MINORITY REPORT
SENATOR NICK XENOPHON AND
THE AUSTRALIAN GREENS
1. Introduction
1.1
The Inquiry was
established for the purpose of considering three bills – the Poker Machine
Harm Reduction Tax (Administration Bill 2008), the Poker Machine Harm
Minimisation Bill 2008 and the ATMs and Cash Facilities in Licensed
Venues Bill 2008, each introduced into the Senate and referred to the
Committee on the recommendation of the Selection of Bills Committee. The
purpose of the bills is outlined in the majority report.
1.2
Given that up to
85 per cent of problem gamblers have a problem because of poker machines, the
most effective way to immediately and dramatically reduce the harm caused by
gambling in Australia would be by the total removal of
poker machines.[1]
1.3
However, there
are many useful measures, short of removing all machines that can be
implemented to significantly reduce the level of gambling addiction and related
harm. These measures can be mandated by Commonwealth legislation, given the
scope of the Commonwealth’s powers over corporations, taxation, banking and
telecommunications.
2. Counting
the Costs of Gambling
2.1
The Productivity
Commission Report of 1999[2]
into Australia’s gambling industries highlighted
the extent of the problem using a comprehensive national household survey of
some 10 600 respondents. It found:
- an estimated 2.1
per cent of the adult population or the equivalent of 293 000 people
experienced significant problems associated with their gambling;
- problem gamblers
comprise 15 per cent of regular gamblers and account for about $3.5 billion
dollars, or one-third of the gambling industry’s market in expenditure
annually;
- problem gamblers
lose around $12 000 each per year, compared with just under $650 for other
gamblers;
- the incidence of
problem gambling varies by mode. It is highest for poker machines and racing,
and lowest for lotteries;
- 5 to 10 other
people can be directly affected to varying degrees by the behaviour of a
problem gambler;
- 4.7% of those who
actually played a poker machine developed a gambling problem [3]
2.2
Table 5.6 of the Productivity
Commission Report provides data regarding the number and spending of problem
gamblers as follows:[4]
2.3
Table 5.7 of the Productivity
Commission Report also provides data on the share of spending or losses
accounted for by problem gamblers by different gambling products as follows:[5]
3. How the
Industry Works
3.1
A more recent
report prepared by Drs Livingstone and Woolley entitled “Risky Business: A
Few Provocations on the Regulation of Electronic Gaming Machines”,[6]
suggests that problem or at-risk gamblers spent about 53 per cent (AU $1.3
billion) of the money expended on hotel and club electronic gaming machines
(EGMs) in 2005-2006, (as compared with 33.7 per cent and 8.7 per cent for
severe and moderate problem gamblers reported by the Productivity Commission in
1999).[7]
3.2
Livingstone and Woolley also provided an analysis of other more recent data which
also pointed to a number of interesting findings, including:
- the near-miss
effect, related to the reel-symbol ratio of EGM devices has been found to be
associated with the development of excessive gambling in experimental groups;
- studies that have
manipulated ‘spin speed’ or length of game cycle have shown that faster speeds
are associated with an increased risk of excessive gambling;
- speed of play has
been found to predict problem gambler status;
- lowering the bet
size would reduce the level of harm associated with gambling;
- by comparing play
on modified machines it was found that modified EGMs reduced time spent
gambling, the number of bets and losses;
- more than three
times as many problem gamblers (7.5%) as recreational players (2.3%) placed
maximum bets in excess of AU$1.00 and the preference for relatively large bets
was a predictor of gambling problems and severity;
- the availability
of banknote acceptors (BNAs) and multiple line betting significantly increased
gambling turnover;
- 22% of problem
gamblers used high-denomination BNAs compared to 10% of non-problem gamblers;
- Current
configurations of EGM technology provide an unsafe mode of rapid and expensive
consumption;
- 75 per cent of
gamblers failed to notice modifications to spin rates, BNAs and maximum bet
sizes;
- whilst reducing
maximum bet limits produced a positive harm minimisation effect, this did not
appear to reduce amenity for gamblers;
- problem gamblers
played more quickly than non-problem gamblers;
- slower game
cycles had a small negative impact on enjoyment but this did not reduce
intentions to continue gambling;
- limiting the rate
at which gambling losses occur can reduce the potential for excessive gambling;
- with the added
benefit that if BNA parameters and maximum bet sizes are coordinated, no
reduction in amenity for non-problem gamblers is expected.[8]
3.3
In their report, Livingstone
and Woolley argue that the proliferation of EGMs in Australian club and hotel
venues is “generating revenues of billions of dollars annually and
account[s] for the majority of gambling expenditure”; that these revenues “rely
on unsafe consumption practices, generating considerable harm”; and that “clear
evidence is available describing unsafe levels of EGM consumption by regular
EGM consumers in hotels and clubs, and indicating modifications to the EGM
technology and systems to minimize harm”.[9]
3.4
However they say,
there is a ‘comfortable orthodoxy’, the discourse of ‘business as usual’ that
perpetuates current arrangements, focussing on the ‘problem’ gambler as an ‘individualized
flawed consumer’[10]
- a classic example of blaming the person and not the product.
