Regional Electronic Gaming Machine Caps Review Panel

Final Report

Office of Gaming and Racing

November 2005

Regional Electronic Gaming Machine Caps Review Panel

Final Report

Office of Gaming and Racing

November 2005

Panel members:

Robert Hudson MP, Member for Bentleigh, Chair

Luke Donnellan MP, Member for Narre Warren North

Karen Overington MP, Member for Ballarat West

Published by the Office of Gaming and RacingVictorian Government Department of JusticeMelbourne Victoria AustraliaNovember 2005

ISBN 0 9751191 7 6

© Copyright State of Victoria, Department of Justice, 2005

This publication is copyright. No part may be reproduced by any process except in accordance with the provisions of the Copyright Act 1968.

Also published on www.justice.vic.gov.au

Authorised by the Victorian Government, 55 St Andrews Place, Melbourne. Printed by DPA Document Printing Australia Pty Ltd, 332-342 Lorimer Street, Port Melbourne 3207.

DisclaimerThe opinions, findings and proposals contained in this report represent the views of the Regional Electronic Gaming Machine Caps Review Panel. Every effort has been made to ensure that the information presented in this report is accurate at the time of publication.

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Chair’s foreword

I am pleased to present the report of the Regional Electronic Gaming Machine Caps Review Panel. This review offered the Panel a valuable opportunity to identify changes that the Panel considers will enhance the regional electronic gaming machine caps policy of the Bracks Government.

The Bracks Government has put in place a wide ranging strategy to minimise harm from gambling and continues to review and refine this strategy. This review provided a significant opportunity to engage a broad range of stakeholders in the gaming industry in relation to a key feature of the Government’s strategy.

The Panel undertook a comprehensive consultation process with local governments, industry and community stakeholders. Our focus during this process was the Government’s regional gaming machine caps policy, however we also heard from stakeholders about a range of other issues. These other suggestions have been documented by the Panel and forwarded to the Minister for further consideration.

Victoria faces ongoing challenges arising from the growth of poker machines since their introduction in 1992. The Panel was struck by the wide level of concern that exists in the community about the ready accessibility of electronic gaming machines in vulnerable communities and the desire to tackle this problem. This report addresses these concerns.

I would like to thank my fellow Panel members, Karen Overington and Luke Donellan for their thoughtful contributions to this review.

The Panel would like to thank all staff at the Office of Gaming and Racing, Department of Justice who have assisted the Panel throughout the review and in the development of this report.

Particular thanks must go to the Executive Officer, Susan Graham who provided outstanding support to the Panel and had the prime responsibility for drawing together the thinking of interested stakeholders and the views of the Panel.

The recommendations in this report propose substantial changes to the regional electronic gaming machine caps policy. These changes will enhance the operation of regional caps and ensure vulnerable communities in Victoria are better protected from high concentrations of gaming machines.

ROBERT HUDSON MP Member for Bentleigh Chair, Regional Electronic Gaming Machine Caps Review Panel

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Contents

CHAIR’S FOREWORD iii

LIST OF TABLES AND FIGURES ix

LIST OF ABBREVIATIONS x

EXECUTIVE SUMMARY xi

INTRODUCTION 1

Terms of reference 2

Panel members 2

Process of review 2

Australian National University analysis 3

Availability of material to inform the review 3

CHAPTER 1 THE CONTEXT 4

Current gaming machines statistics 4

Regulation of gaming machines 4

Role of the Victorian Commission for Gambling Regulation 5

The broad policy framework 5

What is problem gambling? 6

Measuring the prevalence of problem gambling 6

What is harm minimisation or harm reduction? 6

Conclusion 6

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CHAPTER 2 FIRST ROUND REGIONAL CAPS 7

Selection of regions 7

Indicators of vulnerability 7

Boundaries for regions 7

Regions capped 7

Setting the cap limit 8

Reduction in gaming machine numbers in regions 8

Stakeholder assessment 8

Study into the impact of caps on gaming machines 10

What was the impact of the first round of caps? 10

Other factors affecting expenditure levels 11

What conclusions can be drawn? 11

CHAPTER 3 REGIONAL CAPS ELECTION COMMITMENT 12

Election commitment 12

Consultation process 12

Issues for consideration 12

Stakeholder views 13

CHAPTER 4 GEOGRAPHIC CONCENTRATION OF GAMING MACHINES 14

Is there a relationship between gaming machine density and level of disadvantage? 14

Is there a relationship between expenditure and density? 15

Distribution by suburb 15

Other jurisdictions 16

Impact on communities 16

Conclusion 17

CHAPTER 5 ACCESSIBILITY AND PROBLEM GAMBLING 18

Is there a link between accessibility and gambling activity? 18

Is there a link between accessibility and problem gambling? 18

What are the factors that influence accessibility? 19

Reducing accessibility to gambling opportunities 19

Destination gaming as a means to reduce accessibility 20

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CHAPTER 6 REGIONAL CAPS—A NEW APPROACH 22

Do regional caps have a role to play in harm minimisation? 22

Key questions for the Panel 23

Geographic basis of regions 23

Plus area caps 23

Issues regarding implementation of the 2002 election commitment 24

Postcode area caps 24

Local government area caps 25

Identifying vulnerable regions to cap 25

Indicators used to identify regions in the first round 25

Issues with indicators of vulnerability 26

Resident population and temporary populations 26

Variations in vulnerability within local government areas 26

Changing vulnerability 26

What are the options for identifying vulnerable regions? 27

Universal caps: a new approach 27

CHAPTER 7 LEVEL OF CAP 29

Analysis undertaken by the Panel 29

Levels considered by the Panel 30

Cap at existing level 30

Cap at state density level of 7.0 30

Cap at density level of 8.5 31

Cap at density level of 8.0 31

City of Melbourne 32

CHAPTER 8 DETERMINING VENUES FROM WHICH TO REMOVE GAMING MACHINES IN CAPPED REGIONS 33

Method for implementing reductions in gaming machines in the first round 33

Impact of voluntary venue closures and mergers 34

Developing a method to implement a reduction in gaming machine numbers 34

Options identified by stakeholders 34

Factors influencing selection of method 35

Analysis of different methods 35

Method for determining reductions—a model 36

How are postcode level reductions in gaming machines determined? 36

How are venue level reductions in gaming machines determined? 38

Weighting factor 39

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Additional principles 39

Level of reductions in gaming machines for individual venues 39

Minimum level of gaming machines per venue 39

Impact of additional rules on overall cap level of a region 40

Analysis of the impact of cap on gaming venues 41

Proportional reductions in gaming machine numbers 41

Implementation timeframe 41

CHAPTER 9 OTHER IMPLEMENTATION ISSUES 43

The ongoing role of local government 43

Resourcing the Victorian Commission for Gambling Regulation 44

Population growth 45

Periodic review of the cap level 45

CONCLUSION 46

REFERENCES 47

APPENDIX A SUBMISSIONS RECEIVED BY THE PANEL 48

APPENDIX B CONSULTATION SESSIONS 50

APPENDIX C PANEL MEETINGS WITH ORGANISATIONS 52

APPENDIX D RESEARCHERS CONTACTED BY THE PANEL 53

APPENDIX E COMPARISON OF VULNERABILITY RANKINGS USING THREE INDICATORS APPLIED IN FIRST ROUND REGIONAL CAPS 54

APPENDIX F CASE STUDY: DETERMINING VENUES FROM WHICH TO REMOVE GAMING MACHINES IN CAPPED REGIONS 56

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List of tables and figures

TABLES:

Table 1 Reduction of gaming machine numbers as a result of the first round of regional caps 8

Table 2 Socio-economic disadvantage and gaming machine density by local government area 14

Table 3 Impact on gaming venues 40

FIGURES:

Figure 1 Postcode reduction model 37

Figure 2 Venue reduction model 38

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List of abbreviations

AHA (Vic) Australian Hotels Association (Victoria)

ANU Australian National University

CPGI Canadian Problem Gambling Index

EFTPOS Electronic funds transfer at point of sale

MP Member of Parliament

SEIFA Socio-economic indexes for areas (Australian Bureau of Statistics)

SOGS South Oakes Gambling Screen

VCGR Victorian Commission for Gambling Regulation

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Executive summary

When the Bracks Government was elected in 1999, it inherited a gaming environment with a significant number of gaming machines but no substantial measures in place to tackle problem gambling. This Government has responded with a comprehensive strategy to minimise the negative impacts of gambling on the community.

Part of this strategy was the 2001 introduction of regional caps on the level of gaming machines in five areas. The regional caps policy was a response to community concerns about the number of gaming machines in areas of socio-economic vulnerability.

In March, the Minister for Gaming, the Hon. John Pandazopoulos MP, established the Regional Electronic Gaming Machine Caps Review Panel (the Panel) to examine the regional caps policy and strategy and to advise the Government on the best way forward.

Chapter 1 The contextSince the introduction of electronic gaming machines to Victoria in 1992, their number has grown rapidly. By the time the Bracks Government came to office in 1999, there were approximately 30 000 gaming machines across Victoria, producing expenditure in excess of $2 billion per annum.

The Bracks Government permits the playing of gaming machines as a legal and legitimate recreational activity within a tightly regulated environment. At the same time, it recognises that

the availability of this recreational activity is related to the development of problems for some individuals, which can impact on their families and communities. To address this harm, the Bracks Government has implemented a comprehensive problem gambling strategy.

Chapter 2 First round regional capsThe intention of regional caps is to protect communities that are most vulnerable to the harmful effects of gambling. Using density of gaming machines per thousand adults, average player loss per adult per year and the socio-economic status of areas, the government identified five regions for capping in the first round. The regions selected were more likely to be harmed by large numbers of gaming machines.

The cap was set at a level of 11.7 gaming machines per thousand adults, requiring the removal of 406 gaming machines from four of the capped regions over three years. (Darebin Plus was capped at its existing level of machines at 30 June 2000 because it had a gaming machine density level below that of the cap.)

The Victorian Government commissioned research into the impact of the first round of regional caps. The Panel considered the Study into the Impact of Caps on Electronic Gaming Machines as part of the review. The study found mixed results from the first round of regional caps.

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In some regions, spending on gaming machines decreased more than would be expected from simply reducing the number of gaming machines. The control regions examined by the researchers, however, experienced a decline in net gaming machine expenditure of similar magnitude. The researchers conclude that the quantitative reduction of 406 gaming machines from four of the capped regions was too small to impact the accessibility of gambling opportunities.

The Panel agrees that the regional caps policy implemented in the first round was not of a scale and scope that would lead to a shift in the way gaming machines are distributed and, therefore, was unlikely to reduce accessibility to gambling opportunities. The findings of the study are supported by the evidence the Panel collected during its review. The majority of stakeholders indicated that they did not believe that regional caps would have an affect on existing problem gamblers. Most stakeholders felt that caps would act to displace recreational gamblers.

Venue operators generally reported that the number of machines taken out of each venue was not significant enough to have a big impact on problem gambling. Stakeholders indicated to the Panel that, in venues that lost machines in the first round, the remaining machines were used more intensively.

Local councils were particularly supportive of the regional caps policy. Some community stakeholders also supported a cap, but indicated that they did not believe that the government would implement caps at a level that would impact on the accessibility of gaming opportunities.

Chapter 3 Regional caps election commitmentThe Government’s 2002 election policy, Responsible Gaming—Labor’s plan for better gambling regulation in Victoria, included a commitment to cap more areas under the regional caps policy. The Government’s commitment indicated it will double the number of capped areas to ten and increase the size of the current metropolitan capped areas. The new capped regions were to be based on the local government areas of Ballarat, Shepparton, Geelong, Warrnambool and Moonee Valley. The current capped regions to be extended are Darebin Plus, Maribyrnong Plus and Dandenong Plus.

The Panel was appointed to make recommendations on how to implement the Government’s commitment and to examine the possibility of an extended caps policy. In carrying out this task, the Panel consulted extensively with stakeholders in each of the regions identified in the election commitment.

Councils were generally supportive of the introduction or extension of regional caps in their local government area. There was a consensus among industry representatives within the regions consulted that, if regional caps were to be imposed, they should be set at or above the current level to allow for population growth.

Generally, community stakeholders in the regions indicated that they did not believe regional caps would be set at a level low enough to reduce the prevalence of problem gambling. They agreed, however, that regional caps were needed to ensure no further growth in gaming machine numbers.

Chapter 4 Geographic concentration of gaming machinesA statistical analysis of gaming machine densities in local government areas and the corresponding level of disadvantage shows that there is a significant relationship between the geographic concentration of gaming machines and an area’s level of socio-economic disadvantage. Disadvantaged local government areas have a greater likelihood of having a higher than average number of gaming machines per thousand adults when compared with more advantaged local government areas.

The Panel’s analysis of this situation suggested that there is a relationship between gaming machine density, expenditure levels and socio-economic disadvantage. This relationship occurs at both the local government level and at a suburb level.

It is evident from the statistical analysis undertaken by the Panel that gaming machines are concentrated in the areas of highest socio-economic disadvantage in Victoria. This finding is of significant concern to the Panel. Areas of high socio-economic disadvantage can least afford to bear the burden of high concentrations of gaming machines. The Panel considers it necessary to implement measures to ensure a more even distribution of gaming machines across Victoria.

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Chapter 5 Accessibility and problem gamblingA number of research studies have shown that there is a link between accessibility and gambling activity. Given this link, the question that naturally follows is whether there is a link between accessibility and problem gambling.

The Productivity Commission, in its 1999 inquiry into Australia’s Gambling Industries, found that “…there is sufficient evidence from many different sources to suggest a significant connection between greater accessibility—particularly to gaming machines—and the greater prevalence of problem gambling.” Other research suggests, however, that there is a need for further empirical research to determine whether it is the actual number of gaming machines per venue or the convenience of where those venues are located that causes harm.

There is relatively little research to conclusively prove that greater accessibility to gambling opportunities will result in a higher incidence of problem gambling. The Panel considers this is a significant issue and should be the subject of further research. The link between accessibility and gambling activity suggests that reducing the accessibility of gambling opportunities will probably result in less people gambling.

Addressing any one aspect of accessibility in isolation is unlikely to have as great an impact on problem gambling as simultaneously addressing a combination of accessibility factors. The Panel considers that caps on the number of gaming machines will have a greater impact if combined with measures aimed at addressing other factors of accessibility.

The Panel is particularly supportive of destination gaming. Destination gaming refers to venues and machines located at distinct destination locations. The Panel can see a number of benefits to destination gaming. Having fewer, but larger, destination venues will translate into an overall decline in accessibility.

Recommendation 1That the Minister examine options to restructure the gaming industry that result in:

• gaming venues that are less accessible to vulnerable communities

• a shift towards more destination gaming venues

• fewer venues across Victoria.

Chapter 6 Regional caps—a new approachThe Panel considers there is a strong case for maintaining and extending Victoria’s regional caps policy. Regional caps provide certainty to communities that are anxious about the number of gaming machines in their area. In addition, a reduction in the number of gaming machines in some areas may reduce the accessibility of gaming machines, thereby reducing the incidence of problem gambling in the future.

The Panel acknowledges the evidence from some stakeholders that indicates reductions in gaming machine numbers are unlikely to impact significantly on persons with a current gambling problem unless gaming machine numbers are reduced to extremely low levels. The Panel is particularly concerned, however, about the high concentration of gaming machines in some areas of high socio-economic disadvantage and the accessibility of those machines to, and the spending by, vulnerable members of the community. The Panel finds that capping the number of gaming machines in vulnerable communities should be an important component of the Government’s ongoing harm minimisation strategy.

Geographic basis of regionsLocal government areas were the primary basis for regional caps in the first round. The government created plus regions for the three metropolitan areas capped. These regions encompassed the local government area identified plus neighbouring postcodes of similar vulnerability.

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During the consultation phase of this review, stakeholders identified a number of significant issues with the creation of plus regions:

• the plus regions are distinct from all other existing geographic boundaries, such as local government boundaries, postcodes and suburbs

• it is difficult to monitor the impact of caps on plus regions

• the inclusion of neighbouring postcodes in the plus regions may serve to dilute the effect of the cap by increasing the population base of the capped region.

In considering how best to implement the Government’s 2002 election commitment, the Panel examined which neighbouring postcodes should be included in an extension of the three current plus regions and in the creation of the Moonee Valley Plus region under the second round regional caps. The Panel found that, in some cases, the particularly vulnerable suburbs in neighbouring local government areas were not located adjacent to the capped local government area.

