The money or the gun: NSW pokies audit spotlights gambling policy inefficacy days before budget

The NSW government will come under unprecedented pressure in next week’s budget to wean the state’s finances off socially harmful takings from poker machine revenue.

This follows the publication of the most excoriating official assessment of the efficacy of supposed controls since the damning 2022 Project Islington joint law enforcement report.

A week ago, the Audit Office of NSW issued its report into the “Regulation of gaming machines” that found that “more than half of all gaming machines in Australia are located in NSW” and that the “Department [of Creative Industries, Tourism, Hospitality and Sport] and ILGA [Independent Liquor and Gaming Authority] regulate gaming machines in a structured and consistent manner but are not supporting harm minimisation outcomes effectively”.

It went down as a bit of a ‘pokies are bad’ yawn moment in mainstream news, especially those that promote sports betting, but as the evidence mounts, electoral credits are running down.

Betting that the status quo can continue logically attracts far longer odds thanks to the audit report. Lobbyists will adjust.

The pokies audit is a bombshell because it officially confirms the functional inefficacy of not just the application of regulations but the overall policy, which is a rather big problem. And now there’s a new bump in pokie numbers.

“A legislated forfeiture scheme that aims to reduce the number of gaming machines in NSW has existed since 2001,” the auditor found. “The number of gaming machines operating in NSW has decreased gradually, noting there has been an increase in the number of gaming machines in NSW since 2021-22.

“Most venues that have the largest number of gaming machines have not had their licence conditions reviewed in recent years and are operating gaming machines with licence conditions that may not be consistent with contemporary approaches to harm minimisation.”

That’s Clubland. Labor clubs, even if rebranded, are still part of the great pokies estate of NSW.

The inefficacy of the harm minimisation policy on its own is an indictment, but against the previous evidence put on the record by police and regulators via the Islington report, that pokies funnel ill-gotten gains into public revenue coffers, a regulatory Jenga castle does appear to be forming.

To recap, the Islington report, which drew from the Australian Criminal Intelligence Commission, the Australian Transaction Reports and Analysis Centre (AUSTRAC), the NSW Crown Solicitor’s Office, the NSW Police Force, the Data Analytics Centre, and the NSW Bureau of Crime Statistics and Research, found that vast criminal proceeds weren’t so much being laundered but just plain lost to pokies.

The report’s findings, issued by key regulators and criminal enforcement and intelligence agencies, made it clear that there was a link between the massive squandering of criminal proceeds and the attendant state revenue gain in NSW.

“The inquiry did, however, find compelling evidence that drug dealers were gambling on a large scale via EGMs [pokies] with the money obtained by their offending. They were not seeking to disguise or ‘wash’ the origin of the cash but, instead, were using the cash proceeds of their crimes to gamble. This ‘spending’ of proceeds of crime is illegal under the Crimes Act and currently some clubs and pubs are failing to take sufficient steps to prevent this,” the Islington report said.

The comprehensive picture was clouded by a convenient lack of statistics.

“The extent of money laundering via EGMs cannot be precisely quantified, but the inquiry assesses it to be widespread and significant. Even utilising the combined holdings of law enforcement agencies and coercive functions, the Inquiry was not able to get a complete picture of criminal activity due to a lack of data,” the Islington report said.

“This hinders detection and investigation by law enforcement and minimises the ability of the NSW Police Force and other law enforcement agencies to prosecute this type of criminal activity. The recommendations in this report are designed to make it significantly more difficult for criminals to place their ill-gotten gains into EGMs.”

Now there are some more very inconvenient statistics.

“Tax on gambling profits is the fourth largest category of tax revenue in NSW after stamp duties, payroll tax and land tax. The tax revenue from gaming machines in NSW totalled almost $2.3 billion in 2023-24, which was 66% of the total amount of tax revenue from gambling in NSW in that financial year,” the NSW auditor found.

“Tax revenue from gaming machine profits is expected to continue to increase, reaching more than $2.9 billion in 2027-28. The forecast increase in gaming machine profits is due to expected increases in the use of gaming machines.

“Venues in Western Sydney had the highest total profits from gaming machines in NSW. In 2023-24, gaming machines in clubs and hotels generated a profit of $717 million in the Canterbury-Bankstown local government area, $659 million in Fairfield and $488 million in Cumberland.”

“This combined profit of around $1.9 billion across the three LGAs accounted for 22% of NSW’s gaming machine profit in 2023-24 despite these LGAs having only 13% of NSW’s total number of gaming machines and 10% of NSW’s population.”

So what’s right with this picture?