3.5
As Livingstone and Woolley argue, “the marketing and distribution of EGMs is neither
accidental nor something for which the individual is responsible, and neither
is the safeguarding of oneself from the harm produced by goods licensed by
Government”.[11]
3.6
They say the “pursuit
of a goal of safe consumption for all EGM gamblers requires disruption of the
discourse of ‘business as usual’”.[12]
3.7
Senator Xenophon and the Australian Greens agree with
Livingstone and Woolley that the “appropriate balance has not been found between
liberalisation and regulation in EGM gambling in hotels and clubs”.[13] We share their concern that “current configurations of EGM technology
and the EGM commercial system produce unacceptable levels of harm”[14]
and agree that “this imbalance cannot be corrected by post harm-production
interventions, yet feasible supply-side harm reduction measures are ignored.
Instead, the responsibility and cost of EGM-related harm are sheeted home to
individual gamblers.”[15]
3.8
Taken together,
these arrangements represent a ‘comfortable orthodoxy’ that “supports the
maintenance of current EGM arrangements in Australia, masking a level of harm production
that would not be acceptable in other consumer markets”.[16]
3.9
The current
regulatory approach within Australia can be
summarised as one in which:
1. Only a small proportion of gamblers
suffer harmful consequences from EGM gambling;
2. Current EGM arrangements are safe:
gamblers are the problem;
3. Current EGM arrangements should not
be altered as this would reduce the enjoyment of those who are not troubled;
4. The worlds of EGM gamblers are well
understood, and their voices are heard in the framing of policy and regulation.[17]
3.10 This
‘comfortable orthodoxy’ has two main themes. First, it takes gambling, an
acknowledged “risky diversion to the usual standards of consumer safety.
Second, it represents individuals as freely choosing, well informed of this
risk”.[18]
3.11 Livingstone and Woolley conclude this ‘comfortable orthodoxy’ doesn’t “deny problem
gambling but it does exclude upstream issues of harm causation from discourse
while privileging down-stream treatment based responses.” That’s why they call
this ‘comfortable orthodoxy’, ‘business as usual’.
3.12
Another, less
academic way of looking at it can be found in the old adage ‘it’s much better
to have a fence at the top of a cliff, rather than the best equipped ambulance
at its base’, or to put it even more simply, ‘prevention is better (and
cheaper) than cure’. There are compelling arguments that for too long the
legislative, regulatory and policy framework has been less about building
fences and more about acquiring increasing numbers of ambulances. This view
was also supported during evidence by Mr Mark Longmuir, Manager of Anglicare
Victoria, Community Services, when he said, “we need to be building a fence
at the cliff edge, rather than adopting the current approach of funding lots of
ambulances at the base of the cliff to deal with the issue.”[19]
3.13
Part of the
‘business as usual’ approach stems from the industry’s argument (which is
seemingly subsumed in the regulatory framework), that transfers responsibility
for the harm caused by poker machines to individual players/consumers, as a
matter of ‘individual choice’. This argument is commonly evoked with the
phrase ‘no-one is forced to use poker machines’[20]
– that somehow the devastation caused to hundreds of thousands of Australians (through
family break-up, crime, bankruptcy, depression and most tragically of all,
suicide) are an inevitable but acceptable cost of doing business.[21]
3.14
Another assertion
raised by the gambling industry is that problem gambling levels have decreased.[22]
This claim is fundamentally misleading for two reasons. Firstly, the 'screen'
to measure problem gambling has changed from the South Oaks Gambling Screen
(SOGS) to the Canadian Problem Gambling Index (CPGI). CPGI is considered by
many experts as a more superior test to SOGS. However, the two cannot be
compared in a direct sense, which appears to be what the industry is attempting
to do.