The Panel has concluded that the 2002 election commitment should not be implemented as proposed. That is, regional caps should not be based on boundaries that include parts of neighbouring local government areas. The Panel considered two alternative options for determining the geographic boundaries of regions to be capped: postcode area caps and local government area caps.

Postcode area capsA range of stakeholders recommended to the Panel that regional caps be applied at a postcode level rather than to a whole local government area. The arguments for this approach were based on the many examples of extremely high concentrations of gaming machines within some postcodes.

The Panel sees a number of problems with postcode level caps:

• They would spread machines across local government areas, probably leading to more venues with fewer machines—and potentially more venues in residential areas.

• They would not address the difficulty of monitoring the impact of the cap where the region extends beyond the municipal boundary.

• They would not address the concerns raised by local councils regarding the problem of applying local area planning policies when caps cross municipal boundaries.

For these reasons, the Panel does not recommend postcode level caps.

Local government area capsMost local councils that met with the Panel supported the use of local government boundaries to determine the boundaries for regional caps. Under this option, the plus regions identified under the 2002 election commitment would be included under a cap for the entire local government area.

The Panel considers that the best option is to base capped regions on local government area boundaries. This approach enhances the ability of local councils to apply their own local area planning controls and policies, and to monitor the ongoing impact of gaming machines caps.

Identifying vulnerable regions to capThe regions to be included in the second round of regional caps have been identified by the Government’s 2002 election commitment. The Panel has also been asked, however, to make recommendations on the possibility of an extended regional caps policy.

The Panel considers that the 2002 election commitment should not be implemented as proposed. The reasons for this include:

• Issues arising in relation to the use of plus boundaries to define the geographic region of a capped area in the first round indicate they should no longer be used.

• The Panel is of the view that the best option is to base capped regions on local government area boundaries.

• In addition to the areas identified in the election commitment, there are a number of other areas that are vulnerable to harm from gambling and should be capped.

• No single set of indicators will be effective in either identifying all areas of vulnerability or responding adequately to changes in vulnerability levels.

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The Panel therefore recommends that all Victorian communities have the benefit of a cap on the density of gaming machines in their community, rather than only those identified in the 2002 election commitment.

A universal cap applied to every local government area in Victoria will:

• ensure a more equitable distribution of gaming machines across the State while ensuring that areas with high socio-economic disadvantage do not have significantly higher concentrations of machines

• deliver a solution to the disadvantages and anomalies that have been identified with the current regional caps policy

• provide certainty for local governments and the industry in the lead up to the review of gaming licences and into the foreseeable future.

Recommendation 2That as an alternative to implementing the 2002 election commitment, the Government instead extend the regional caps policy to impose a universal cap on the maximum number of gaming machines in any local government area.

Chapter 7 Level of capIn forming its view about the appropriate level at which to set the cap, the Panel was aware of two factors:

1. the need to set the cap at a level that reduces the accessibility to gambling opportunities in vulnerable communities

2. the impact that removing a significant number of gaming machines from these communities will have on gaming venues.

The Panel analysed a range of cap levels, including the current overall state density of 7.0, 8.0 and 8.5 gaming machines per thousand adults respectively.

Cap at existing levelIndustry representatives generally advocated a cap set at the existing level of gaming machines. The Panel notes the arguments presented by industry to support this view but a cap set at this level is inconsistent with the findings of the South Australia

Centre for Economic Studies. Its study into the impact of the first round of caps found that the reduction in gaming machines was too small to impact on the accessibility of gaming opportunities. The Panel, therefore, does not recommend that the caps be set at a level equal to the existing number of gaming machines in each local government area.

Cap at state density level of 7.0There was considerable support from local governments and community stakeholders for a cap set at the state density level of 7.0. The Panel was initially inclined to recommend setting the cap at the overall state density level. If the cap was set at this level, approximately 3426 gaming machines would have to be removed from 28 local government areas.

Setting the cap at this level would ensure an equal spread of gaming machines throughout all local government areas. On closer examination, however, the Panel found that the reductions required to reach this level in a number of regions would impose unreasonable hardship on a significant proportion of gaming venues, without achieving additional demonstrable benefits in terms of accessibility.

While setting a cap at a density level of 7.0 would probably have a significant impact on the accessibility of gambling opportunities and may result in a lower incidence of problem gambling, the evidence to support this view is not conclusive. It does not justify the severe adverse impact on the industry that would result from a cap at this level.

Cap at density level of 8.5The Panel received submissions suggesting that the cap be set at a level equal to 120 or 125 percent of the state density level—equal to approximately 8.5 gaming machines per thousand adults. If the cap was set at this level approximately 1301 gaming machines would have to be removed from 18 local government areas.

Cap at density level of 8.0A cap set at the level of 8.0 machines per thousand adults would require the removal of approximately 1872 gaming machines from 19 local government areas. Approximately 75 percent of local government areas are currently at or below a density level of 8.0 gaming machines per thousand adults.

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The Panel has compared the potential impact on the gaming industry of caps at the level of 8.0 and 8.5. There is only a small difference in the impact of caps set at 8.0 and caps set at 8.5 in respect to gaming venues that would be required to have a significant proportion of gaming machines removed.

Ultimately, setting the cap level is an inexact process. The challenge for the Panel was to recommend a cap level that will involve substantial reductions in gaming machines in those areas with high machine densities that are particularly vulnerable to the harm of gambling, while avoiding an unjustifiably harsh impact on the industry.

The Panel recognises, however, that gaming is a legal and legitimate industry. Caps on gaming machine numbers should not be so restrictive that business is totally prevented from responding to market demand for gaming machines from recreational gamblers.

There is widespread support from local governments and community stakeholders for a cap at a level of 8.5 or below. Of the local councils and community stakeholders in the regions identified in the government’s 2002 election commitment, virtually all called for the cap to be set at a level below 8.5 (Warrnambool City Council and Melbourne City Council support a cap set at the existing level), with the majority of local councils and community stakeholders in these regions calling for caps to be set at 7.0 or below.

Taking these issues into account, the Panel recommends that the level of the cap be set at a density of 8.0 machines per thousand adults. The Panel considers this level will be substantial enough to impact on the accessibility of gambling opportunities in some of the most vulnerable areas, but will avoid reducing gaming machines to such low levels that many gaming venues become unviable.

Recommendation 3That the universal cap be set at a density of 8.0 gaming machines per thousand adults.

City of MelbourneThe City of Melbourne has unique characteristics that warrant a separate consideration of the regional cap issues. There is a significant concentration of gaming machines located within the central business district.

In a sense, the City of Melbourne is the principal destination gaming area in Melbourne outside of Crown Casino. The Panel considers, therefore, that the central business district, Docklands and Southbank should not have the number of gaming machines capped.

There are large parts of the City of Melbourne that are residential areas, however, some with significant housing commission areas. These areas should be capped in accordance with our recommendation regarding all other local government areas.

Recommendation 4That the City of Melbourne be capped at 8.0 gaming machines per thousand adults, with the exception of the central business district, Southbank and Docklands.

Chapter 8 Determining which venues to remove gaming machines from in capped regionsImplementing the recommended regional cap will involve removing approximately 1872 gaming machines from 19 local government areas with densities of gaming machines above 8.0 per thousand adults (excluding the City of Melbourne). A significant proportion of the gaming machines removed in the first round came from voluntary venue closures and mergers. The Panel supports such moves by venues, particularly where it results in fewer venues and gaming machines. It is important, however, that the integrity of any principles established by the Government is not compromised by activities that result in unintended outcomes.

The Panel recommends that the Victorian Commission for Gambling Regulation (VCGR) reduces gaming machine numbers as required at the venue level. The VCGR should not make adjustments for voluntary reductions or arrangements made by the gaming operators or venue operators.

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Method for determining venue level reductions in gaming machinesThe Panel’s goal was a method that would assign each venue its own proportion of gaming machines to be removed. This method was based on a reasonable, balanced consideration of venue viability and the level of gaming intensity evident in an area.

The Panel considers that the removal of gaming machines should be aimed at those areas and venues that are being used the most. In this way, it is hoped that the regional caps will act to reduce the accessibility of gaming machines.

Method for determining reductions—a modelThe objective of the model recommended by the Panel is to remove more gaming machines from those postcodes and venues within each region that have the highest gaming intensity. Gaming intensity is measured using two factors:

1. share of the number of gaming machines

2. average expenditure per gaming machine.

Areas with high gaming intensity are those with above average levels of expenditure per gaming machine.

The model requires the VCGR to conduct an analysis at two levels:

1. Postcode level: to identify postcodes that have higher than average expenditure per gaming machine when compared with the average for all postcodes within that local government area.

2. Venue level: to identify venues that have higher than average expenditure per gaming machine when compared with the average for all venues within that postcode.

The Panel recommends a method that requires a greater proportion of machines to be removed from postcodes and venues with high gaming intensity: hotspot postcodes and venues. To determine how many more gaming machines should be removed from a hotspot postcode area (that is, above the proportion of total gaming machines), a weighting factor (equivalent to 33 percent of the amount by which expenditure exceeds average expenditure per gaming machine) is assigned. The removal of gaming machines from postcodes and venues that have lower than average spending levels

is calculated (after removals from the hotspot postcodes and venues) using their relative share of gaming machines.

Recommendation 5That where gaming machines must be removed from a local government area to reduce the density of machines to the cap level:

• the method for determining where gaming machines will be removed from should be calculated by postcode in the first instance and then by venue in each postcode

• a higher proportion of gaming machines should be removed from hotspot postcodes and venues; that is, postcodes and venues that have above average expenditure per gaming machine

• removal of gaming machines should be initially determined on a proportional basis by relative share of gaming machines

• for hotspot postcodes/venues, a weighting, equivalent to 33 percent of the amount by which expenditure exceeds average expenditure per gaming machine, should be applied to determine the number of machines to be removed.

Additional principlesThe Panel highlighted a number of additional guidelines that should be used when deciding how many gaming machines to remove from each venue.

Level of reductions in gaming machines for individual venuesThe Panel recommends that, in determining how many gaming machines to remove from venues, no venue is subject to a reduction of more than 70 percent of its total gaming machines.

Minimum level of gaming machines per venueThe Panel recommends that venues with less than 20 machines not be subject to any reductions as a result of regional caps. In addition, the Panel recommends that, in applying the required reduction model, no venue be reduced to a level below 20 machines.

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Recommendation 6That, where gaming machines must be removed from a local government area in order to meet the universal cap, gaming machines should be removed subject to the following provisos:

• the number of gaming machines to be removed from a gaming venue should not exceed 70 percent of the total number of gaming machines at that venue

• a minimum of 20 gaming machines must remain in a gaming venue after gaming machines have been removed

• no gaming machines should be removed from a venue with less than 20 gaming machines.

Impact of additional rules on overall cap level of a regionIn applying these additional rules, the Panel noted that there might be some cases in which a local government area is not able to meet the reduction in gaming machines required to reach the capped level of 8.0 gaming machines per thousand adults. In such cases, the Panel considers that the VCGR should be given the flexibility to provide for such regions to remain above the recommended capped level. The Panel recognises that, by the time the reductions have been completed, population growth will probably have reduced the overall density level.

Analysis of the impact of cap on gaming venuesIn the local government areas with a gaming machine density above the cap level of 8.0 machines per thousand adults, more than 30 venues will not have any reduction in gaming machines. Further, more than 66 percent of venues will have their gaming machines reduced by less than 20 percent of their total machines. The Panel notes, however, that some venues will be required to significantly reduce their number of gaming machines under the proposed cap level and model recommended by the Panel.

The Panel’s analysis indicates that less than ten Victorian venues would be required to reduce their number of gaming machines by more than 40 percent. This equates to less than five percent of venues in the affected local government areas. The impact on those venues affected will be

significant but the Panel considers that the potential benefit from the reduced accessibility to gambling opportunities justifies the negative impact on these few venues.

Implementation timeframeThe Panel recognises that the level of the regional cap and the model for determining which venues’ gaming machines will be removed from will have a significant impact on some venues. For this reason, it recommends a phased implementation process over four years. This period will enable gaming venues to plan for the loss of gaming machines, and it will provide sufficient time for the operators to move gaming machines into alternative venues.

To further limit the impact on venues, the Panel recommends that venues should only be subject to one removal process, with the total reductions required for a venue implemented at one time. Under the Panel’s proposal, venues with the highest proportion of total reductions in gaming machine numbers would have the longest time to remove those machines.

Recommendation 7The timetable for the reduction of gaming machines required to meet the universal cap be as follows:

• Where a venue is required to remove between 0 percent and 10 percent of its gaming machines, the machines must be removed within 12 months of the date on which the gaming operator receives a written direction from the VCGR.

• Where a venue is required to remove between 11 percent and 20 percent of its gaming machines, the machines must be removed within two years of the date on which the gaming operator receives a written direction from the VCGR.

• Where a venue is required to remove between 21 percent and 30 percent of its gaming machines, the machines must be removed within three years of the date on which the gaming operator receives a written direction from the VCGR.

• Where a venue is required to remove between 31 percent and 70 percent of its gaming machines, the machines must be removed within four years of the date on which the gaming operator receives a written direction from the VCGR.

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Chapter 9 Other implementation issues

The ongoing role of local governmentBoth prior to and during the course of this review, local councils have had much to say about the concentration and location of gaming machines in their local government area. Some councils have expressed the view that they should have more say in the placement of gaming machines in their communities.

In 2002, the government made an election commitment to amend the Victoria Planning Provisions to require a planning permit to be obtained for all new gaming venues and for all increases in the number of gaming machines at an existing venue. The Panel has been advised that these amendments are currently being drafted and the new requirement for a planning permit is expected to come into operation early in 2006. The Panel supports this election commitment. The Panel also notes that councils, as planning authorities under the Planning and Environment Act 1987, already have significant powers in relation to gaming venues and gaming machines in their local government area.

The Panel strongly recommends that all councils consider developing a gaming machine policy and including the policy in their planning framework. The Panel considers that developing and implementing such policies will enable local government to take greater responsibility for, and control of, the gaming activity in their local government area and to protect their vulnerable communities.

Recommendation 8That the Victorian Government encourages all councils to develop a local gaming machine policy—to be included in their local planning framework—that outlines the factors the council will take into account when considering a gaming machine planning permit application

Resourcing the VCGR The Panel considers that the recommendations made in this report have the potential to generate significant additional workload for the VCGR in respect to its statutory licensing functions. It is imperative for the successful implementation of the extended caps policy that the VCGR is able to process and determine these applications as expeditiously as possible. The Panel recommends, therefore, that the Government examines whether the existing resources of the VCGR are sufficient for this purpose.

Recommendation 9That the Government ensures that the VCGR has sufficient resources to implement the extended regional caps policy. This includes having the resources to expeditiously determine all applications for approval to move gaming machines from one venue to another.

Periodic review of the cap levelUnder the Gambling Regulation Act 2003, the VCGR is required to conduct a review of the limits set by regional caps at five-year intervals. The Panel understands that the purpose of this review is to determine whether the level of the cap is still appropriate and whether adjustments to the cap should be made.

The Panel has recommended that the new universal cap be implemented over a four-year period. No review of the regional cap limit should occur until the cap has been fully implemented.

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1

Introduction

When the Bracks Government was elected in 1999, it inherited a gaming environment with a significant number of gaming machines but no substantial measures in place to tackle problem gambling. The Bracks Government has responded with a comprehensive strategy to minimise the negative impacts of gambling on the community.

Part of this strategy was the 2001 introduction of regional caps on the level of gaming machines in five areas. The regional caps policy was a response to community concerns about the number of gaming machines in areas of socio-economic vulnerability.

In its 2002 election policy, Responsible Gaming—Labor’s plan for better gambling regulation in Victoria, the Government stated that it would implement regional caps for a further five areas and extend the boundaries of the current capped metropolitan areas. It was in this context that the Minister for Gaming, the Hon. John Pandazopoulos MP, established the Regional Electronic Gaming Machine Caps Review Panel (the Panel) to examine the regional caps policy and strategy and to advise the Government on the best way forward.

The Panel undertook a comprehensive consultation process that engaged local governments, the gaming industry and community stakeholders. Although the terms of reference for the review focused on the issue of regional caps, a broad range of issues were canvassed by stakeholders during consultations.

While it has not been possible for the Panel to consider all of these issues, it has gathered the information provided and has provided the Minister with a summary of the issues raised so that the Government and the Responsible Gambling Ministerial Advisory Council can draw on this information in the future.

