Sunday, 10 December 2017

Poker machine apocalypse?


There seems little doubt the fate of poker machines post 2023 will be an issue that will get plenty of coverage during the upcoming State election campaign.

Depite the government assuring the Joint Select Committee into Future Gaming Markets it would be open to recommendations based on evidence, Premier Stansfield and Chief Strategist McQuestin had their minds made up well before the Committee reported.  The government arranged for a Dorothy Dixer on the 11th of September to allow the Treasurer to set out the government’s policy on gaming. If pokies are banned from communities it would have a “devastating effect on pubs and clubs” he told parliament.

Rather than blithely following the dictates of his political overlords the Treasurer should have read a paper prepared by his own department for the Committee.

A close analysis of Treasury’s modelling reveals in the case of regional areas beyond the 50 km reach of casinos where 40% ($42.9 million) of player losses occur, player losses will reduce by 75% ($31.4 million). There will be some migration to casinos and substitution with Keno, in total about 25%. Pubs and clubs will be worse off by $6.4 million, but the $25 million that previously flowed out of towns to Federal Hotels’ Network Gaming will be free to circulate within regional towns.

Currently on average, only 20% of player losses remain with pubs and clubs via net commissions from Network Gaming. The rest flows out of town to Network Gaming. It is well beyond the wit of this writer to figure why the government is so willing to accept the dumb proposition that stopping the haemorrhaging of regional towns will have a devastating effect on those communities. It’s going to be very difficult to convince an electorate growing weary of political lies. 

Regional pubs and clubs will be worse off by only $6.4 million. This is before any changes to their business models to attract some of the extra $25 million circulating in the community rather than being hijacked by Network Gaming.

Wednesday, 29 November 2017

Removing pokies


All’s quiet on the western front as Labor ponders its position on poker machines ahead of the March election.

What if and when pokies are reduced or removed from communities, players gamble at casinos instead? Will the community be better off? The consensus view seems to be confining pokies to a couple of enclaves will solve all problems. Will it?

The parliamentary select committee into Future Gaming Markets reported at the end of September. The written submissions were already on the public record, as were the transcripts of the public hearings. The minutes of the Committee’s meetings published at the time of the Report’s release revealed additional written evidence mainly from correspondence with interested parties.

One additional piece of evidence not mentioned in the Report was an eight page note from Treasury on the estimated economic impact to State tax receipts if EGMs were removed from hotels and clubs and a $1 bet limit was imposed on casino EGMs. It was a study worthy of more attention than it received.

Friday, 17 November 2017

Forestry Tasmania's demise in detail


Forestry Tasmania’s slide from its peak in 2004 has seen it lose $1 billion. Almost half have been cash losses. The rest have resulted from the loss in value of the trees entrusted to it. FT entered commercial arrangements with customers, particularly major customer Gunns, which effectively forfeited its commercial advantages as a monopoly supplier. As a consequence it fortunes closely tracked those of the industry particularly Gunns, and since the latter’s demise has only survived courtesy of government patronage.

After numerous inquiries, reports and years of procrastination, the government appointed Treasury Secretary to the Board in May 2015 to act as de facto Voluntary Administrator to see if FT could be resuscitated. An interim report was presented to government on 29th September 2016.His tenure lasted until February 2017, FT was restructured as much as its political masters would allow before being handed back for directors to run under the new name of Sustainable Timbers Tasmania (STT).

The following is a more detailed report on FT’s demise following the period of administration. It covers the events leading to insolvency, the actions taken and the prospects for the future.



CONTENTS

The 2016/17 year

The plantation sale

The superannuation transfer

Overview since 2004

Other assistance to the forest industry

The Ta Ann deception

Insolvency signs

Problems with the current model

The future



Thursday, 9 November 2017

Forestry Tasmania's final report


A survey of the wreckage left behind by Forestry Tasmania (FT) reveals since its peak in 2004 it has lost over $1 billion from forestry activities.