3.15
Secondly, under
the SOGS test, a score of 5 or more indicates a gambling problem. Under the
CPGI screen, a score of 3 or more is accepted as reaching a problem gambling
threshold.
3.16
A recent
discussion paper of the Independent Gambling Authority of South Australia (IGA)[23]
states:
In
conducting their work[24]the researchers applied the national
definition of problem gambling[25], and have classified as problem gamblers identify
persons scoring 3+ on Canadian Problem Gambling Index (consistent with the most
recent South Australian population survey).[26]
3.17
However, in a
report commissioned by the New South Wales Office of Liquor, Gaming and Racing entitled,
"Prevalence of Gambling and Problem Gambling in NSW – A Community
Survey 2006” [27]
- which the industry has relied on heavily when making assertions regarding the
levels of problem gambling, problem gambling is only defined as a score of 8 or
more on the CPGI. A score of 3 - 7 is defined as 'moderate risk' gambling
rather than problem gambling.[28]
3.18
The gambling
industry argument fails to take into account that even a gambler at ‘moderate
risk’ under the CPGI screen is still an at risk problem gambler. This view was
supported by the evidence of Mr Phillip Ryan,
Chief Executive Officer of Responsible Gambling Networks, when he stated:
The
argument that problem gambling impacts only 2 per cent of the population is
fallacious...it does not reflect the high volume of turnover on the machines by
problem gamblers or highly at-risk gamblers; nor does it reflect the true
lifetime rate of problem gambling, which is usually five times the level of the
instantaneous rate as measured in a survey at any one point in time and that
the lifetime rate is typically 10 per cent if the instantaneous rate is 2 per
cent; nor does it acknowledge the significant number of people impacted upon by
problem gamblers.[29]
3.19 Statistics reveal that gambling
losses, including poker machines, have continued to increase.[30]
The only exception to this followed the introduction of smoking bans
introduced in various states, starting with Victoria in 2002. Based on the evidence available, smoking bans has been the
only measure that has resulted in any decrease in losses from gambling.
3.20 There is now an overwhelming body of
evidence of the harm caused by poker machines. Senator Xenophon and the Australian Greens believe this places onto all legislators an
obligation to take urgent action to reduce the harm caused. A number of
measures could be implemented now as an interim harm reduction strategy pending
the outcome of the Productivity Commission Inquiry (which is due to report by the
end of next year).
3.21 It is clear from this information
that the industry could take significant steps to minimise the harm experienced
by problem gamblers without impacting on the amenity and enjoyment of other
users.
4. Poker Machine Design &
Disclosure of Information by the Industry
4.1
The Committee
heard evidence about the addictive nature of poker machines. For instance, Sue Pinkerton,
President of Duty of Care, talked about the “purposeful design of gambling
machines” [31]
and the promotion of an “unsafe product as a safe, fun-filled form of
entertainment”.[32]
4.2
The issue of poker
machine design and the disclosure or lack thereof of information by the
industry was also canvassed by Livingstone & Woolley in a report prepared
for the Independent Gambling Authority of South Australia in 2008.[33]
4.3
They stated that
a major gap in publicly available research is the effect of particular
configurations of reinforcement schedules, which constitute the core technology
of EGMs.[34]
In that report, Livingstone and Woolley highlighted the need for detailed information relating to
the relationships between reinforcement schedules, machine volatility, particular
pay tables and prize allocations, actual gambler behaviour and the development
of gambling problems.[35]
4.4
Representatives
from Gaming Technologies Association (GTA, formerly AGMMA) gave evidence that
reinforcement schedules did not exist. Mr Gibson described as a ‘nonsense’ the notion
that that the poker machine industry utilises “a schedule that predetermines
the rate of a machine granting small wins during play that is designed to keep
the player hooked on the machine”.[36]
He stated that reinforcement schedules do not exist and claimed that they
were a “figment of Dr Livingstone’s imagination.” [37]
4.5
This evidence is
in stark contrast to that subsequently provided by Dr Livingstone who, in his
second submission[38]
to the Committee, refers to a report[39]
commissioned by the AGGMA (now TGA) refuting the conclusions drawn in the IGA
Report as prepared by Drs Livingstone & Woolley.