Regional caps are not the only policy initiative of the Bracks Government in relation to problem gambling. The Government has a comprehensive problem gambling strategy to minimise the negative impacts of gambling on the community and is currently introducing a range of new responsible gambling and problem gambling measures which include:

• an additional $12 million for problem gambling services for 2005–06

• a ban on the advertising of poker machines and restrictions on signage outside gaming venues

• legislation to ensure venue staff are trained in recognising and responding to problem gambling

• the development of a school curriculum to educate young people about the risks associated with gambling

• the introduction of a new Recovery Assistance Program to assist recovering problem gamblers.

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Terms of referenceThe terms of reference for the review stated that:

The Panel is requested to consider:

• the Government’s regional caps election policy commitment

• the available research regarding existing capped areas

• the geographic concentration of electronic gaming machines, and in particular the high density of gaming machines in areas with high socio-economic disadvantage

and to make recommendations on:

• addressing these issues

• implementing the election commitment

• the possibility of an extended caps policy.

The Minister initially requested that the Panel report its findings by the end of August 2005. In May, the Minister agreed to extend the reporting date of the review to November 2005 to allow the Panel to carry out more comprehensive consultation.

Panel membersThe Panel is chaired by Robert Hudson MP, Member for Bentleigh. The other members of the Panel are Karen Overington MP, Member for Ballarat West and Luke Donnellan MP, Member for Narre Warren North.

Process of reviewThis report is based on evidence received throughout the review, including written submissions and stakeholder consultation sessions. The report also draws on research and data analysis obtained by the Panel.

The Office of Gaming and Racing briefed the Panel in March and April 2005. The Panel also met with the Victorian Commission for Gambling Regulation.

The Panel undertook a comprehensive consultation process between April and August 2005. A consultation paper was published in April 2005 to provide background information on the Victorian Government’s regional gaming machine caps policy and identify the particular issues of interest to the Panel.

The Panel wrote to approximately 400 stakeholders in April and May advising them of the terms of reference of the review, enclosing the consultation

paper and inviting written submissions and expressions of interest to meet with the Panel. This was sent to all Victorian local governments, 94 community stakeholders, 214 gaming venues and eight peak industry stakeholders. In addition, the Panel wrote to all members of the Victorian Parliament.

Eighty-one written submissions were received and are set out in appendix A; seven submissions have been kept confidential at the request of the submitters. While these seven submissions have been considered, their confidential nature has prevented the Panel from directly addressing them in this report.

The Panel conducted consultation sessions for industry and community stakeholders between April and August. Those attending these sessions included representatives from 118 venues located in capped or nominated regions and 23 representatives from community organisations. The sessions were held across metropolitan Melbourne and in Ballarat, Shepparton, Warrnambool and Geelong. A list of the consultation sessions is set out in appendix B.

The Panel met with representatives from six peak industry organisations, six peak community bodies, 15 local governments currently in a capped region or a region nominated for capping in the second round, and three local governments not included in the regional caps policy. A list of these organisations is set out in appendix C.

The Panel also wrote to nine researchers with expert knowledge in the area, inviting them to respond to the issues raised in the course of the review. A list of these researchers is set out in appendix D.

The Panel visited a number of gaming venues over the course of the review. The venues it visited represented a cross section of the different types and sizes of venues in Victoria.

Many individuals and organisations contributed to this review by making written submissions and participating at consultation sessions and meetings. The Panel is grateful to all of these people for their contribution of expertise and ideas.

The Panel met privately with a group of Gambler’s Help clients during the course of the review. This group consisted of people with ongoing gambling problems, spouses of people with a gambling problem and people recovering from a gambling

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problem. The Panel would particularly like to thank this group for sharing some of their deeply personal experiences with us.

The Study into the Impact of Caps on Electronic Gaming Machines by the South Australian Centre for Economic Studies was released by the Victorian Government in June 2005. It examined the impact of the first round of regional caps and was a key resource in the review. The Panel forwarded a copy of the executive summary of the study to all stakeholders it contacted during the review. The full study is available on the Department of Justice website.

During the course of the review, it became necessary for the Panel to consider disaggregated venue expenditure data when developing recommendations. This information, collected by the Victorian Commission for Gambling Regulation, is protected information under the Gambling Regulation Act 2003. The Minister for Gaming issued a certificate under the Gambling Regulation Act in May 2005 to make this information available to the Panel.

Australian National University analysisThe Australian National University (ANU) Centre for Gambling Research undertook a socio-spatial analysis for the Panel. It analysed 16 local government areas using disaggregated venue expenditure data. The analysis identified and analysed hotspots of gaming intensity within the regions identified in the Government’s 2002 election commitment.

In this analysis, hotspots were identified using a combination of the following two variables:

1. proximity of venues to other venues in an area

2. level of net gaming machine expenditure by venue.

Identification of a hotspot using the above variables could indicate a number of possible scenarios, including:

• a cluster of venues in close proximity with moderate levels of gaming expenditure

• a small number of venues with relatively high levels of expenditure

• a group of venues in close proximity with one venue generating extremely high levels of expenditure.

The ANU based its analysis on confidential disaggregated venue expenditure data provided to the Panel under the certificate issued by the Minister, as discussed above. The confidential nature of the analysis prevents the Panel from publicly releasing the findings. It is able, however, to highlight the main findings of the analysis:

• There was a significant number of concentrated hotspots of gambling intensity across all of the regions analysed.

• In some cases, the hotspots of intensity varied significantly over the four years analysed (2001–2005), while in others, the hotspots were relatively stable for the period analysed.

• Hotspots were located in areas of both high socio-economic disadvantage and relatively low socio-economic disadvantage (as measured by socio-economic indexes for areas (SEIFA).

Availability of material to inform the reviewDuring the course of the review, the Panel found a distinct lack of detailed research to inform its consideration of the issues involved. In particular, there was little detailed research on the relationship between accessibility, particularly the number and location of gaming machines, and problem gambling.

The most detailed examination of gambling in Australia remains the Productivity Commission’s 1999 inquiry into Australia’s Gambling Industries. Despite this landmark report being released almost seven years ago, it remains the most comprehensive report on the Australian gambling environment. As such, the Panel has relied heavily on the Productivity Commission’s findings in its report. The Panel considers that there is a need for further research, especially in the area of accessibility, to augment the current body of knowledge about gambling and problem gambling, and to inform future policy.

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Chapter 1 The context

1Electronic gaming machines were first introduced to Victoria in 1992, with 10 000 machines introduced over an 18-month period. By the time the Bracks Government came to office in 1999, the number of machines across Victoria had grown to approximately 30 000, producing more than $2 billion per annum.

The Bracks Government has capped the total number of gaming machines in the state at 30 000. Of these, 2 500 gaming machines are located at Crown Casino (these machines are not part of this review).

Current gaming machines statisticsAs at 30 September 2005, 27 221 gaming machines were in operation in Victoria (not including Crown Casino). There are two gaming operators (Tabcorp and Tattersall’s), who may each operate up to 13 750 gaming machines in Victoria (under the Ministerial Direction of 19 September 2002). As at 30 September, Tabcorp operated 13 740 gaming machines and Tattersall’s operated 13 481 gaming machines. These are spread across 69 local government areas in 523 venues.

The Minister has issued a direction that a minimum of 50 percent of gaming machines must be in licensed clubs and a minimum of 20 percent must be in regional and rural venues. As at 30 September, 13 494 gaming machines were located in licensed clubs, and 13 727 were located in pubs and hotels. Approximately 17 800 gaming machines

were located in the metropolitan area, with 7 340 located in regional areas.

In the financial year 2004–05, total net gaming machine expenditure in Victoria was $2 393 million. This represents expenditure per adult of $618.27 ($664.77 in the metropolitan area and $419.52 in regional areas). The Productivity Commission estimated that approximately 40 percent of total expenditure on gaming machines in Australia comes from problem gamblers (Productivity Commission 1999).

Regulation of gaming machinesThe Victorian gaming machine industry is subject to significant regulation. The Gambling Regulation Act is the primary regulatory instrument governing gaming machines. The objectives of the Gambling Regulation Act include fostering responsible gambling in order to minimise the harm caused by problem gambling and to accommodate those who gamble without harming themselves or others.

Tabcorp and Tattersall’s are the only licensed operators of gaming machines in Victoria apart from Crown Casino. The gaming operators enter into approved contracts with venue operators for the supply and operation of gaming machines. The licences are regulated by the Victorian Commission for Gambling Regulation (VCGR).

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Role of the Victorian Commission for Gambling RegulationThe VCGR approves premises suitable for gaming and issues licences to venue operators. Any variations to those licences, including a change in gaming machine numbers at a gaming venue, must also be approved by the VCGR.

In order to approve a new gaming venue, the VCGR must be satisfied that:

• the applicant has the authority to make the application

• the premises are (or will be on the completion of building works) suitable for the management and operation of gaming machines

• the net economic and social impact of the approval will not be detrimental to the wellbeing of the community of the local government area in which the premises are located.

The VCGR considers the economic and social impact of a new gaming venue, or of an increase in the number of gaming machines at an existing venue, on a case-by-case basis. Information that the VCGR considers includes data on gaming machine and venue density, gaming machine expenditure per capita, the SEIFA ranking developed by the Australian Bureau of Statistics, and local unemployment levels. (The Australian Bureau of Statistics develops the SEIFA ranking by measuring the relative social and economic wellbeing of areas from the 2001 Census.)

Where an application to the VCGR relates to an increase in the number of gaming machines at an existing venue, the venue operator is required in his or her submission to demonstrate the net economic and social benefit that will accrue to the local community in the relevant local government area and the impact that the proposed increase will have on surrounding local government areas.

The broad policy frameworkThe Bracks Government permits the playing of gaming machines as a legal and legitimate recreational activity within a tightly regulated environment. At the same time, it recognises that the availability of this recreational activity is related to the development of problems for some individuals, which can impact on their families and communities.

To address this harm, the Bracks Government has implemented a comprehensive problem gambling strategy. The strategy aims to minimise the negative impacts of gambling on the community by minimising the level of harm associated with problem gambling. The regional caps policy is only one part of this strategy. Other measures that the Government has implemented to address problem gambling in Victoria include:

• a ban on gaming machines accepting $100 banknotes

• a ban on autoplay facilities

• a limit on game spin rates

• a requirement that machines be capable of generating and displaying game and player information, including the amount of time and money spent by the player in a session of play

• a complete ban on automatic teller machines in gaming rooms

• a cap of $200 per transaction on withdrawals from automatic teller machines and EFTPOS (electronic funds transfer at point of sale) machines located elsewhere in a venue

• the compulsory payout by cheque for winnings over $2000

• the requirement that providers of player loyalty schemes supply statements of gaming activity to their members at least annually

• increasing local councils’ ability to have input into gaming matters by requiring a planning permit for any new venue or for an increase in gaming machines at an existing venue. Local councils are also able to request that the Victorian Civil and Administrative Tribunal review any decision on applications for new premises and for an increase in gaming machine numbers at an existing venue.

• a ban on advertising that promotes the playing of gaming machines, including advertising through the media and by unsolicited direct mail from pubs, clubs and the casino

• restrictions on the display of gaming machine related signs at pubs, clubs and the casino

• a requirement that all licensed employees working in the casino or in the gaming machine area of a gaming venue complete a training course on the responsible provision of gambling.

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What is problem gambling?There are a number of different definitions used to explain problem gambling. These definitions discuss problem gambling as a medical problem, an economic problem, as part of a pattern of gambling behaviour, and in terms of the harm it can cause gamblers and others. The Bracks Government supports the following definition, developed as part of the Gambling Research Australia research program: “Problem gambling is characterised by difficulties in limiting money and/or time spent on gambling which leads to adverse consequences for the gambler, others, or for the community.” (Neal, Delfabbro and O’Neil 2004, p. 3)

Measuring the prevalence of problem gamblingOne of the challenges faced when developing strategies to address problem gambling is that it is difficult to measure its prevalence. As is the case with defining what problem gambling is, there are various tests that are used to measure the prevalence of problem gambling in the community.

The South Oakes Gambling Screen (SOGS) is one of the most widely used and accepted tests in Australia, New Zealand and Sweden. Despite its acceptance, however, SOGS is limited in its ability to measure the severity of people’s problems and its appropriateness for people of different cultures (Productivity Commission 1999, vol. 1, p. 20). As a result, other tests such as the Canadian Problem Gambling Index (CPGI) are becoming more popular in Australia and overseas. This test has been developed partly as a response to the potential shortcomings of SOGS, and two major research studies have proposed the CPGI as the preferred instrument. Using the SOGS test, the Productivity Commission estimated in 1999 that just over two percent of the Victorian adult population are problem gamblers, with an additional one percent having ‘severe problems’.

What is harm minimisation or harm reduction?Regardless of which definition and test of problem gambling is used, it is widely accepted that the consequences of problem gambling can be significant. Problem gambling causes harm.

The Victorian Longitudinal Community Attitudes Survey in 2003 found that more than 85 percent of the Victorian population consider that gambling is a serious social problem. It also found that more than 82 percent of problem gamblers indicate that playing ‘pokies’, or electronic gaming machines, is their favourite form of gambling (McMillen and Marshall 2004, pp. 12–13). The harm that problem gambling with gaming machines causes is a key focus for the Bracks Government as it seeks to minimise the harm caused by gambling.

Harm minimisation focuses on limiting the negative effects of a social problem (such as drug use or problem gambling). More specifically, harm minimisation involves reducing the negative health, social and economic consequences of such problems without necessarily enforcing abstinence.

The Productivity Commission has supported the adoption of a harm minimisation approach by recommending that harm minimisation be used to deal with the social costs of problem gambling. The Government’s approach meets community expectations that governments have a responsibility to minimise the harm caused to the community by problem gambling.

ConclusionThe Victorian gaming machine industry grew quickly after the initial introduction of electronic gaming machines in 1992. Evidence suggests that the prevalence of problem gambling and its associated harm also grew. Since the Bracks Government came to office, a comprehensive strategy has been implemented to address problem gambling and its effects on individuals, their families and communities. The regional caps policy is an important part of the Government’s strategy.

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Chapter 2 First round regional caps

2The Bracks Government first introduced regional caps on gaming machines in 2001. The aim of the Government’s policy was to identify those communities that are most vulnerable to the harmful effects of gambling and to cap the level of gaming machines in those communities.

Selection of regionsThe selection of the regions to be capped under the first round of caps was a two-stage process. The first stage was to identify the communities that were most vulnerable to the harmful effects of gambling and the second stage was to define the geographical area that best represented these vulnerable communities.

Indicators of vulnerabilityThree indicators were used in the first round to determine the communities that were the most vulnerable:

1. the accessibility individuals have to gaming machines, measured by the number of gaming machines per thousand adults

2. the average player loss per adult per year on gaming machines

3. the socio-economic status of particular areas in Victoria as indicated by the SEIFA ranking.

Correlations between these three indicators identified communities that were more likely to be harmed by large numbers of gaming machines. High gaming machine accessibility and high losses, accompanied by socio-economic disadvantage, were taken as indicators of an increased need for protection.

Boundaries for regionsIn determining the boundaries for the regions, the Government was mindful of identifying areas bordering the local government area that also needed protection. At the same time, the Government was careful not to specify regions so large that the protection given to the particular vulnerable communities was reduced.

Regions cappedThe Government identified five areas in which to implement the first round of regional caps:

1. Maribyrnong Plus—the City of Maribyrnong plus the adjoining postcodes 3015 (the portion not included in the City of Maribyrnong), 3020 and 3031

2. Greater Dandenong Plus—the City of Greater Dandenong plus the adjoining postcodes 3170, 3177 and 3803

3. Darebin Plus—the City of Darebin plus the adjoining postcodes 3058, 3060, 3061, 3074 and 3081

4. Bass Coast Shire

5. City of Latrobe.

The five regions were selected because the statistical indicators identified these communities as being most vulnerable to the harm associated with gambling. The three metropolitan areas (Maribyrnong Plus, Greater Dandenong Plus and Darebin Plus) were not defined solely by local government boundaries because vulnerable

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communities extend across established boundaries. The ‘plus’ areas were designed to promote cooperation across local government boundaries.