 During that time cash outlays were $440 million more than trading revenue and the value of the forest estate fell by over $600 million. Add the two figures together give the aggregate loss over the past 13 years of $1 billion. Equal to $40 for each tonne harvested.

Spending on plantations ($106 million), property and plant ($33 million) and roads ($105 million) added nothing to FT’s asset base. Together with the continual losses from forest harvesting meant FT’s cash losses totalled $440 million over the last 13 years.

Then there are non-cash losses, often called book losses, principally the fall in the value of the forest estate. This has occurred because a lot of trees have been chopped down and sold and because as maintenance and harvest costs rise faster than prices for forest products then the value of remaining forests consequently falls. Over the past 13 years the value of FT’s forests has fallen by over $600 million. Trees entrusted to FT are now worth a fraction of their former value.

So how did FT cover its cash losses?

Monday, 9 October 2017

Pokies: A time to be brave


Everyone is trying to pressure Opposition Leader Rebecca White to make up her mind what to do about poker machines post 2023, the government even bringing on a motion in Parliament a few weeks ago to try to embarrass her. A few weeks even a month or two isn’t going to make an ounce of difference.

All too often the overwhelming social arguments against poker machines are trumped by the gambling industry’s mantra of jobs jobs jobs. It’s important the bogus economic arguments are fully understood by Ms White.

Dear Ms White

You were right to delay framing a new position on EGMs until the Joint Committee presented its findings based on the latest evidence. That was the aim of the inquiry.

From a policy viewpoint an inquiry becomes pointless if trying to confirm predetermined policies drives the process.  Fortunately the Chair managed to keep focussed.

Confirmation bias however dominated the approach of both the Liberals and the Greens, culminating in Ms Courtney’s dissenting report arguing  that the significant reduction in EGMs in pubs and clubs recommended by four of the other five committee members would have “devastating economic and employment impacts on many businesses and communities..”.

Recommendations are supposed to be based on evidence presented. No evidence was offered by non EGM businesses stating withdrawal of some or all EGMs from communities would have adverse effects let alone devastating ones. Communities clamouring to retain EGMs to prevent devastation were also conspicuously absent.

Friday, 15 September 2017

Federal Group's pokie haul




Back in 1996 the Federal Group’s leisure business comprised the two casinos. Its revenue in that year was $134 million, well over half coming from gaming activities including tables, pokies and Keno. Net profit after tax for the leisure business was $4.4 million. The Group’s freight business provided another $2.2 million in profit. Borrowings were $50 million. In 1996 there was no spare cash to pay dividends to shareholders.

All was soon to change. On the first of January 1997 poker machines were rolled out into the community. Over the next 20 year the Group bought 12 pubs, the 9/11 bottleshop chain, built the Saffire resort, bought the leasehold business known as the Henry Jones Art Hotel, and acquired the lease on the new Maq01 hotel on Hobart’s waterfront.  The cash tsunami was such there was enough left over to pay $238 million as dividends to shareholders over the period. At the end on the 2016 year borrowings were $123 million, an increase of only $73 million over the 20 year period. Cash from pokies funded the show.

Saturday, 26 August 2017

Federal Group stitches up a deal?


The Joint Select Committee inquiry into Future Gaming Markets recently received a joint proposal from the Tasmanian Hospitality Association and the Federal Group and heard evidence from the two parties.

The proposal highlights most of the economic and financial issues at stake for the inquiry. The following note was submitted to assist the Committee in its important deliberations.

The proposal will perpetuate existing bad public policy. Benefits will accrue to the few existing participants in proportion to the benefits they have already received over the last 20 years. As a way of assisting businesses to grow it is poorly targeted. Allocating perpetual licenses to existing venues for nil consideration will not only give a windfall gain to a privileged few with unsubstantiated  benefits for the wider community, but will tie the hand of future governments if ever they feel a need to make changes.