4.6
In that report, Drs Blaszycyncski
and Nower’s state that:
EGMs are
popular, in part, because they contain certain basic core technology that is
attractive to players: a machine containing mechanical or video display reels
that spin on the push of a handle or button, whose outcome is determined
randomly resulting in a random ratio schedule of reinforcement.[40]
4.7
In a letter to Dr
Livingstone dated 3 October 2008, Mr Robert Chappell, Director of the IGA also
stated that both Mr Gibson and the GTA should understand the concept (of
reinforcement schedules) better, given that on 29 April 2008, a similar
submission was made by the AGMMA’s Queen’s Counsel before the Authority.[41]
At that hearing, Mr Chappell indicated as follows:
...for sake
of clarification, I suggested there was disingenuousness about AGMMA saying
that there was no such thing as a reinforcement schedule, and that there did
not need to be a piece of paper headed “reinforcement schedule” if such a
schedule could be derived from the game mathematics.[42]
4.8
The GTA has now
indicated in its evidence a willingness to provide further information from its
members.[43]
Should such information requested by Drs Livingstone and Woolley be provided to them their analysis and conclusions as to the
relationship between specific aspects of machine design and any links with
problem gambling ought to be revisited by this Committee.
5. Volatility of Machines
5.1
It is a
requirement in all States and Territories that poker machines provide a minimum
‘return to player’ percentage of the amount bet on a poker machine.[44]
This requirement is inherently misleading and deceptive to gamblers. The fact
that the return to player percentage can vary in jurisdictions up to 15 per
cent, and that the percentage is generally based on either the life of the
machine, the type of game, or even an average of machines at a particular
venue, provides an illusion to players that somehow, sooner rather than later,
they will get most of their money back.
5.2
The high
volatility of machines has been identified by Livingstone and Woolley as an integral part of the core
elements that can lead to, or exacerbate, problem gambling.[45]
6. Access to
cash through ATMs
6.1 As previously mentioned, the
Productivity Commission last reported on the issue of gambling in 1999. In its
National Gambling Survey, the Productivity Commission found that problem
gamblers were significantly more likely than non-problem players to withdraw
money from an ATM at a venue whilst playing poker machines.[46]
6.2 In assessing the degree to which problem gamblers use
ATMs relative to recreational gamblers, the Productivity Commission found that
the large bulk of recreational players never used an ATM at a venue when
playing the poker machines, while the large bulk of problem gamblers did use an
ATM, with one in five problem gamblers always doing so.[47]
At table 16.7 of the Report, the questions was asked, “How often do you
withdraw money from an ATM at a venue when you play the poker machines?”.