Setting the cap limitUnder the Gambling Regulation Act, the VCGR is responsible for setting the caps on gaming machine numbers for each of the regions. The VCGR sets the caps in accordance with the criterion specified by the Minister. The Minister specified that the level of gaming machines in the identified regions should not be higher than the level of gaming machines per thousand adults of the lowest 90 percent of municipalities, as at 30 June 2000. This equated to a density level of 11.7 gaming machines per thousand adults. (The Darebin Plus region had a density level below 11.7 at the time the caps were introduced, therefore, the region was capped at its actual density level as at 30 June 2000.)

Reduction in gaming machine numbers in regionsThe Minister’s direction identifying the first five regions was published on 15 February 2001 and the number of gaming machines in those regions was subsequently reduced by 406, amounting to a reduction of more than seven percent. The reductions were implemented by 14 February 2004. Table 1 outlines the phased reduction of machines that occurred as a result of the first round of caps.

Stakeholder assessmentDuring the consultation phase, the Panel heard a range of stakeholders’ views on the impact of the first round of regional caps and the use of regional caps as part of a harm minimisation strategy. Most industry stakeholders indicated that they did not believe that regional caps would have an effect on existing problem gamblers. They felt that caps would act to displace recreational gamblers instead.

The Australian Hotels Association (Victoria) (AHA (Vic)) stated that “AHA (Vic) is firmly of the view that caps on electronic gaming machines are ineffective in terms of further addressing problem gambling” (submission to Panel, p. 9). Clubs Victoria also reflected this view in its submission.

Melbourne Racing Club suggested to the Panel that “the rationale behind caps helping problem gamblers is contradictory as they impact all players and don’t target problem gamblers” (submission to Panel, p. 1). The Altona Bowling Club commented that “the notion that reduction in gaming machine numbers will correlate with the number of problem gamblers in the area cannot be supported, it is more likely to deter the vast majority of residents from a legitimate recreational option within their community” (submission to Panel, p. 1).

The Council of Gambler’s Help Services concluded that “the current caps have experienced no significant impact. Since electronic gaming machines can still be accessed in all capped areas

Table 1 Reduction of gaming machine numbers as a result of the first round of regional caps

Cumulative reductions in machine numbers required by:

Initial Number as at 14 February 14 February 14 February Region 30 June 2000 2002 2003 2004 Greater Dandenong Plus 1687 29 88 147

Maribyrnong Plus 1329 31 94 157

Darebin Plus 1554 0 0 0

Latrobe 663 12 37 61

Bass Coast Shire 261 8 24 41

Total 5494 80 243 406

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and most, if not all, venues are still in operation (albeit with slightly smaller machine numbers), access by problem gamblers is still sufficient to enable them to gamble excessively” (submission to Panel, p. 2).

The Panel also spoke to a number of gaming venue operators currently subject to regional caps. These venue operators had a range of views about the impact of the first round of caps on their businesses.

At the venue operators’ consultation session in Greater Dandenong, gaming venue operators reported that the number of machines taken out of each venue was not significant enough to have a big impact on problem gambling.

Mr Marc Rodway from the Flemington Racecourse Tabaret reported that the removal of 20 machines from that venue under the Maribyrnong Plus cap did not have a negative impact on expenditure at the venue, except during race days when rates of use were at their highest (Melbourne venue consultation session, 8 June 2005). In contrast, the Yarraville Club, also under the Maribyrnong Plus cap, suffered a significant loss of revenue as a result of the removal of 15 machines. The Yarraville Club indicated that the “immediate impact to the club of the reduction in electronic gaming machines was a loss of over $200,000” (submission to Panel, p. 2). Further, as a result, it was forced to reduce staff by one full-time position and reduce hours for casual staff (Maribyrnong venue consultation session, 3 August 2005).

Other venue operators reported that, while the reduction in the number of gaming machines they suffered as a result of the regional cap did not have a significant detrimental effect, it did put them at a competitive disadvantage to other venues in the area that were not required to reduce their gaming machine numbers. Seagulls Nest (Williamstown Football Club) stated in its submission that “…it would be an injustice if Williamstown Football Club was again affected by the caps, when its competition prospers with the electronic gaming machines which have not been affected by the caps” (submission to Panel, p. 2).

A number of stakeholders, however, indicated that they did see benefits to the regional caps policy. Local councils were particularly supportive of the regional caps policy. All local councils that met with

the Panel indicated support for regional caps in some form. The Municipal Association of Victoria noted that:

…despite the lack of evidence to indicate that electronic gaming machine caps have been effective in reducing the incidence of problem gambling, Councils have indicated that they would prefer that caps remained in place or increased rather than not have capping. The majority of councils have clearly asserted that they do not want increase in gaming machine numbers within their municipality. (submission to Panel, p. 4)

The Victorian Local Governance Association advised the Panel that councils support the notion of caps in some form, but they do not see them as being the single answer to problem gambling (meeting with Panel, 15 June 2005).

Dr Mark Zirnsak from the Uniting Church in Australia stated that the welcome part of the regional caps policy was that gaming machines would be taken from areas of high disadvantage (meeting with Panel, 25 May 2005).

At a consultation session for community stakeholders on 4 August 2005, those present generally supported regional caps. Some stakeholders felt, however, that the caps should be more precise and that they should be targeted towards problem gamblers. They argued that it is not the number of machines that is the issue but rather where those machines are located. Some community stakeholders supported a cap, but indicated that they did not believe that the Government would implement caps at a level that would impact on the accessibility of gaming opportunities.

The Panel heard evidence from stakeholders that the caps policy would not reduce the incidence of problem gambling unless the number of gaming machines was significantly reduced in conjunction with other protections for the player (Bethany Community Support submission, p. 5). The Victorian Council of Social Service argued that in order for regional caps to have an impact, they would need to reduce the number of gaming machines by half (meeting with Panel, 11 August 2005). Representatives from Communities Acting on Pokie Problems indicated support for regional caps with a further reduction in gaming machines, but believe that regional caps will only work properly if they have a real local connection (meeting with Panel, 21 July 2005).

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Study into the impact of caps on gaming machinesThe Victorian Government, through the Gambling Research Panel, commissioned the South Australian Centre for Economic Studies to conduct research into the impact of the first round of regional caps. The results of this research are reported in the Study of the Impact of Caps on Electronic Gaming Machines (O’Neil 2005).

The research compared the cap regions with control regions with similar characteristics. In the case of the metropolitan regions, the control regions are identified as minus regions. The findings of this study are summarised below.

What was the impact of the first round of caps?The research found mixed results of the first round of regional caps. During the period between March 2002 and June 2004, net gaming machine expenditure in Victoria declined by 6.4 percent. In all but one capped region (City of Latrobe), the decline in net gaming expenditure over the period was greater than the decline across Victoria.

In a number of regions, net gaming machine expenditure decreased by more than the reduction in the number of gaming machines in the region. The control regions examined by the researchers, however, experienced a decline in net gaming machine expenditure of similar magnitude.

The researchers found that the decline in expenditure was not greater in the venues that lost gaming machines under the caps. Nor did venues that lost a larger share of their machines suffer greater losses in gaming machine expenditure than those venues that lost a smaller share of their gaming machines.

This evidence suggests that, in the capped regions, factors other than the reduction in the number of gaming machines were responsible for the decline in net gaming expenditure. The researchers concluded that the remaining machines in the capped regions were probably used more intensively after the regional caps were implemented. Between March 2002 and June 2004, for example, the Greater Dandenong Plus region experienced an 8.3 percent decline in net gaming machine expenditure and a 5.8 percent reduction in machine numbers. During

the same period, there was an 8.8 percent decline in net gaming expenditure in the control region, Monash Minus, even though there was no change in machine numbers.

In the Maribyrnong Plus and Hobsons Bay Minus regions, there was a decline in gaming machine expenditure of 8.1 percent and 8.5 percent respectively, and reductions in the number of gaming machines of 10 percent and zero respectively over the same period. In the City of Latrobe, the decline in net gaming expenditure between March 2002 and June 2004 was lower than the reduction in the number of gaming machines. Latrobe experienced a 3.7 percent decline in total net gaming machine expenditure and a 4.3 percent reduction in the number of gaming machines. In contrast, the control region Ballarat experienced an increase in net gaming expenditure of 3.3 percent, while the number of gaming machines fell by 0.1 percent.

The potential impact of factors other than reductions in gaming machine numbers is highlighted by the findings in the Darebin Plus capped region. From March 2002 to June 2004, the Darebin Plus and Moreland Minus regions experienced a decline in gaming machine expenditure of 6.9 percent and 6.2 percent respectively. This was the case despite the fact that there were no changes in gaming machine numbers in these areas.

The exception to the above findings is the Bass Coast region, where net gaming machine expenditure declined by more than the reduction in the number of gaming machines. Bass Coast experienced a decline of 23.7 percent in net gaming machine expenditure compared with a 14.1 percent reduction in the number of gaming machines. In contrast, the control region, Greater Geelong experienced a decline in net gaming machine expenditure of 6.9 percent, and no change in the number of gaming machines.

On balance, the researchers found no evidence that the first round of regional caps had any positive influence on problem gamblers or problem gambling. The evidence suggested that, in those venues (and regions) that lost gaming machines, rates of electronic gaming machine use increased following machine reductions because previously idle machines were used more after the implementation of the caps.

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The researchers concluded that the modest removal of 406 machines from the capped regions did not appear to result in gamblers queuing to use gaming machines. This is due to the low utilisation rates of gaming machines generally; making it more likely that the remaining machines were used more intensively in the capped regions after the regional cap was implemented.

Other factors affecting expenditure levelsVarious other measures introduced between March 2002 and June 2004 may have affected net gaming machine expenditure. Most notable were the introduction of a ban on smoking in gaming areas and restrictions on 24-hour trading.

The researchers found that the introduction of the smoking ban in gaming areas had a clearly identifiable impact on slowing gaming losses, although the exact impact on problem gamblers is unknown. Average monthly expenditure on gaming machines in Victoria was almost 20 percent lower in the year after the ban on smoking in gaming areas was introduced.

Restrictions on 24-hour trading introduced over the same period also had an impact on expenditure levels. In the venues that lost 24-hour trading, gaming expenditure fell by 3.3 percent. On a per machine basis, expenditure dropped by an average of almost 10 percent one year after trading hours were reduced. All 25 venues that ceased 24-hour trading were located in the metropolitan capped regions.

What conclusions can be drawn?The findings of the study into the impact of the first round of regional caps are equivocal. The researchers concluded that the quantitative reduction in gaming machines of 406 machines from four of the capped regions was too small to have any real impact on accessibility to gambling opportunities.

The Panel agrees that the scale and scope of the regional caps policy implemented in the first round was not of a degree that would lead to a shift in the way gaming machines are distributed and, therefore, was unlikely to reduce accessibility to gambling opportunities. This is an important conclusion for future regional caps policies. The study into the first round caps indicates that a more substantial

reduction in gaming machines is required to reduce accessibility to gaming opportunities.

The case of the Bass Coast region supports this conclusion. This region experienced the largest overall reduction in the number of gaming machines: 14.1 percent of all machines. The Bass Coast region also experienced the largest decline in net gaming expenditure: 23.7 percent.

The findings of the study are supported by the evidence provided to the Panel in the course of its review. Stakeholders indicated that, in venues that lost machines in the first round, the remaining machines were used more intensively. The Panel heard a lot of evidence that gaming machines in venues are only utilised fully on a few nights of the week—generally Friday and Saturday and on ‘club nights’.

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Chapter 3 Regional caps election commitment

3The Government’s 2002 election policy, Responsible Gaming—Labor’s plan for better gambling regulation in Victoria, includes a commitment to extend the number of areas capped under the regional caps policy. The terms of reference for this review require the Panel to make recommendations to the Government about how best to implement this commitment.

Election commitmentThe Government stated it would:

…double the number of capped areas to 10 as well as increase the size of the metropolitan capped areas. The extended regional capped area boundaries and the new regional areas will be determined with community consultation and using the Australian Bureau of Statistics socio-economic data…

The new capped areas will be based on:

• City of Ballarat

• City of Warrnambool

• City of Geelong, including the Borough of Queenscliffe

• City of Greater Shepparton

• Moonee Valley Plus, including parts of City of Moreland, as well as part of the City of Melbourne.

The extended current capped areas will include:

• Darebin Plus—to include parts of both Whittlesea Council area and Hume Council area

• Maribyrnong Plus—to include parts of both Brimbank Council area and Hobsons Bay Council area

• Dandenong Plus—to include parts of both Casey Council area and Monash Council area.

Consultation processThe Panel conducted an extensive consultation process with stakeholders in each of the regions identified in the 2002 election commitment. The Panel actively sought the views of local government, venue operators and community stakeholders.

Between April and August, the Panel visited the regions identified in the election commitment and met with venue operators, local governments and community stakeholders. In addition, the Panel has received written submissions from virtually all affected local councils and a number of venues and community stakeholders.

Issues for considerationTo determine the best way to implement the Government’s election commitment, the Panel developed a list of questions based on the key issues under consideration. The Panel sought responses from stakeholders to the following questions:

• What is your assessment of the current regional electronic gaming machine caps and their impact on problem gambling?

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• With reference to the Government’s extended regional gaming machine caps policy, what should the boundaries of the identified areas be?

• What criterion should be used to determine the caps for these areas and what timeframe should be applied for the implementation of the caps?

• Do you think an extended gaming machine caps policy will reduce the prevalence of problem gambling in Victoria? If so, what do you think the key elements of such a policy should be?

• What do you think should be the indicators used to determine areas for capping gaming machines under an extended caps policy?

Stakeholder viewsThe Panel heard evidence from all local councils in the relevant areas, with the exception of Hobsons Bay City Council, which elected not to make a submission or meet with the Panel. Councils were generally supportive of the introduction of regional caps or the extension of the existing regional caps in their local government area. Some councils suggested that the regional caps should target high concentrations of gaming machines within postcodes and suburbs that have a level of high socio-economic disadvantage—either by requiring that gaming machines be removed from these areas or by capping all postcodes at a certain density level.

Councils expressed a wide range of views about the level at which the regional caps should be set. Many argued that the cap should be set at the current state density so that no region could have more than 7.0 gaming machines per thousand adults. A number of councils advocated that the caps should be set at the existing density of gaming machines in a region. Others advocated a cap level below the state density for areas with particularly high socio-economic disadvantage. There were also some suggestions that the regional cap be set at a level 120 to 125 percent above the state density, which equates to approximately 8.5 gaming machines per thousand adults. Most councils supported an implementation timeframe that would enable the industry to plan for any reduction in the number of gaming machines.

There was a consensus among industry representatives within the regions consulted that, if regional caps were to be imposed, they should be set at the current level or at a level higher than the current level to allow for population growth. Industry advocated for the longest implementation time possible in order to adjust to any new regional caps.

The Panel found divergent views among the industry in regard to the boundaries for the capped regions. Some venue operators called for caps to be determined by local government boundaries to ensure that all venues operate under the same regulatory conditions. In regional centres, the Panel heard evidence that the boundaries for capped regions should include neighbouring regional centres that were serviced by the relevant local government area.

Community stakeholders in the regions indicated that they did not believe regional caps would reduce the prevalence of problem gambling. They agreed, however, that regional caps were needed to ensure no further growth in gaming machine numbers.

A number of community stakeholders suggested that the cap level would need to be significantly lower to impact on problem gamblers. Most community organisations argued for caps to be set at the state density or lower. They also advocated a much shorter implementation timeframe, ranging from three months to one year, to prevent industry making adjustments to compensate for the loss of gaming machines.

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Chapter 4 Geographic concentration of gaming machines

4The Panel has been asked to consider the geographic concentration of gaming machines, with a particular emphasis on the high density of gaming machines in areas of high socio-economic disadvantage. The Productivity Commission examined this issue in its 1999 landmark report Australia’s Gambling Industries. The Commission found an “inverse relationship between income levels and the density of gaming machines in Victoria”—that is, areas with a higher density of gaming machines are often also geographic areas with relatively low income levels. The Commission’s finding supports the community’s widespread perception that gaming machines are concentrated in local government areas of higher socio-economic disadvantage.

Is there a relationship between gaming machine density and level of disadvantage?A statistical analysis of gaming machine densities in local government areas and the corresponding level of disadvantage shows that there is a significant relationship between these two factors. Disadvantaged local government areas are more likely to have a higher than average number of gaming machines per thousand adults than more advantaged local government areas.

Table 2 illustrates this by comparing gaming machine density figures for the three highest and lowest areas of socio-economic disadvantage in Victoria (determined by the Australian Bureau of Statistics’ SEIFA).

