Pokies Value in the Australian Economy

Pokies are big business. This is true across the globe, and especially here in Australia where we’re extra keen on the game. But there’s more to the pokies business than how much money we wager, or the prize money players pick up. This is only part of the equation in determining pokies’ value in the Australian economy as a whole – and yes, they are that big that they make an impact. There’s the money that casinos generate, the cash pokies manufacturers garner, and in turn the salaries their workers earn. Plus, there is a matter of taxation, which has the most serious impact of all.

A bit of background on the history of pokies in Australia

To begin to understand pokies’ value in the Australian economy, let’s start with a brief look at the place of pokies in Australia as a whole. First invented in the United States somewhere in the 1890s – the precise date is up for debate – slots machines as they were (and continue to be) known there, made their way to Australia at the turn of the 20th century. Originally illegal, they nonetheless quickly grew in popularity. So much so that local developers took to work and came out with a home-grown poker machine – the Clubman from Aristocrat Leisure in 1953. Very soon thereafter, pokies began gaining legal status, starting in New South Wales.

Today, pokies and casinos as a whole are basically legal throughout Australia. And they are very much loved. So much so, that Australia is now home to more pokies machines per capita than any other place on earth. And we play them more frequently than other citizens of the planet, with as many as 4% of Australians wagering on a spin each week. Even more indicative of our national “obsession” if you will, is how much we spend on them. Let’s put it this way, in a nation that loves gambling, where some 80% of adults confess to engaging in some sort of such activity, 62% of our annual gambling spend goes to pokies….

There are of course different laws in each Australian province or territory, governing where pokies machines can be installed (for example only at licensed casinos or also at pubs), when they can be played (some places exclude holidays such as Christmas Day or Good Friday), and for how much (like if the machine accepts bills and coins, or only coins).

In addition to offline casinos being legal throughout Australia, online gambling is legal here as well. And this needless to say includes online pokies, which continue to grow in popularity over the years.

Why did the Australian government legalize pokies?

While it may seem obvious that pokies are legal here – seeing as Australians love them so much –  this is a more complex question to consider than it may appear. First of all, some might say, it’s a matter of chicken or egg. That is, which came first? Are pokies games so popular here because they are so accessible? Or are they so accessible in line with our national love for them? The truth is likely a bit of both, i.e. something in between.

So if it wasn’t simply to appease the local population’s tastes, you might ask, why did the Australian government legalize pokies then? Well, there are a couple of good answers, all of which were likely taken into consideration to one degree or another.

First of all, Australia is a pretty progressive country. And the government, for the most part, doesn’t get over-involved in our lives, at least not in the moralizing sense. So unlike countries where say religion might get in the way, it’s not a force to be reckoned with here. Instead, the government prides itself on delivering a freedom-loving lifestyle.

Another big reason any government gets involved in gambling, and likewise here in Australia, is to take care of its citizens. This is done in a number of ways. For starters, by legalizing gambling it keeps the industry above board. This means that there is a licensing protocol to follow, which helps keep gambling safe and fair. In addition, it ensures that public interest plays a role as well. This is especially pertinent in today’s day and age in which problem gambling is an increasing issue in the Australian landscape.

And finally, the other big reason for legalization is actually probably the biggest of all. And that is taxation. Yep. It is as unglamorous as that. The government wants to get its cut in terms of tax dollars for all that money changing hands. Of course, here in Australia, you as an individual are not taxed as gambling winnings are not looked upon as income. However, the game providers are, and all that tax money certainly helps fill the coffers. But more than that, all those tax dollars are actually put to good use helping bankroll public infrastructure and a range of services we all enjoy. Just how much? We’ll get back to this in a bit.

The grand sum stands around $9 billion – annually!

So just how much money are pokies machines generating? Well at last official count, they are seen to have contributed nearly $9 billion to the local economy. The precise number quoted in a recent article in the Sydney Morning Herald, which was based on a 2018 research piece from the Centre for International Economics was actually $8.32 billion, but what’s a few hundred million here or there, right?

Pokies have a tremendous tax value

This grand total of $8.32 billion the “Economic Contribution of the Australian gaming machine industry” study cites is comprised of a number of elements. The largest portion is the taxes derived from poker machines, which according to the study have recently exceeded $5.5 billion per year – most of which is collected through state taxes.