In response, 78.2% of non-problem players said ‘never’, 11.8% said ‘rarely’ and
5% said ‘sometimes’. Only 1.4% said ‘often’, 3.2% said ‘always’ and 0.4% could
not say. For problem gamblers with a SOG score of 5 and above, which is the
threshold for problem gambling, 34.6% said ‘never’, 12.4% said ‘rarely’, 15.1%
said ‘sometimes’, 16.5 % said ‘often’ and 21.3% said ‘always’. In relation to
problem gamblers with a SOGS score of 10-plus, 18.2% said ‘never’, 7% said
‘rarely’, 16.1% said sometimes, 34.8% said ‘often, and 23.9% said ‘always’.[48]
6.3 Overall, problem gamblers surveyed by the Commission
ranked ‘ATM location’ as one of the most important issues for effective harm
minimisation with 37.8% of problem gamblers (SOG 5+) and 58.7% of problem
gamblers (SOGS 10+) reporting that they often or always withdrew money from an
ATM at a venue when playing poker machines compared to 4.6% of non-problem
players.[49]
6.4 The more recent report “The Use of ATMS
in ACT Gaming Venues: An Empirical Study”,[50]
commissioned by the ACT Gambling and Racing Commission and published in
September 2004, found that regular and problem gamblers access ATMs at gaming
venues more frequently than recreational and non-gamblers.[51]
6.5 It also showed that a significant 60% of
self-identified problem gamblers usually access ATMs at clubs. This is
compared with only 25% of regular gamblers, 12.7% of recreational gamblers and
5.2% of non-gamblers who reported accessing an ATM at a club. Sixty per cent
of those self-identified problem gamblers also reported withdrawing more than
$100 as compared with ATM withdrawals of less than $100 for all other gambler
groups.[52]
6.6 The Tasmanian experience also highlights the benefits
of removing ATMs from licensed venues. Unlike other States and Territories, Tasmania doesn’t have ATMs in its
pubs and clubs and their losses per capita are significantly less than the rest
of the country. For instance, figures from the 24th edition of Australian
Gambling Statistics[53]
show that for 2005-2006, the turnover per machine in Tasmania was $397 095
compared with $582 549 for South Australia, $573 759 for New South Wales and
$900 293 for Victoria. The turnover for gaming machines per capita for
Tasmania was $2575 compared with $6100 for South Australia, $6 274 for
Victorian and $10 848 for New South Wales.[54]
While there are other influences that may have had an impact on these figures,
the absence of ATMs must be a significant factor.
6.7 Throughout the Inquiry, access to cash through ATMs was also
highlighted as a key issue for problem gamblers using poker machines. In
addition to evidence received from welfare organisations, gambling counsellors
and researchers, Mr Chappell of the Independent Gambling Authority in South Australia indicated that access to cash was a critical factor in
people controlling their behaviour, stating that:
It is
quite clear that access to cash it is a clear and burning issue and, in the
absence of any other way of giving people the means of controlling their
behaviour in-venue, access to cash is an excellent proxy for giving people the
ability to commit to expenditure.[55]
6.8 Dr Livingstone also stated that:
...almost
all problem gamblers to whom I have spoken say that they always try to limit
their expenditure, but they cannot because of the ready availability of access
to cash through ATMs and so on. There is no doubt that removing ATMs would
have a big impact on the expenditure of people like that. It seems pretty
clear that limiting access to cash facilities would have a big impact. Would
they turn to an alternative form of gambling? The evidence does not support
that. Eighty-five per cent of the gambling problems in Australia are clearly attributable to poker
machines. That has been validated endlessly in every prevalence study that has
been undertaken over the past 10 years and longer.[56]
6.9 He considered this approach
as “almost a classic harm minimisation strategy to make it harder for
people to get access to their cash”,[57]
and that “for a large proportion of problem gamblers it would have an
immediate and beneficial impact.” [58]
6.10 Professor Hancock reiterated the same views when she
said that limiting access to cash is fundamental to protecting players.[59]
6.11 It
is acknowledged that the removal of ATMs from gambling venues alone will not
eliminate problem gambling. However, at the very least, by limiting access to
cash inside a venue, gamblers will, in many instances, have time to reflect on
their actions and think twice about withdrawing money from an ATM at another
location to continue gambling. This view is supported by problem gamblers who
often describe being in a trance like state when playing poker machines. For
instance, at a hearing of the Select Committee on Gaming Licensing in Victoria,[60] Ms Gabriela Byrne, a former
problem gambler stated that, “that is why I think taking ATMs out – by the time you walk
somewhere to draw out money, you have a chance to come back to your senses, if
that makes sense.”[61]
6.12 Simply limiting the amount of money that can be withdrawn from
ATMs does not go far enough, as this does not prevent problem gamblers from
accessing cash through separate transactions or through the use of multiple
cards.