Table 2 Socio-economic disadvantage and gaming machine density by local government area

SEIFA (socio-economic Gaming machine density index of disadvantage) (adults)

Lowest socio-economic status Greater Dandenong 876 10.89

Maribyrnong 915 13.38

Brimbank 918 7.29

Highest socio-economic status Bayside 1107 3.29

Stonnington 1107 3.84

Boroondara 1122 2.02

Victoria 7.01Note: a low SEIFA score indicates a lower socio-economic status.

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The three most disadvantaged local government areas, Greater Dandenong, Maribyrnong and Brimbank, are associated with above average gaming machine density levels, with the City of Greater Dandenong having a density 55 percent above the state average. In contrast, the City of Boroondara, with the highest SEIFA index rating, has a gaming machine density 71 percent below the state average.

The Panel heard evidence from local governments and community stakeholders about the higher concentration of gaming machines in areas of high socio-economic disadvantage. During meetings with the Panel, Maribyrnong City Council and Dandenong City Council both highlighted the particularly high level of socio-economic disadvantage in their regions and the high levels of both gaming machine density and total gaming expenditure per adult. Outside the City of Melbourne, the City of Maribyrnong has both the highest density of gaming machines per thousand adults and the highest level of gaming expenditure per adult (Maribyrnong City Council meeting with Panel, 10 August 2005). The City of Greater Dandenong has the fourth highest density of gaming machines and the third highest level of expenditure per adult (Greater Dandenong City Council meeting with Panel, 8 June 2005).

Moonee Valley City Council conducted an analysis of the north-west region of Melbourne that revealed that:

…the north-west is overburdened by electronic gaming machines, with greater social and economic disadvantage, a higher number of machines and greater than average losses compared to the metropolitan area. (submission to Panel, p. 8)

The Panel found that there is a relationship between gaming machine density and level of disadvantage in Victoria.

Is there a relationship between expenditure and density? In the financial year 2004–05, the Victorian total net gaming machine expenditure was $2 393 million. This represents an average expenditure per adult of $618.27.

The Panel has used a statistical analysis to determine the strength of the relationship between expenditure and density. This analysis asks a series of questions which are outlined below and are coupled with the outcome of that analysis.

• Is there a direct relationship between total net expenditure and the number of machines at a local government area level?

Yes.

• Is there a direct relationship between the number of machines and the average spend per adult at a local government area level?

Yes.

• Is there a direct relationship between the average spend per adult and gaming machine density (number of machines per thousand adults) at a local government area level?

Yes.

The above analysis suggests that in local government areas in Victoria there is a connection between the following key factors:

• the level of socio-economic disadvantage

• the level of gaming machine density

• the average level of expenditure per adult.

Distribution by suburbThe Panel conducted the above analysis at the local government area level, but the level of disadvantage, density of gaming machines and expenditure levels may vary significantly within local government areas. The City of Monash, for example, has relatively low levels of socio-economic disadvantage and gaming machine density overall. Gaming machines are concentrated in the most disadvantaged suburbs, such as Chadstone/Ashwood, Oakleigh and Clayton.

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In its submission to the Panel, the City of Monash noted that the Chadstone/Ashwood area is ranked in the 20 percent most disadvantaged areas in the state, yet has a density of 19.03 gaming machines per thousand adults. In Oakleigh and Clayton, also highly disadvantaged areas, the density is 16.39 and 14.42 gaming machines per thousand adults respectively (Monash City Council submission, pp.3–4).

The high number of electronic gaming machines per adult population in the areas of least advantage as well as the number of electronic gaming machines in areas bordering Monash creates a high-exposure, high-risk environment for vulnerable communities. (Monash City Council submission, p.4)

This pattern is also evident in the City of Greater Geelong, where the highest concentrations of gaming machines are found in the northern suburbs included in the Corio area. The northern sub-region of the City of Greater Geelong, which is significantly more disadvantaged than any other part of the city, accounts for 29 percent of the adult population but has 38 percent of the total gaming machines in the local government area and 41 percent of total gaming venues (Peter Loney MP, Member for Lara, submission, p. 4).

Greater Geelong City Council stated that “this would indicate that machine location is closely related to areas of significant disadvantage and lends credibility to the inference that machine operators target the poorest in the community” (submission to Panel, p. 2). The Panel received further evidence supporting this trend from a number of other local councils. The City of Kingston noted that the two areas of greatest disadvantage in the city, Clayton South and Chelsea, have gaming machine densities of 18.8 and 9.4 respectively (submission to Panel, pp. 6–7). In Brimbank, “a review of the electronic gaming machines in the city indicates that 60 percent of machines are located in the lowest socio-economic areas” (Brimbank City Council submission, p. 2). Whittlesea City Council noted that:

Of the current 616 electronic gaming machines in the city, 85 percent are located within a 2km radius of the city’s ‘urban south’. This is the area which contains the greatest disadvantage and the highest population densities within the municipality. (submission to Panel, p.9)

The City of Yarra noted that, of the gaming venues located within its local government area, six out of nine were located in Richmond, where the largest high-rise estate is located (City of Yarra submission, attachment 1). In the City of Stonnington, high concentrations of gaming machines “are located at the very centre of Stonnington’s most disadvantaged residents in the heart of the housing commission high-rise flats” (Stonnington City Council submission, p. 4).

Other jurisdictionsEvidence suggests that the concentration of gaming machines in areas of higher socio-economic disadvantage also occurs in other jurisdictions. The Productivity Commission’s analysis included Queensland, New South Wales and South Australia. The Commission found that the inverse relationship between income levels and the density of gaming machines applies in New South Wales and South Australia, but not in Queensland. That is, in New South Wales and South Australia, as in Victoria, there is a relationship between higher gaming machine density levels and geographic areas with relatively lower socio-economic levels.

Impact on communitiesHigh concentrations of gaming machines in areas with high socio-economic disadvantage are inevitably going to have implications for those communities. “The burden of gambling losses generally falls most heavily to those communities least able to bear those costs” (Greater Dandenong City Council submission, p. 2).

The InterChurch Gambling Taskforce suggested to the Panel that “the concentration of electronic gaming machines in areas of high socio-economic disadvantage soak up valuable community services in having to deal with people impacted by problem gambling” (submission to Panel, p. 3).

Bass Coast Shire Council noted that high concentrations of gaming machines and high levels of expenditure coupled with the low socio-economic status of the Shire, have a negative impact on the health and wellbeing of the community. “Depression, financial difficulties, isolation and poor work performance have all been linked to problem gambling” (submission to Panel, p. 2).

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Brimbank City Council submitted that “research, which is supported from the community’s feedback, demonstrates that gaming affects the entire community in a number of ways, including reducing the discretionary spending of families with an already low-income base” (submission to Panel, p. 2). The Country Women’s Association drew attention to the vulnerability of women from high concentrations of gaming machines, stating that “it seems women go to poker machine venues because they feel safe there…In our view, the needs of these women are clearly not being met by their communities” (Country Women’s Association submission, p. 1).

Data for the period 1999–2003 indicates that 56 percent of gaming machine gamblers are female, which is much higher than the proportion of female gamblers who participate in other forms of gambling (23 percent). Further, over 85 percent of female problem gamblers who sought help from Gamblers Help in Victoria used gaming machines as their usual form of gambling (O’Neil 2005, p. 65), reinforcing the view that the more vulnerable sectors of the community are most directly affected by the flow-on effects of easily accessible and plentiful opportunities to gamble.

Moonee Valley City Council noted:

Evidence exists that some communities continue to be disproportionately affected by adverse consequences of gambling. Social harms of concern to Council and the broader [community] include:

• domestic violence related to financial stress associated with gambling

• social stigma and stress associated with debt and related collection practices

• compromise to basic standard of living including nutrition and health care for dependents in households affected by gambling debt

• compromise to education, recreation and social opportunities for dependents in household affected by gambling debt

• alcohol and other substance misuse associated with gambling related debt and stress. (submission to Panel, p. 9)

ConclusionThe Panel’s statistical analysis illustrated that gaming machines are concentrated in the areas of highest socio-economic disadvantage in Victoria. Local governments’ and community stakeholders’ evidence clearly demonstrated that high concentrations of gaming machines have a significant impact on vulnerable communities.

The Panel is significantly concerned about this finding. Areas of high socio-economic disadvantage can least afford to bear the burden of high concentrations of gaming machines. The Panel considers it necessary to implement measures to ensure a more even distribution of gaming machines across Victoria.

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Chapter 5 Accessibility and problem gambling

5Given the high concentration of gaming machines in areas with high socio-economic disadvantage, it is important to examine whether there is a link between concentrations of gaming machines and an increased incidence of problem gambling.

Is there a link between accessibility and gambling activity?Evidence of a link between accessibility and gambling activity can be found in a number of research studies. South Australian research has demonstrated a definite, direct link between the density of gaming venues (per square kilometre), the density of machines in local government areas and the level of gaming expenditure per adult in South Australia (O’Neil 2005, p.56).

An ANU study into gaming machine accessibility in Canberra found that there is a relationship between gambling activity and the distance between a gambler’s residence and a regularly frequented venue. It established that there is a tendency for higher annual gambling expenditure among residents who live closer to their venue than gamblers who reside further away. Further, it discovered that people living within four kilometres of their regular gaming machine club have more frequent gaming sessions per annum than those who reside further away (Marshall et al. 2004, p. 11).

Another study in Victoria found that most gaming machine gamblers do not travel beyond their local

area to access machines. In fact, nearly 60 percent of gaming machine gamblers travelled less than five kilometres to the venue where they last played machines, with almost a third travelling just over two kilometres (McMillen and Marshall 2004, p. 19).

The level of accessibility can also be determined by who is likely to be exposed to opportunities to gamble. More specifically, this relates to the level of access to opportunities to gamble of people from a low socio-economic background, who may be more likely to seek a solution to their financial problems by gambling (Productivity Commission 1999, p. 8). This is particularly relevant given the higher concentration of machines found in areas with high socio-economic disadvantage and the fact that gaming machines can be accessed with little initial outlay.

Is there a link between accessibility and problem gambling?Given the link between accessibility and gambling activity, the question that naturally follows is whether there is a link between accessibility and problem gambling. In its 1999 inquiry into Australia’s Gambling Industries, the Productivity Commission examined whether there was a causal link between greater accessibility to gambling products and problem gambling. The Commission found that “…there is sufficient evidence from many different sources to suggest a significant connection between greater accessibility—particularly to gaming

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machines—and the greater prevalence of problem gambling” (Productivity Commission 1999, p. 8.1).

Other research, such as that recently completed by the South Australia Centre for Economic Studies, identifies the need for further empirical research to determine whether it is the actual number of gaming machines per venue that causes harm or the convenience of where those venues are located (O’Neil 2005, p. 54). There is relatively little research to conclusively prove that greater accessibility to gambling opportunities results in a higher incidence of problem gambling at small geographic scales (like local government areas). The Panel considers that this issue is significant and should be the subject of further research. The lack of any certainty about the specific link between accessibility and problem gambling is of real concern to the Panel. The Panel recommends, therefore, that the Minister commissions further research into the link between accessibility, specifically the number and location of both gaming machines and gaming venues, and problem gambling when determining the Government’s research agenda.

What are the factors that influence accessibility?Various factors influence accessibility to gambling opportunities and they have varying impacts on the actual level of accessibility in different communities. On balance, the number or concentration of gaming machines in an area generally increases the likelihood that machines will be available for more frequent use—thereby resulting in greater accessibility, including for groups such as problem gamblers.

Opening hours and the physical location of venues directly affect the accessibility of gambling opportunities. Gaming venues that are open longer hours and are located on main arterial roads, on public transport routes and in shopping precincts are more accessible than other venues.

Some stakeholders believe that the number of gaming venues in a region has a significant impact on the incidence of problem gambling. This is based on the premise that if a gambling opportunity is close by, individuals will be more likely to use it and that some people are inherently susceptible to problem gambling.

Other stakeholders cite the ease of entry to gaming venues and the nature of gaming machines themselves, being simple devices that can be accessed with minimal outlay (Financial and Consumer Rights Council Submission, pp. 4–5). A problem gambler who met with the Panel stated that this accessibility and, in particular, the location of venues near shopping centres, public transport and on main roads, is a particular driver of problem gambling (Problem Gamblers’ group meeting with Panel, 17 August 2005). Conditions of entry, including dress standards and the ease with which gambling machines can be used, are also factors that may affect accessibility (Productivity Commission 1999, p. 8.6). Higher dress standards, for example, may make venues less appealing to some problem gamblers. Finally, gaming machine venues are able to cater to both the social needs of people who either wish to avoid social interaction when gambling or those who seek social contact with fellow gamblers and staff.

Reducing accessibility to gambling opportunitiesAs identified above, accessibility has a number of dimensions. Controlling or limiting accessibility requires a comprehensive range of measures. Stakeholders suggested that physical location and venue density are important issues when considering reducing opportunities to gamble.

One stakeholder suggested it is the number, distribution and location of gaming venues that affect accessibility to opportunities to gamble, rather than the number of machines per se (Borderlands Co-operative submission, p. 2). Another stakeholder suggested reducing access to gambling opportunities by decreasing the number of gaming venues and consolidating them into larger venues in more “inconvenient” locations, such as industrial areas, as the best way of decreasing accessibility and helping problem gamblers (Gambler’s Help Southern submission, p. 3). The Maroondah City Council stated that locating gaming venues away from major transport hubs and residential areas, and thereby ensuring that there is a “considered” distance between venues, will create enough of a time delay to encourage problem gamblers to reassess their compulsive gambling behaviour (submission to Panel, p. 3).

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While a specific causal link between accessibility and problem gambling has not been conclusively proven, the link between accessibility and gambling activity suggests that reducing accessibility to gambling opportunities will likely result in less people being exposed to gambling activity. Regional caps are intended to affect accessibility by limiting the number of gaming machines in a region. The extent of the impact on the accessibility of gaming machines is determined by the level of the cap. In its simplest form, if the number of gaming machines is limited to ten machines per thousand adults, no more than ten people in a thousand will be able to play those machines at any one time.

Addressing any one aspect of accessibility in isolation is unlikely to have as great an impact on problem gambling as simultaneously addressing a combination of accessibility factors. The Panel considers that caps on the number of gaming machines will have a greater impact if combined with measures aimed at addressing other factors of accessibility.

Destination gaming as a means to reduce accessibilityThe Panel heard from a number of stakeholders regarding the concept of destination gaming versus convenience gaming. Convenience gaming refers to gaming venues located in commonplace locations, whereas destination gaming refers to venues located at distinct destination locations.

A number of stakeholders argued that there should be a shift towards more destination gaming in Victoria. They argue that convenience gaming lends itself to spontaneous gaming, reinforces habitual gaming behaviour and creates a perception that regular gaming is a fully normal and acceptable activity. In contrast, destination gaming requires a pre-determined decision to travel and participate in gaming. It reduces the risks of impulse gaming and lessens the exposure of gaming in general.

A considerable number of peak community representatives who attended a consultation session with the Panel on 4 August 2005 supported destination gaming. Most stakeholders advocated the removal of gaming machines from urban residential areas into entertainment precincts.

The Victorian Local Governance Association suggested that the best places for gaming machines are in entertainment precincts that become destinations of choice. This would limit the gambling opportunities for problem gamblers who may engage in impulse gambling rather than making an informed decision about their gambling behaviour (meeting with Panel, 15 June 2005).

Further, financial counsellors who work with problem gamblers reported that their clients find the number and visibility of gaming venues to be significant obstacles to gamblers’ rehabilitative efforts (Financial and Consumer Rights Council submission, p. 4).

The Panel can see a number of benefits to destination gaming. Having fewer, but larger destination venues will translate into an overall decline in accessibility. If one city has only a few large venues, evenly spread across the area, and another has more smaller gambling venues, then the accessibility to gambling is higher in the small venue city. In addition, the nature of larger destination venues may facilitate implementation of more comprehensive and effective responsible gambling programs at venue level.

As stated previously, there is a greater likelihood that a person will make a more considered choice to attend a destination venue than to attend a smaller local venue. The most compelling argument the Panel heard regarding this issue came from a group of problem gamblers. They indicated that the location of venues in residential areas, on major arterial roads and close to public transport and shopping centres meant that they were readily accessible at all times. Due to their location and prominence in the area, the venues are unavoidable—they are convenient. The result is that people may often make an impulse decision to go into the venue rather than a conscious decision to make the effort required to travel to a venue located away from their daily travel route (Problem Gamblers’ group meeting with Panel, 17 August 2005).