And in this case, taxes are seen as a good thing. Gaming Technologies Australia, which is a group that represents the large local gaming manufacturers (like Ainsworth Game Technology and Aristocrat Leisure), is quick to point out what we mentioned above. That is, that these tax dollars make a significant positive contribution to the Australian economy going towards building our roads and transportation systems, funding educational and cultural initiatives, subsidizing hospital programs, and so much more. In fact, this use of tax dollars is one of the gambling lobby’s strongest selling points, knowing how crucial pokies tax dollars are in terms of funding some very essential services. So much so that it is one of the most compelling arguments that the industry uses to protect the status of pokies gambling within.

But in all fairness, it is only part of the picture. The flipside of the argument would say, while yes, pokies tax dollars go towards funding educational and much needed social services, there is also a huge societal cost to gambling. And some might argue it is even higher than the $5.5 billion contributed to tax dollars. One recent study from the Victorian Responsible Gambling Foundation even went so far as to claim that the social costs of gambling in Victoria alone reached almost $7 billion annually when you take into account the costs of family problems, domestic violence, depression, and other forms of distress that problem gambling may cause.

Also, it is important to consider, the math did here, as in all statistics, is not 100% clear. Or at least obvious without a second thought. That’s because another stat has it that pokies losses account for approximately half of Australians’ $24 billion-dollar annual gambling losses, which of course totals $12 billion. To understand this, you need to note that not every dollar lost apparently is calculated as a contribution to the economy. Still, that is a lot of money being lost. More troubling, however, is the fact that this loss rate has grown in recent years at approximately double the rate at which inflation has grown.

Back to the tax dollars, this is no small consideration. And despite opposition by some parties, pokies tax dollars are only expected to increase over the next number of years. So much so that state budgets have already taken these blossoming numbers into account. So for example, in Victoria where the government previously enjoyed $1.09 billion in pokies tax dollars, it is now budgeting based on an expectation of $1.16 billion for the financial year of 2020-21. In New South Wales, tax revenues are expected to rise from $1.5 billion to $1.8 billion. And in Queensland, the budget from gambling taxes is set to surge even further, up some 20% from $684 million last year to $819 million in the year to come.

One warning the gambling industry makes, or scare tactic if you prefer, to those that want to curb pokies access, is that these tax dollars would have to be filled some other way if not from pokies. And you can guess what that might be. Hint, think your pocket.

The export value of Australian pokies

In addition to being a tremendous source of tax dollars, there are other ways that pokies add value to the Australian economy. For example, the Centre for International Economics study mentions that pokies machine exports also contributed significantly, adding $284 million to the grand total. This includes both the sales of pokies machines overseas, as well as international gamblers playing pokies machines while visiting here in Australia. Both these activities, of course, are good for the local manufacturing business and its workers as well.

The impact of pokies on the workforce

Speaking of workers, the gaming industry as a whole is also a significant employer in Australia. And pokies machines specifically contribute to employment as well. In fact, when you include pokies machine manufacturing in the equation, pokies are seen to provide direct employment to 46,660 people, equivalent to 24,150 full-time jobs (you need to take into account shift operators and part-time workers as well). However, since most pokies machines are found in pubs and casinos, and are not directly operated by an individual, these numbers are only indicative at most and are in all reasonableness far lower than the reality. Similarly, think of where the rest of the casino’s employees would be without the massive draw of the pokies machines and you quickly understand what we mean.

What about online pokies machines’ contribution to the economy?

Since Australian law taxes the service provider and not the individual player, online pokies make little contribution to the Australian economy. The government doesn’t have any local companies to tax because Australia-based online casino providers are not allowed to operate here. And we cannot levy taxes on foreign operators, at least until some sort of licensing procedure is setup.

So at the moment, the many potential tax dollars associated with online pokies are slipping through the government’s fingers. The only contribution you might say that online pokies have on the economy here is on the lucky winners’ bank accounts – which if they hit a progressive jackpot, in all honesty, can be quite significant. The other minor contribution, perhaps, is the local pokies software developers. While they cannot offer the games they create for real money play out of say their Sydney offices, they are certainly free to develop online pokies and sell them abroad, which is a totally legit enhancement to the local economy.

Final assessment in terms of pokies value in the Australian economy

Bottom line, there is no doubt about it. Pokies machines have and continue to make a major impact on the Australian economy. Now standing at the near $9 billion-dollar mark annually, poker machines are a financial force to be reckoned with. Even those who oppose pokies gambling can see to an extent their positive side. As such, it is unlikely that pokies gambling in Australia will go anywhere any time soon. While some concerned bodies may press for tighter legislation and increased limitations, this will have to be balanced with pokies’ value to the local economy, not to mention potentially irate players. And this financial consideration is no minor matter. The value that pokies generate in Australia is significant in terms of funding many social welfare projects, educational and cultural initiatives, as well as actual employment – all things that matter to us, whether we gamble or