6.13 As highlighted by Ms Sue Pinkerton,
President of Duty of Care:
Most
people who develop an addiction to ‘pokies’, access to cash is tantamount. I
did not just go once with the money that I could afford to spend; I would keep
on going back. When I was gambling in South Australia they already had in force the $200 per transaction
rule. I would make anything up to five or six visits to the ATM in a session
to get another $200.[62]
6.14 On this basis, Senator Xenophon and the Australian Greens recommend
that legislation should be enacted to require that ATMs are removed from
gambling venues.
7. Smart Card
Technology
7.1 The Committee received submissions and heard evidence on the
issue of Smart Card technology and, in particular, player pre-commitment.
7.2 During evidence, Mr Phillip Ryan,
Chief Executive Officer of Responsible Gambling Networks, talked in some length
about the benefits of player pre-commitment, which he described as the “combined
seatbelt and airbag to protect all player-machine players from a potential
financial crash”.[63]
He stated that:
Player pre-commitment,
is the only rational means by which players can protect themselves from all the
collective aggressive marketing of venues, the exploitative behaviours of
operators, and the razzamatazz of new poker machines, once they enter a venue.
The grate advantage of player pre-commitment as a public policy solution is
that once it is implemented, it does not matter what the operators, the venues,
the banks or the machine manufacturers subsequently attempt to do to entice
more money from you, they cannot make you change your mind about purchasing
behaviour once you enter their gambling venue.[64]
7.3 While Mr Ryan supported the movement towards
player pre-commitment, he also highlighted some of the concerns raised over smart
card technology, such as, “problem gamblers are highly intelligent. They
will find a way to get two or three smart cards. Problem gamblers learn how to
fool people. They are highly intelligent in shuffling accounts.”[65]
7.4 Player pre-commitment has the potential to form a useful part of
a harm minimisation strategy, provided that the issues of privacy and security
can be resolved. A biometric technology may provide a means of ensuring that
problem gamblers cannot use multiple cards or devices to get around the system.
We believe that the privacy safeguards and the relative efficacy of biometric
smart cards, USB player protection keys and other
similar technologies should be evaluated as a matter of urgency.
8. Conclusion
8.1 The majority report concludes that in view of the anticipated
Productivity Commission Inquiry into Australia’s gambling industries, the three
bills introduced into the Senate by Senators Fielding and Xenophon not be
passed at this time.
8.2 The Committee has heard about the impact of problem gambling and
the harm caused by poker machines and it is abundantly clear on the strength of
this evidence that the Productivity Commission will find that significant harm
is being caused by poker machines. There are a number of measures which could
be implemented immediately as interim harm reduction steps pending the outcome
of the Productivity Commission Inquiry (which is due to report by the end of
next year).
- The first is the
removal of ATMs from gambling venues.
- The second is the
complete banning of banknote acceptors on poker machines. There is no valid
reason why poker machines in some State and Territories ought to have banknote
acceptors.
- Further
consideration should also be given to an appropriate form of pre-commitment
technology such as biometric pre-commitment solution provided that privacy
concerns are effectively addressed.
- Measures should
also be implemented to slow down the rate of play and limit the maximum bets
per spin on poker machines, as well as limits on jackpots.
8.3 These are all measures that have the potential to reduce the
level of problem gambling, and the rates of losses of existing problem
gamblers, without materially affecting the amenity of the majority of players. Senator Xenophon and the Australian Greens do not accept
that the Committee should wait for the Productivity Commission to report on its
findings before recommending these sorts of measures. The harm caused by poker
machines is well established. Senator Xenophon and the Australian Greens believe
that there is no reason to delay acting on these issues, and recommend that
immediate action is taken as suggested to minimise the harm experienced by
problem gamblers.
8.4 There has been little action to combat the effects of problem
gambling by State Governments who rely so heavily on gambling revenue and seem
incapable of overcoming their own addiction to it – despite the high level of
cost problem gambling imposes upon the community. The exception of Western Australia (which does not have poker machines
in its hotels and clubs), provides sufficient evidence that poker machines are
not a ‘necessary evil’. Senator
Xenophon and the Australian Greens recommend
that immediate action should be taken by the Commonwealth to address this
issue.
Senator Nick Xenophon
Independent, South Australia
Senator
Rachel
Siewert
Australian
Greens,
Western Australia
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