It was suggested to the Panel that a move to destination gaming could be achieved by allowing some venues to have more gaming machines than the current limit on the number of gaming machines in a venue allows. This proposal would see the limit of 105 gaming machines lifted for venues that meet specific destination gaming criteria. Such criteria could focus on the location and facilities of the venue.

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A key aspect of this proposal is that the destination venue would be required to enter into agreements with other venues in the area to transfer their gaming machines to the destination venue. This would ensure that there is not a net increase in the number of gaming machines in a local government area. The Panel considers that venues located at racetracks and venues located a significant distance from residential areas and set back from main roads would be best suited to this option.

Recommendation 1That the Minister examine options to restructure the gaming industry that result in:

• gaming venues that are less accessible to vulnerable communities

• a shift towards more destination gaming venues

• fewer venues across Victoria.

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Chapter 6 Regional caps—a new approach

6As outlined in chapter 2, the Bracks Government first introduced regional caps with the aim of protecting communities that were most vulnerable to the harmful effects of gambling and to address public concerns about the high numbers of machines in those communities. Despite the lack of conclusive evidence to prove that caps on the number of gaming machines in a region will directly affect the incidence of problem gambling, the Panel considers that there is a strong case for maintaining and extending Victoria’s regional caps policy because it will reduce the accessibility to gambling opportunities in vulnerable communities.

Do regional caps have a role to play in harm minimisation?Regional caps can prevent and, in some cases, reduce high concentrations of gaming machines in areas that are vulnerable to harm from gambling. Regional caps provide certainty to communities that are anxious about the number of gaming machines in their area and about the possibility that the number of machines will increase in the future. The 2003 Victorian Longitudinal Community Attitudes Survey found that more than 85 percent of Victorian residents are significantly inclined to prefer an overall reduction in the number of gaming machines and more than 55 percent of respondents were in favour of a reduction in the number of gaming machines in their local community (McMillen and Marshall 2004, p. 139). In addition, reducing the number of gaming machines in some areas may (depending on the

level of the reduction) make gaming machines less accessible and reduce the level of expenditure in those areas.

The Panel considers that substantially reducing gaming machine density at the local level will reduce the number of people exposed to gaming machines in the longer term. The aim here is to reduce the number of people who develop a gambling problem associated with gaming machines in the future.

This view is supported by the Study of the Impact of Caps on Electronic Gaming Machines, which noted that “the longer term benefit of a restriction policy such as capping is that less people may be exposed to gambling, thus contributing to a lower incidence of problem gambling” (O’Neil 2005, p. 71).

The Panel acknowledges the evidence from some stakeholders that indicates that reductions in gaming machine numbers are unlikely to impact significantly on persons with a current gambling problem unless gaming machine numbers are reduced to extremely low levels. The Panel is particularly concerned, however, about the high concentrations of gaming machines in some areas of high socio-economic disadvantage and how accessible those machines are to, and the money that is spent by, vulnerable members of the community. The Panel finds that capping the number of gaming machines in vulnerable communities should be an important component of the Government’s ongoing harm minimisation strategy.

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Key questions for the PanelThe review’s terms of reference require the Panel to consider and make recommendations on how best to implement the regional caps election commitment. The review also requires the Panel to make a recommendation on the possibility of an extended regional caps policy. There are two key questions that arise in relation to setting regional caps on gaming machines:

1. What should be the geographic basis of a region for the purpose of regional caps?

2. Which regions should be included in a regional caps policy?

These two questions are intertwined. The Panel could identify vulnerable regions and determine appropriate geographic boundaries for those regions. This was the approach adopted in the first round of regions caps.

The Government identified five new regions for capping in its 2002 election commitment. The question of which regions should be included in the regional caps policy has therefore already been partially answered, but the question is still relevant in the context of the Panel considering an extended caps policy.

The Panel has approached these questions slightly differently from the way that the Government dealt with them in the first round of caps. It began by considering what the geographic basis of a region should be, concentrating on the regions that the Government identified in its election commitment. Once the Panel determined its position on geographic boundaries, it considered which regions should be included in a possible extended regional caps policy.

Geographic basis of regions

Plus area capsLocal government areas were the primary basis for regional caps in the first round. In determining the geographic boundaries for the capped regions, the Government tried to capture areas bordering the areas that needed protecting. Its aim was to achieve a larger area of protection without diminishing the protection given to specific vulnerable communities by setting regions that were too large.

The Government created plus regions for the three metropolitan areas capped. These regions encompassed the local government area identified plus neighbouring postcodes of similar vulnerability.

The 2002 election commitment involves extending the three metropolitan capped regions to include additional neighbouring vulnerable postcodes as well as establishing a new plus region for the City of Moonee Valley, which includes parts of the cities of Moreland and Melbourne.

During the consultation phase of this review, stakeholders identified a number of significant issues with the creation of plus regions. The plus regions result in geographic boundaries that are distinct from all other existing geographic boundaries such as local government boundaries, postcodes and suburbs.

The atypical nature of the boundaries means that local councils are not able to identify and have ownership of the boundary of the capped region. The Victorian Local Governance Association noted that the plus region boundaries “made application of local area planning and local policies extremely difficult” (submission to Panel, p. 1). Such boundaries also make it difficult for stakeholders to monitor the cap on an ongoing basis because measures, such as the density of gaming machines per thousand adults and the average net expenditure per adult, are not collated on plus regions, but on local government areas.

In addition, the effect of the cap was diluted in the first round by including neighbouring postcodes in the plus regions because this increased the population base of the capped regions. The Maribyrnong Plus region is an example of where the included postcodes increased the population base without proportionally increasing gaming machine numbers. This resulted in the capped region of Maribyrnong Plus having a density level of 11.7 machines per thousand adults and the City of Maribyrnong itself continuing to have a density level higher than the cap (currently 13.4 gaming machines per thousand adults).

The Panel also noted that the selection of plus regions in the first round was criticised because the Government did not clearly articulate the rationale and criteria for selecting regions. The primary criticism was that some neighbouring postcodes

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with high socio-economic disadvantage immediately adjacent to the declared region were excluded (Livingstone 2001).

Issues regarding implementation of the 2002 election commitmentIn considering how best to implement the Government’s 2002 election commitment, the Panel examined which neighbouring postcodes should be included when extending the three current plus regions and when creating the Moonee Valley Plus region under the second round regional caps. The Panel found that, in some cases, the particularly vulnerable suburbs in neighbouring local government areas were not located adjacent to the capped local government area. If the Darebin Plus cap is to be extended into further parts of the City of Hume, for example, the boundary should be extended westwards to include Broadmeadows, Jacana and Dallas (3047 postcode), which have extremely high levels of socio-economic disadvantage. Within the City of Hume, however, Craigieburn and Roxburgh Park (3064 postcode) also have high levels of socio-economic disadvantage. These areas are a considerable distance from the City of Darebin border but the risk is that if the Government does not include them in the Darebin Plus cap, machines could be moved out of the capped areas in Hume and into these disadvantaged areas.

The Panel also identified the same issue in the City of Monash. The Mulgrave area is capped as part of the existing Greater Dandenong Plus region. The Government could extend the cap to include the Clayton area directly adjacent to the capped part of Monash. This postcode (3168) has areas with high levels of socio-economic disadvantage and a large concentration of gaming machines. There are three other postcodes that cover Chadstone and Oakleigh (3147, 3148 and 3166), however, which contain areas with high levels of socio-economic disadvantage and high concentrations of machines. It would not be desirable to have machines moved out of Clayton and into these areas in the City of Monash.

For these reasons, the Panel concludes that the Government should not implement the 2002 election commitment as proposed. Regional caps should not be based on boundaries that include parts of

neighbouring local government areas. Given the Panel’s findings, it has considered two alternative options to determine the geographic boundaries of regions to be capped: postcode area caps and local government area caps.

Postcode area capsA range of stakeholders recommended to the Panel that regional caps be applied at a postcode level, rather than to a whole local government area. A postcode area cap would mean that each postcode could not have a higher density of gaming machines than that specified by the cap. The stakeholders based their arguments on the many examples of extremely high concentrations of gaming machines within some postcodes (this issue was discussed more fully in chapter 4). The Council of Gambler’s Help Services argued that “boundaries of capped regions need to be made significantly smaller to allow for targeted and focused impacts on areas of socio-economic disadvantage” (submission to Panel, p. 4).

The Panel also heard how a cap at postcode level would allow different approaches to reflect the different characteristics within local government areas. Taylor Hotel Nominees Pty Ltd argued that the Greater Geelong region should be looked at as a collection of “sub regions” within the area:

…some areas of Greater Geelong may need to be treated differently to some of the growth areas within the City of Greater Geelong. In such a vast geographical area as COGG clearly there is a need for an ‘area by area’ assessment. (submission to Panel, p. 1)

A number of local governments were also concerned that smaller areas of disadvantage with high concentrations of gaming machines might be missed when considering local government areas. East Gippsland Shire Council noted that “it may be that the selection of areas may fail to recognise pockets within municipalities where such concentration does exist” (submission to Panel, p. 1).

Not all areas within postcodes, or postcodes within local government areas, exhibit the same, or even similar, levels of socio-economic disadvantage. A cap applied at postcode level would not acknowledge these differences. Pockets of difference exist in many local government areas and at the postcode level.

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Further, the Panel considers that postcode level caps would result in machines being spread across local government areas. This would most likely lead to more venues with fewer machines—and potentially more venues in residential areas.

As discussed in chapter 5, the Panel considers that there should be fewer venues in Victoria, and prefers destination style gaming venues as opposed to convenience venues located in residential areas. The Panel recommends that these venues be located in entertainment and business precincts.

As noted above, a key issue for many stakeholders was that the plus boundaries in the first round did not allow for easy monitoring of the impact of caps because statistics on expenditure and the number of gaming machines are reported by local government area. This problem would remain if the caps were applied at a postcode level. Further, a postcode boundary would not address the concerns raised by local councils about applying local area planning policies when postcodes, and therefore postcode based caps, cross municipal boundaries. For these reasons, the Panel does not recommend postcode level caps.

Local government area capsMost local councils that met with the Panel supported the use of local government boundaries to determine the boundaries for regional caps. The Municipal Association of Victoria reported that “local government in Victoria has clearly expressed a desire for the boundaries of capped areas to be aligned with municipal boundaries” (submission to Panel, p. 4).

Darebin City Council concluded that:

…for a number of reasons, including consistency of definition, ready availability of relevant data from multiple sources, availability of representation by elected local authorities, and simplicity, we are strongly of the view that boundaries for capped areas should be coextensive with local government areas. (submission to Panel, p. 2)

Using local government area caps, the plus regions the Government identified in its 2002 election commitment would be included under a cap for the entire local government area. In the case of the Greater Dandenong Plus cap, for example, the Government would implement three separate caps for the City of Greater Dandenong, the City of Monash and the City of Casey.

Extending the cap in the plus regions to include the entire local government area will protect those parts of a local government area that have high levels of socio-economic disadvantage or existing high concentrations of gaming machines, but would not have been included in the plus regions. It will also avoid ongoing debate over which areas have been included or excluded because the entire local government area would be included. Further, if most of the local government area is included in the plus region, it would make sense to cap the entire local government area. This option would also make it easier to apply local area planning policies and monitor the impact of any reduction in the number of gaming machines.

For these reasons, the Panel considers that the best option is to base capped regions on local government area boundaries. The Panel sees a significant benefit to this approach because it enhances the ability of local governments to apply their own local area planning controls and policies, and to monitor the ongoing impact of caps on gaming machines.

Identifying vulnerable regions to capThe Government has identified the regions that it will include in the second round of regional caps in its 2002 election commitment. The Panel has also been asked to make recommendations on the possibility of an extended regional caps policy. To this end, it has examined the indicators that might be used to identify vulnerable regions for the purpose of regional caps.

Indicators used to identify regions in the first roundAs outlined in chapter 2, the first round of regional caps used three indicators to identify regions that were considered particularly vulnerable:

1. the density of gaming machines in the region

2. the average expenditure per adult per year in the region

3. the SEIFA ranking (to indicate relative disadvantage) of the region.

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These indicators were combined to produce a vulnerability ranking for each local government area. The Government selected the five regions in the first round of regional caps because they had the highest vulnerability rankings and there was good evidence that they were vulnerable to harm from gambling.

Issues with indicators of vulnerabilityStakeholders raised a number of issues regarding the indicators used to determine whether a region should have a regional cap on gaming machines. The issues highlight the difficulty in determining vulnerable regions.

Resident population and temporary populations Both the density of gaming machines and average player losses are calculated using resident population figures. Temporary increases in resident numbers are not factored into the overall density and average expenditure calculations for a region. This is a particular problem for tourism and regional centres. Some stakeholders suggested that tourists are significant gaming machine users in some regions (Warrnambool City Council meeting with Panel, 12 May 2005; Ballarat venue operators consultation session, 28 April 2005).

A significant number of regional centres also draw visitors from the surrounding areas. Warrnambool services a large area in the western district, for example, while the cities of Melbourne and Dandenong have large daily influxes of people for work, shopping or recreation purposes. Some stakeholders suggested that relying on resident population figures when calculating the density of gaming machines and expenditure levels may result in an area appearing more vulnerable than it would be if non-resident populations were also factored in.

Variations in vulnerability within local government areasThe indicators that the Government used in the first round of regional caps were applied to the local government area as a whole. Stakeholders pointed out that many local government areas have a low level of vulnerability overall, but have suburbs and postcodes that are much more vulnerable to harm from gambling.

The Panel is concerned that such local government areas would not be capped using the indicators from the first round. The City of Kingston, for example, has a SEIFA ranking that indicates a low level of socio-economic disadvantage and has moderate levels of gaming machine density per thousand adults and average expenditure rates when compared with all local government areas. Using the indicators from the first round of regional caps, the City of Kingston is ranked as the 23rd most vulnerable local government area. As such, it is not considered relatively vulnerable overall.

Within the City of Kingston, however, there are two distinct areas of high socio-economic disadvantage with high gaming machine density levels—Clayton South and Chelsea. The Clayton South area has 18.8 gaming machines per thousand adults and the Chelsea area has 9.4 gaming machines per thousand adults (Kingston City Council Submission, p. 14). It would not be desirable for the number of gaming machines in these areas to increase.

Baw Baw Shire Council submitted to the Panel that:

Local government areas generally, but perhaps particularly so in large regional municipalities, can exhibit substantial variance in social and economic characteristics and there would be strong argument that the setting of caps at a local government area level based upon mean social and economic indicators does not adequately recognise or cater for local variances. (submission to Panel, p. 1)

The Panel is concerned about high concentrations of gaming machines in disadvantaged postcode areas but, for reasons it has outlined in this chapter (see page 24), it does not regard caps applied at the postcode area level as a reasonable solution to this issue. In Recommendation 1 the Panel requested that alternative options be examined to reduce the number of gaming venues. This would ensure that gaming opportunities are less accessible in such vulnerable communities.

Changing vulnerabilityThe Panel has analysed all local government areas in Victoria, (using the indicators applied in the first round), to assess which areas are most vulnerable to harm from gambling. The Panel’s comparison of the vulnerability rankings from the first round regional caps and the revised rankings using 2005 data show that the level of vulnerability of local government areas can change with time. Appendix E compares the Panel’s analysis of the vulnerability of local

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government areas with the vulnerability rankings from the first round.

While the three most vulnerable regions in Victoria did not change (Maribyrnong, Greater Dandenong and Latrobe), the Bass Coast Shire went from being the fourth most vulnerable region at the time the first round caps were implemented to being the ninth most vulnerable region. The City of Hobsons Bay’s vulnerability ranking also decreased from eighth to twelfth.

The City of Brimbank increased in vulnerability, from thirteenth at the time of the first round caps to fifth most vulnerable in 2005. The City of Hume’s vulnerability ranking increased from eleventh to sixth.

These changes to the vulnerability rankings become a particular concern if the number of regions capped is limited. If a limited number of regions are to be capped, small changes in vulnerability rankings can have a significant impact on whether a region is included. The changing nature of vulnerability was reinforced by the results of the research into hotspots of gaming intensity commissioned by the Panel (outlined on page 3 of this report).

The research commissioned by the Panel and conducted by the ANU indicates that gaming machine activity and vulnerability can move from one area to another relatively quickly. An area that was not identified as a hotspot suitable for capping when regions were selected may, due to changes in demographics and machine numbers, become a hotspot in subsequent years.

