

Even though there are a few unknowns with Labor policy, there are massive unknowns with the Libs’ position. How will licences to operate be allocated? By tender? Gifted? For those currently in the queue? Those currently operating? What about the network operator or LMO? How will that be allocated? More than one LMO? What about Community Support Levy in casinos? What about raising Keno taxes from their current woeful level? How about Keno commission to pubs and clubs which is very low? What about a Keno levy for tourist infrastructure? Are the Libs going to make any changes that may impact the Federal Group?

With Labor surrendering its fan club membership, the Federal Group appears to have lost a lot of its leverage. Its placard waving rent a crowd performance was pathetic. How will Saffire and MACq01 be affected. People stay there because they haven’t got pokies. What about 9/11 bottleshops? How will they be affected if pokies go? Sales will increase if anything. It’s not Bec White who presents a problem for 9/11. It’s Dan Murphy when he builds at the Maypole.

If the THA is to look after its members it will have to adopt a different position to that of the Federal Group.  Ironically their pig headed obstinacy has contributed to the demise of the golden goose. Soon it’ll be everyman for himself.

Other recent posts on gaming policy

·       Will the sky fall in  looks at the effect of Labor’s policy to remove pokies in the most regional area, the electorate of Braddon.

·        Federal Groups' pokie haul details how Federal Groups’ 20 year gaming monopoly has been worth $400 million.

·       Federal Group stitches up a deal analyses the proposed joint deal with THA to keep the rivers of gold running into their joint coffers. (Included in full in the final report of Future Gaming Markets parliamentary inquiry.)

·       Federal Hotels treads water looks at the 2016 financials and detects trouble ahead.

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