Saturday, 10 February 2018

Liberal pokie gifts

Andrew Wilkie in his latest media release reckons the Federal Group is “set to pocket an enormous $18 million windfall if the Liberals win government.”


The figure is $75 million.

There’s obviously a bit of misunderstanding about how the Libs’ pokie industry welfare policy works. The value of pubs and clubs with pokies will receive a boost with increased pokie commission. If the venues are given licenses for a set period, then the amount of those future commissions will reflect in enhanced capital values of venues. If the licenses are in perpetuity, then the value of pubs and clubs with pokies will increase by $250 million.

The Federal Group told the parliamentary inquiry into Future Gaming Markets that increasing the commission to pubs and clubs from 30 per cent to around 50 per cent as proposed by Federal/THA and subsequently adopted by the Liberals as the way to take the State to the next level, would result in a windfall capital gain of $150 million. This was independently verified, so the joint committee was told.

The Labor party is proposing to remove pokies from pubs and clubs in which case the capital value of the pokie component of pubs will be zero. The Libs policy of gifting licenses which will earn a 50 per cent commission from player losses in perpetuity means the venues with those licenses will increase in value by $250 million.

That’s the booty the Love Your Local boys are trying to grab. That’s what the Vote Liberal campaign is all about. There is no doubt some jobs are at risk. But if there were 5,000 jobs then there wouldn’t be any profits in pokies and the licenses would be worthless.

However Federal Group/THA have categorically stated increasing the pokie commission from 30 per cent to 50 per cent will increase the value of venues with pokie licenses by $150 million. Applying the same methodology gives venues with pokies a value $250 million greater than if those same venues didn’t have pokies as Ms White is proposing.

That’s the value of the gift which the Liberals intend to give pokie venue owners should the Liberals win.  The gift will be funded over time by pokie players as pokies are a government regulated activity that largely shifts income from one section of the population to another, all in the name of a few jobs and the supposed unassailable right to spend money as one pleases.

The value of the gift varies in proportion to how profitable pokies are to a particular venue. Because all venues have the same level of fixed costs per machine, those that attract higher losses are proportionately even more profitable than others. Which means that Federal Hotels with 15 per cent of pokies via its twelve pubs receiving 25 per cent of player losses will be given about 30 per cent of the $250 million handout. That equals $75 million.

The seven groups (including Federal’s Vantage Group of pubs) with 65 per cent of pokies receiving 75 per cent of all losses will get 80 per cent or $200 million of the Liberal handout. Without this assistance there is no doubt all will suffer balance sheet losses if pokies go. There are some who will be forced to restructure as reduced asset values and reduced income will lead to breaches of loan covenants. Injecting more equity or selling assets at distressed prices are the only realistic options.

That’s why a Liberal victory is so important.

It beggars belief that the proposed handout hasn’t received more scrutiny. A government which has turned its back on its stated market-based principles to allocate licenses and instead plans to bestow enormous gifts on a few warrants some explanation.  The State was just about to turn over a new leaf. For a while David Walsh had us starting to look at the stars but there are still some determined to keep us mired in the gutter.


  1. Are they only getting revenue from Pokies and do they invest that money back into the community they so willingly ...I was going to say profit from but on this scale there must be another word for it...just Vultures?

    1. Most economists regard investing as building developing and acquiring new assets. The Federal Group has done very little investing of this nature, certainly much less than the undertakings it gave when negotiating the extension of the exclusive gaming license in 2003.Most of the funds generated from gaming have been used to either buy more pokie pubs and bottleshops or to pay dividends to interstate shareholders.

  2. Disgraceful liberal party are ignoring the fact that pokie addiction is a scientifically recognised addiction. The libs are instead blaming the addict for getting addicted.
    The club's and pubs and casinos are neglecting self-excluded pokie addicts and are letting them back into pokie venues to grab more money, taking advantage of the addiction.