What are the options for identifying vulnerable regions?The Panel’s concern, in light of the above issues, is that no single set of indicators will be effective in either identifying all areas of vulnerability or responding adequately to changes in vulnerability levels. Extending the regional caps policy without having ready solutions to the issues highlighted above would result in uncapped local government areas seeking to be included on grounds that cannot be objectively assessed.

This creates ongoing uncertainty for the community and the industry. The AHA (Vic) submitted that “in order for the industry to maintain the current levels of employment and to meet current financial commitments, or to make future plans, it is

essential that venues be given certainty of tenure” (submission to Panel, p. 8).

Tattersall’s submitted that:

Over recent years, a venue’s ability to access finance has been, in part, assessed upon the number of electronic gaming machines that the venue is licensed to operate. A reduction in the number of electronic gaming machines in a venue would arguably impact the venue’s ability to access funding…

…Reduced business confidence could also manifest itself in other areas. With uncertainty about future revenues, it is common for employment to be affected by either a failure to backfill vacancies or through enforced reduction in staff numbers. (submission to Panel, pp. 29–30)

The Yarraville Club reported that:

…the capacity of the club to generate business support through redevelopment or refinancing of borrowings has been significantly impacted. Whereas previously the club was in a strong position to seek loans based on business performance. Now there is anxiety within financial institutions on the directions of the State Government and its impact on decisions regarding the future performances of the club. (submission to Panel, p. 3)

The Panel considers it important that the industry has certainty regarding the level of gaming machines in regions looking forward to 2012. It is also important that the Government reassures communities about the level of gaming machines that will be located in their region into the future.

Universal caps: a new approach In light of the problems associated with identifying vulnerable areas to be included in an extended regional caps policy, the Panel recommends to the Government that all Victorian communities have the benefit of a cap on the density of gaming machines.

It is recommended that a universal regional caps policy be implemented instead of the 2002 election commitment.

Some stakeholders supported this idea. Goulburn Valley Community Health Service advocated that:

If no particular area has a higher machine to population ratio it would conceivably operate to counteract the propensity for electronic gaming machine providers to concentrate machines in areas of high disadvantage. (submission to Panel, p. 1)

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The Council of Gambler’s Help Services advocated that:

…in the interests of the protection of the entire Victorian community we should also be planning to … cap the state as a whole … To do otherwise would be to continue to allow certain regions to be unfairly exploited beyond appropriate and safe levels of electronic gaming machine concentration. (submission to Panel, p. 5)

Frankston City Council argued that the Government should develop a universal cap model “that is fair and equitable and can be applied to all of Victoria” (submission to Panel, p. 2).

Duty of Care Inc submitted that:

If caps are to be extended and more widely introduced, then all of Victoria must be treated equally, on a ‘low caps’ basis…geographic areas change over time, in socio-economic and demographic terms. Capping decisions that may be made not by government may no longer apply in future years, for individual areas. (submission to Panel, p. 5)

A universal cap applied to every local government area in Victoria will ensure that gaming machines are more equally distributed across the state, ensuring that areas with high socio-economic disadvantage do not have significantly higher concentrations of machines. Further, the universal cap solves the disadvantages and anomalies that have been identified with the current regional caps policy.

Capping all local government areas will provide certainty for local governments and the industry in the lead-up to the gaming licences review and into the foreseeable future. Communities will be reassured about the number of gaming machines in their local government area and industry will be able to plan for the future with the security of a universal (and settled) caps policy.

Recommendation 2That as an alternative to implementing the 2002 election commitment, the Government instead extend the regional caps policy to impose a universal cap on the maximum number of gaming machines in any local government area.

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Chapter 7 Level of cap

7Once the Panel determined that a cap should be applied for all local government areas, it considered the level at which the cap should be set. The Panel found, however, that there is very little research to assist with this task and that stakeholders have a broad range of views about the level at which the cap should be set.

In forming its view about the appropriate level at which to set the cap, the Panel considered two things:

1. the need to set the cap at a level that reduces the accessibility to gambling opportunities in vulnerable communities

2. the impact that removing a significant number of gaming machines from these communities will have on gaming venues.

The Panel is acutely aware of the fact that gaming venue operators have considerable time and resources invested in their gaming venues, and that this investment has been based on certain assumptions about the number of gaming machines that the venue operator will be permitted to install in their venue. For example, a venue operator may have based their income projections on a certain number of gaming machines and then built or renovated premises to house and operate these machines.

Analysis undertaken by the PanelTo determine the most appropriate level for the cap, the Panel analysed a range of cap levels. This included the current overall state density of 7.0, and then 8.0 and 8.5 gaming machines per thousand adults.

It should be noted that the Panel’s analysis was undertaken using data as at 30 June 2005. Any subsequent changes in gaming machine numbers across local government areas will affect the results presented in this report.

The results of the Panel’s analysis showed that:

• if the cap was set at the overall state density of 7.0, approximately 3 426 gaming machines would have to be removed from 28 local government areas

• if the cap was set at 8.0, approximately 1 872 gaming machines would have to be removed from 19 local government areas

• if the cap was set at 8.5, approximately 1 301 gaming machines would have to be removed from 18 local government areas.

The Panel based this analysis on its recommended method for determining from which venues machines are to be removed, outlined in Chapter 8. The unique characteristics of the City of Melbourne mean that it should be considered separately from the universal cap considered in this section. A cap for the City of Melbourne is discussed at page 32 of this report.

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Levels considered by the Panel

Cap at existing level Industry representatives consistently advocated that, if regional caps were to be implemented, then the cap should be set at the existing level of gaming machines in a region or should be set at a higher level to account for population growth and other factors. This view was expressed throughout consultation sessions with venue operators and was reflected in the submissions received from industry stakeholders.

Bruandwo Pty Ltd urged the Panel to recommend that “areas are capped at their existing level, rather than be subjected to arbitrary reductions in machine numbers” (submission to Panel, p. 3). Both the AHA (Vic) and Clubs Victoria Inc advocated that regional caps should be set at existing levels and should not require the number of gaming machines to be reduced. In their submissions, Warrnambool City Council, Glen Eira City Council and Benalla City Council supported the cap being implemented at the existing level of gaming machines in the region.

One argument put forward to support a cap at the existing level is that the industry is facing an uncertain future as a result of new measures to be implemented in the next few years. These new measures include the total smoking ban in 2007 and the changes to signage required in the next 12 months.

Some industry stakeholders also suggested that, in areas of high tourist numbers or population growth, the caps should allow for higher levels of gaming machines. Mac’s Hotel in Warrnambool argued that:

Commercial, administrative, community, entertainment and leisure functions situated in Warrnambool serve not only the local resident population but also the broader regional market and an increasing tourism market. (submission to Panel, p. 27)

In relation to growth areas, Taylor Hotel Nominees submitted that:

…the principles of prudent investment in growth areas should not be undermined by a reduction in the availability of electronic gaming machines for recreational users in areas where councils and governments have created and continue to encourage and facilitate growth in permanent population centres as well as regional tourist destinations. (submission to Panel, p. 1)

The Panel notes these arguments but setting a cap at this level is inconsistent with the findings of the South Australia Centre for Economic Studies in its study into the impact of the first round of caps. This study found that the reduction in gaming machines in the regions in the first round was “too small to provide any real impact on accessibility to gambling opportunities” (O’Neil 2005, p. v). It is apparent that a much lower cap level than that applied in the first round is required.

The Panel does not recommend that the caps be set at a level equal to the existing number of gaming machines in each local government area because this would not result in the number of gaming machines being reduced in areas with particularly high concentrations of gaming machines. Accessibility to gaming machines would therefore not be reduced in these areas.

Cap at state density level of 7.0Of the stakeholders who met with the Panel or made a submission, ten local governments and community stakeholders advocated for the regional cap to be set at the overall state density level, currently 7.0 gaming machines per thousand adults. Councils in Moreland, Monash, Dandenong and Greater Geelong supported a cap set at the current state density level. This view was also expressed by a number of community stakeholders, including Wesley Footscray Outreach, Banyule Community Health Service and Bethany Community Support.

Moreland City Council submitted that “a target gaming machine density closer to the average of around seven for the metropolitan region and an implementation timeframe shorter than three years would be more effective in reducing the impact of problem gambling in areas of high gaming machine density and socio-economic disadvantage” (submission to Panel, p. 14).

Seven local government and community stakeholders suggested that the cap should set at a level below the state density level. Hume City Council suggested that “the density be 10 percent lower than the metropolitan average density of operational machines as at 30 June 2005” (submission to Panel, p. 10).

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Ballarat City Council recommended that, in the City of Ballarat, the number of gaming machines should be reduced to 440 overall, which would result in a density level in the city of 6.65 gaming machines per thousand adults. Other stakeholders called for more significant reductions in gaming machine numbers. Reverend Bryan Nicholls from the Uniting Church advocated a “total removal of all gaming machines from low-income areas with a subsequent redistribution to non-residential zones, but not iconic tourist precincts” (Skipton Street and Mount Pleasant Congregations, Uniting Church in Australia submission, p. 4).

The Panel considers that there is a strong argument to be made for setting the cap at the overall state density level of 7.0. Setting the cap at this level would ensure an equal spread of gaming machines throughout all local government areas. There is no justification for an area, such as Greater Dandenong, to have a substantially higher concentration of gaming machines than, for example, Boroondara.

For this reason, the Panel was initially inclined to recommend that the cap be set at the overall state density level. On closer examination, however, the Panel found that the reductions required in a number of regions to reach this level would impose an unreasonable burden and hardship on a significant proportion of gaming venues.

The Panel’s analysis revealed that a cap at the state density level would result in a reduction of approximately 3 426 machines from 28 local government areas (excluding the City of Melbourne). To reach that level, gaming machines in some local government areas would have to be reduced by between 35 and 47 percent. This level of overall reduction in a local government area would probably result in uncertainty as to the ongoing viability of a substantial proportion of venues.

Further, if all local government areas are capped at the overall state density level, it follows that, in accordance with the current state-wide binding cap, all local government areas would need to have density levels of 7.0 machines per thousand adults if the full 27 500 machines across the state (not including Crown Casino) are to be in operation. This would present a number of challenges in relation to redistribution for the industry and communities.

While setting a cap at a density level of 7.0 will probably have a significant impact on the accessibility of gambling opportunities and may result in a lower incidence of problem gambling, the impact of this level of cap on industry would be severe. The Panel concluded that it is difficult to justify such a severe impact without conclusive evidence that a reduction to a density of 7.0 would provide greater protection to vulnerable communities than if the cap were set at a slightly higher level.

Cap at density level of 8.5The Panel received submissions from three local councils suggesting that the cap be set at a level equal to 120 or 125 percent of the state density level. Darebin City Council advocated for a cap set at 125 percent of the overall state density level, while Maribyrnong and Moonee Valley City Councils supported a cap set at 120 percent of the state density level.

A cap at this level would equate to approximately 8.5 machines per thousand adults (122 percent of state density level) and would result in approximately 1 301 machines being removed from 18 local government areas. The Panel’s analysis revealed that a cap at this level would require gaming machines to be reduced by between 10 and 36 percent for 12 of the 18 local government areas.

Cap at density level of 8.0A cap set at the level of 8.0 machines per thousand adults would require approximately 1 872 gaming machines to be removed from 19 local government areas. Approximately 75 percent of local government areas are currently at or below a density level of 8.0 gaming machines per thousand adults.

The Panel’s analysis found that a cap at this level would require that gaming machines be reduced by between 20 and 40 percent for nine of the 19 local government areas. A further seven local government areas would require reductions of between 10 and 20 percent of gaming machines.

The Panel considers this reduction to be significant and that it would probably reduce the accessibility of gaming opportunities in these regions. The Panel notes that this would result in substantial reductions in the three most vulnerable regions in Victoria: Maribyrnong, Greater Dandenong and Latrobe.

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The Panel has compared the potential impact that caps of 8.0 and 8.5 would have on the gaming industry. The results demonstrated that there is only a small difference between the two with regard to the impact on gaming venues that would be required to have a significant proportion (greater than 50 percent) of gaming machines removed.

Ultimately, setting the cap level is an inexact process. The challenge for the Panel was to recommend a cap level that will involve substantial reductions in gaming machines from those areas with high machine densities that are particularly vulnerable to the harm of gambling, while avoiding an unjustifiably harsh impact on the industry.

The Panel recognises, however, that gaming is a legal and legitimate industry. Caps on gaming machine numbers should not be so restrictive that business is totally prevented from responding to market demand from recreational gamblers.

There is widespread support from local governments and community stakeholders for a cap at a density level of 8.5 or lower. Of the local councils and community stakeholders in the regions identified in the Government’s 2002 election commitment, virtually all called for the cap to be set at a level below 8.5 (Warrnambool City Council and Melbourne City Council support a cap set at the existing level). The majority of local councils and community stakeholders in these regions called for caps to be set at a density of 7.0 or lower.

Taking these issues into account, the Panel recommends that the cap be set at 8.0 machines per thousand adults. The Panel considers this level will be substantial enough to have an impact on the accessibility of gambling opportunities in some of the most vulnerable areas, but will avoid reducing gaming machines to such low levels that many gaming venues become unviable. A full analysis of the potential impact of a cap at 8.0 machines per thousand adults is provided in chapter 8.

Recommendation 3That the universal cap be set at a density of 8.0 gaming machines per thousand adults.

City of MelbourneThe City of Melbourne has unique characteristics that warrant a separate consideration of the issues with respect to regional caps. There is a significant concentration of gaming machines located within the central business district. Of the City’s 859 gaming machines, 572 of these are located in the central business district and Docklands area. In addition, 2 500 gaming machines are located at Crown Casino.

The City of Melbourne, particularly the central business district, Docklands and Southbank, is a significant entertainment precinct in Melbourne, drawing large numbers of tourists, workers and day visitors. The Government’s 2002 election commitment involves extending the Moonee Valley Plus region into parts of the City of Melbourne. Currently, the Kensington area (postcode 3031) is included in the Maribyrnong Plus region.

Melbourne City Council indicated in its submission that it would prefer to see gaming machines redistributed to non-residential areas of the city. It recommended that the northern residential parts of the city be capped in the Moonee Valley Plus region.

In a sense, the City of Melbourne is the principal destination style gaming area in Melbourne apart from Crown Casino. As stated in chapter 5, the Panel supports a shift towards more destination gaming venues. The Panel considers, therefore, that the central business district, Docklands and Southbank should not have their number of gaming machines capped.

There are large parts of the City of Melbourne, however, that are residential areas, some with significant housing commission accommodation. These areas should be capped in accordance with the Panel’s recommendation regarding all other local government areas.

Recommendation 4That the City of Melbourne be capped at 8.0 gaming machines per thousand adults, with the exception of the central business district, Southbank and Docklands.

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Chapter 8 Determining venues from which to remove gaming machines in capped regions

As discussed in chapter 7, the Panel recommends that all local government areas be capped at 8.0 machines per thousand adults. There are currently 18 local government areas (excluding the City of Melbourne) that have a density of gaming machines higher than the proposed capped level. It will be necessary, therefore, to reduce the number of gaming machines in these areas to bring the density level down to 8.0 machines per thousand adults. This will involve removing approximately 1 872 gaming machines from the affected local government areas.

Method for implementing reductions in gaming machines in the first roundIn the first round of regional caps, the Ministerial Direction required that reductions in the number of gaming machines in a region were applied equally between the two operators, Tattersall’s and Tabcorp, and equally between licensed clubs and hotels.

What reduction in gaming machines would be required by each venue was determined by the two gaming machine operators in conjunction with the VCGR. Reductions in gaming machine numbers were generally applied proportionally across venues (that is, large venues lost more machines than small venues).

During this review, the Panel heard from a number of gaming venues that felt that the level of gaming machine reductions required of their venue was

not proportional with reductions in the number of machines in other venues. Some gaming venues expressed significant concern about the methodology the operators applied to determine the required reduction in gaming machines at a venue level.

The Sunshine City Club stated that:

We therefore are of the belief that Tabcorp utilised the Caps Program as a means against all of the smaller venue operators who to them were not meeting their set targets and goals… (submission to Panel, p. 1)

Banyule Community Health Service (Gambler’s Help Northern) argued that “it seems that the previous round of caps enabled the industry to simply remove their least profitable machines” (submission to Panel, p. 5). Darebin City Council stated that “electronic gaming machine operators were permitted to arrange the reductions as they saw fit, consistent with government direction, and could thus be expected to remove the least profitable electronic gaming machines and/or those located in the least profitable venues” (submission to Panel, p. 9).

The Panel has reviewed the removal of gaming machines from regions under the first round and found several examples of apparently disproportional reductions in gaming machine numbers for some venues. In Maribyrnong Plus, for example, the Victoria Hotel had a total reduction in gaming machines of 11 percent (35 machines to 31 under the cap), while the Sunshine City Club had a total reduction of 23 percent (30 machines to 23 under the cap).

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In Greater Dandenong Plus, the Vale Hotel had a total reduction in gaming machines of 30 percent (100 machines to 70 under the cap) and the Dandenong Workers Social Club had a reduction of 20 percent (100 machines to 80 under the cap). In comparison, the Dandenong Club, the Keysborough Hotel and the Sandown Park Hotel had total reductions of 2–6 percent (100 machines to 94, 103 machines to 100, and 100 machines to 98 respectively).

Impact of voluntary venue closures and mergersIn some cases, the disproportional removal of gaming machines was the result of venues entering into arrangements to merge their gaming machines or nominating to have a higher proportion of gaming machines removed from their venue. A significant proportion of the total reduction of gaming machines required in the first round was achieved through such voluntary venue closures and mergers.

The Panel supports such moves by venues, particularly when they result in fewer venues and gaming machines. It is important, however, that the integrity of any principles established by the Government is not compromised by activities that result in unintended outcomes. A number of community and local government stakeholders supported this view, including Wesley Footscray Outreach. It stated in its submission that “the Victorian Government should have the power to determine which electronic gaming machines should be removed…otherwise, only low profit performing electronic gaming machines will be removed” (submission to Panel, p. 1).

The Victorian Local Governance Association also raised concerns about the operators having responsibility for determining where to remove machines from:

All the industry had to do was comply with a numerical determination for a given area. At no point was industry required to achieve targets for reductions in problem gambling that was consistent with the government’s agenda for caps. (submission to Panel, p. 2)

The Panel recommends that the VCGR implement the required reductions in gaming machine numbers at the venue level. This should be done without making adjustments for any voluntary reductions or arrangements made by the gaming operators or the venue operators.

Developing a method to implement a reduction in gaming machine numbersIn order for the VCGR to determine the required venue level reduction in gaming machine numbers, it is necessary to develop a method to determine how many gaming machines must be removed from each venue. The goal is to assign a proportion of the overall number of gaming machines to be removed from a local government area to each venue. This should be based on a reasonable, balanced consideration of the viability of gaming venues and the level of gaming intensity evident in an area.

Options identified by stakeholdersDuring consultation, stakeholders put forward a range of options for determining venue level reductions to meet the cap of 8.0 gaming machines per thousand adults. Some stakeholders proposed that reductions primarily come from hotspots of gaming activity within local government areas, determined by a high concentration of gaming machines and high levels of expenditure.

The argument for using these factors is the high concentration of gaming machines in some suburbs and postcodes and concerns about the level of expenditure associated with such concentrations (discussed in chapter 4).

Monash City Council advocated in its submission that “any reduction in electronic gaming machine numbers through the introduction of regional caps in Monash should be from the areas of least advantage in the city” (Monash City Council submission, p. 1). This was supported by Brimbank City Council who suggested that “there is a need to consider further redistribution or reduction in the low SEIFA postcode areas” (submission to Panel, p. 2).

Latrobe City Council also argued that “prioritisation for removal of electronic gaming machines be made based on the proximity to areas of disadvantage” (submission to Panel, p. 3).

A further suggestion was that higher proportions of gaming machines be removed from hotels as opposed to clubs. The arguments for this preference relate to the perceived community benefit that licensed clubs provide. The Altona Bowling Club submitted that “any reduction of machines should be borne by the hotels and pseudo clubs who

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provide revenue dividends to business interests outside of the designated municipality” (submission to Panel, p. 1). Clubs Victoria also advocated that “it is appropriate that the reductions come from hotels and not from clubs” (submission to Panel, p. 11).

It has also been suggested that the location of a venue be considered when determining where gaming machines should be removed from in local government areas with density levels above 8.0 gaming machines per thousand adults. The Ballarat City Council suggested that “as a priority Council would like to see the machines removed from strip shopping areas, residential areas and lower socio-economic areas” (submission to Panel, p. 6). The InterChurch Gambling Taskforce indicated that it would “support electronic gaming machines being removed from areas where they are more likely to be accessed by youth, both those under the age of 18 and those of university age” (submission to Panel, p. 4).

Some stakeholders suggested that higher levels of expenditure should also be used to determine where machines are removed from. Banyule Community Health Service (Gambler’s Help Northern) advocated that:

…higher turnover results in more harm to problem gamblers. This round of caps should be more prescriptive about which machines are to be removed, so that machines generating high losses are removed from the community. (submission to Panel, pp. 5–6)

Factors influencing selection of method The Panel considers a number of factors important in determining where gaming machines will be removed from in a region. The method should ensure that the regional caps set have the greatest impact possible on the accessibility of gaming machines. To do this, it is necessary to be able to measure where the most accessible machines are located.

This presents a number of difficulties; accessibility has many factors, with different impacts in different regions. Further, gaming machines are not distributed equally across all areas in a region. The method applied should address concentrations of gaming machines within socio-economically disadvantaged suburbs and postcodes.

It is important, however, that the method used is based on measurable, robust data rather than subjective measures. It must be able to be applied in an open and transparent process given that it will be used to determine the level of reduction in gaming machine numbers required in each venue—a determination that will have real impacts on gaming venues.

Reductions are affected at the venue level and it is at the venue level where the direct impact on the accessibility of gambling opportunities from local government area reductions will be felt. The Panel considers that the removal of gaming machines should be targeted to those areas and venues that are being used the most. In this way, it is hoped that the regional caps will act to reduce the accessibility of gaming machines.

Analysis of different methodsIn considering the different methods that could be applied to determine venue level reductions in the number of gaming machines, the Panel has undertaken comprehensive analysis using a range of data, including disaggregated venue expenditure data. The analysis has enabled the Panel to analyse the potential operation of the different methods. As indicated in chapter 7 the Panel’s analysis is based on data as at 30 June 2005.

The disaggregated venue expenditure data is confidential under the Gambling Regulation Act. It was provided to the Panel under a certificate issued by the Minister, in accordance with the protected information provisions in Division 6 of Chapter 10 of the Gambling Regulation Act.

As a result, it is not possible to present the Panel’s complete analysis of the methods considered in this report. Where possible, the Panel has presented the general results of this analysis to inform the discussion of relevant matters.

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Method for determining reductions—a modelThe Panel’s objective in recommending this model is to ensure that there is a greater proportional reduction of gaming machines from postcodes and venues that have the highest gaming intensity. Gaming intensity is measured using two factors:

• share of the number of gaming machines

• average expenditure per gaming machine.

Areas with high gaming intensity are those with above average levels of expenditure per gaming machine. The model requires the VCGR to conduct an analysis at two levels:

1. Postcode level: to identify postcodes within a local government area that have higher than average expenditure per gaming machine when compared with the average for all postcodes in the local government area.

2. Venue level: to identify venues within postcodes that have higher than average expenditure per gaming machine when compared with the average for all venues within that postcode.

The same method of calculating reductions in gaming machines is applied at postcode and then at a venue level within each postcode.

How are postcode level reductions in gaming machines determined?The first stage is to analyse each postcode in the local government area to determine:

• the share of the local government area’s total gaming machines

• the average expenditure per gaming machine.

The expenditure level per gaming machine for each postcode is then compared with the average expenditure per gaming machine for all postcodes in the local government area. Postcodes with higher than average expenditure per gaming machine are identified as hotspot postcodes—postcodes with a high level of gaming intensity.

The method recommended by the Panel requires a greater proportion of machines to be removed from hotspot postcodes. To determine how many more gaming machines should be removed from a hotspot postcode area (that is, above the proportion of total gaming machines) a weighting factor is assigned.

Gaming machines to be removed from postcodes that have lower than average expenditure levels is calculated (after removals from the hotspot postcodes) using their relative share of gaming machines. Figure 1 illustrates the process of calculating the required reduction of gaming machines at postcode level.

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Figure 1 Postcode reduction model

Reduction in gaming machines required for local government area to reach density level of 8.0 machines per thousand adults

Analysis of postcodes within local government area

Reductions calculated for postcodes that have higher than average expenditure per gaming machine

Reductions calculated on basis of share of gaming machines in local government area PLUS 33 percent of the rate of expenditure per gaming machine above average*

Total primary reduction from hotspot postcodes determined

Reductions required from non-hotspot postcodes determined by total required reduction in gaming machines from local government area LESS total primary reductions from hotspot postcodes

Reduction calculated for postcodes with below average gaming machine expenditure

Reductions calculated on basis of relative share of gaming machines*

Total secondary reduction required from non-hotspot postcodes

Total reduction in gaming machines for local government area = total primary reductions from hotspot postcodes plus total secondary reductions from non-hotspot postcodes

* Basis for reduction calculation

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How are venue level reductions in gaming machines determined?The same principles applied in calculating the required reduction of gaming machines in postcodes is applied to determine the required reduction in gaming machines in venues within those postcodes. Each of the venues within a postcode should be analysed using the total number of gaming machines in the venue and the total net expenditure per gaming machine for the venue, and then comparing these to identify those venues within the postcode with higher than average expenditure.

Those venues that have above average expenditure per gaming machine, compared with the average expenditure per gaming machine for all venues in that postcode, will be required to remove a proportionally higher number of gaming machines. Figure 2 illustrates the process of calculating the required reduction of gaming machines at a venue level.

Figure 2 Venue reduction model

Reduction in gaming machines required for postcode

Analysis of gaming venues within postcode

Reductions calculated for venues that have higher than average expenditure per gaming machine

Reductions calculated on basis of share of gaming machines in postcode PLUS 33 percent of the rate of expenditure per gaming machine above average*

Total primary reduction from hotspot venues determined

Reductions required from non-hotspot venues determined by total required reduction in gaming machines from postcode LESS total primary reductions from hotspot venues

Reductions calculated for venues with below average gaming machine expenditure

Reductions calculated on basis of relative share of gaming machines*

Total secondary reduction required from non-hotspot venues

* Basis for reduction calculation

Total reduction in gaming machines for postcode = total primary reductions from hotspot venues plus total secondary reductions from non-hotspot venues

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Weighting factorThe weighting that should be applied to hotspot postcodes and venues is an arbitrary decision. In choosing the weighting, the Panel tested the effects of different weighting levels on venues and the pattern of removal of gaming machines that would result.

Two weighting levels have been tested:

1. 50 percent of the amount by which expenditure exceeds average expenditure per gaming machine

2. 33 percent of the amount by which expenditure exceeds average expenditure per gaming machine.

Using the weighting of 50 percent, the Panel’s analysis showed that a large proportion of venues would have reductions in gaming machine numbers that would likely result in some venues no longer remaining viable. The Panel considers, therefore, that a weighting level of 50 percent is not justifiable.

The Panel’s analysis of a 33 percent weighting reveals a more balanced and viable outcome. The Panel considers that this level will ensure that appropriately higher proportions of gaming machines are removed from postcodes and venues with high intensity gaming. The Panel recommends the application of a weighting level of 33 percent of the amount by which expenditure exceeds average expenditure per gaming machine.

Appendix F provides a case study using a hypothetical local government area to illustrate the model. It applies the recommended method to determine the process of removing gaming machines from regions above the capped level.

Recommendation 5That where gaming machines must be removed from a local government area to reduce the density of machines to the cap level:

• the method for determining where gaming machines will be removed should be calculated by postcode in the first instance and then by venue in each postcode

• a higher proportion of gaming machines should be removed from hotspot postcodes and venues; that is, postcodes and venues that have above average expenditure per gaming machine

• removal of gaming machines should be initially determined on a proportional basis by relative share of gaming machines

• for hotspot postcodes/venues, a weighting equivalent to 33 percent of the amount by which expenditure exceeds average expenditure per gaming machine, should be applied to determine the number of machines to be removed

Additional principlesThe Panel has studied the recommended method for removing gaming machines. It has particularly studied the potential impact this method will have on venues within those regions required to reduce their number of gaming machines. This analysis has highlighted a number of additional principles that should be applied to determine the required reductions.

Level of reductions in gaming machines for individual venuesThe Panel’s analysis has revealed two cases in which individual venues would be subject to reductions of more than 70 percent of their total gaming machines under the model proposed. This situation arises when a venue has substantially higher than average expenditure per machine within a hotspot postcode.

The removal of more than 70 percent the total gaming machines in a venue will have a significant impact on the future operation of that venue.

The Panel considers, however, that difficult decisions must be made in the interest of reducing the level of harm that gaming machines cause some individuals, their families and communities. The Panel recommends that no venue is subject to an overall reduction of more than 70 percent of its total gaming machines.

Minimum level of gaming machines per venueA common suggestion that arose during consultation was a threshold or minimum number of gaming machines that were required for a venue to be viable. Clubs Victoria submitted that there is:

…a ‘critical mass’ of machine numbers below which the electronic gaming machine turnover at the venue is not sufficient for the purposes of the gaming operators. Anecdotally, the ‘critical mass’ is about 30 and definitely not less than 25. (submission to Panel, p. 10)

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The Sunshine City Club stated:

We are of the firm belief that all small venues require a minimum of 30 gaming machines in order to meet their set targets and goals for now and in the future. (submission to Panel, p. 2)

The issue of setting a minimum number of gaming machines for a venue is difficult. There is no single, simple answer to the question: What is the minimum level of gaming machines required to produce a viable venue? In some cases, venues with between five and ten gaming machines indicated that the level of revenue generated from these machines is more than enough to support their operations. Other venues indicated that, from a hotel perspective, threshold levels of 50 gaming machines are required to remain viable.

Some stakeholders also pointed out that relatively small reductions in the number of gaming machines can have significant implications for the ongoing viability of smaller venues. Tattersall’s noted that “the viability of a small community club with few machines can be severely challenged if that venue is forced by regional caps to dilute its gaming offer further” (submission to Panel, p. 30).

A study of all venues in Victoria reveals that the median number of gaming machines per venue is 45. It is difficult for the Panel to judge what the threshold level of gaming machines for a venue might be. It is likely that this will be different across gaming venues.

In light of the study undertaken by the Panel, it would appear that the ongoing viability of venues would be uncertain if they are required to have fewer than 20 gaming machines. The Panel recommends that venues with less than 20 machines not be subject to any reductions as a result of regional caps. The Panel also recommends that, in applying the required reduction model, no venue be reduced to a level below 20 machines.

Recommendation 6That, where gaming machines must be removed from a local government area in order to meet the universal cap, gaming machines should be removed subject to the following provisos:

• the number of gaming machines to be removed from a gaming venue should not exceed 70 percent of the total number of gaming machines at that venue

• a minimum of 20 gaming machines must remain in a gaming venue after gaming machines have been removed

• no gaming machines should be removed from a venue with less than 20 gaming machines.

Impact of additional rules on overall cap level of a regionIn applying these additional rules, the Panel noted that there might be some cases in which a local government area is not able to meet the reduction in

Number of venues

Proportion of venue gaming machines to be removed Density level 8.0 Density level 8.5

Between 0% & 10% 96 112

Between 11% & 20% 41 38

Between 21% & 30% 42 32

Between 31% & 40% 19 7

Between 41% & 50% 6 5

Between 51% & 60% 1 1

Between 61% & 70% 2 1

Total 207 196

Table 3 Impact on gaming venues

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gaming machines required. In such cases, the Panel considers the VCGR should be given the flexibility to provide for such regions to remain above the recommended capped level, recognising that, by the time reductions are complete, population growth will have in all likelihood reduced the overall density level.

In regions with a density of gaming machines above 8.0 machines per thousand adults, no applications for additional machines should be granted by the VCGR until such time as the overall density level for the local government area has reduced to below the regional cap level.

Analysis of the impact of cap on gaming venuesAs indicated, the Panel has extensively analysed the different options for regional caps. Because this analysis is based on confidential disaggregated venue expenditure data, the results cannot be fully detailed in this report.

Below is a summary of the impact of different cap levels on gaming venues, based on the Panel’s analysis.

In the local government areas with gaming machine density above the cap level of 8.0 machines per thousand adults, more than 30 venues will not have to reduce their number of gaming machines. Further, more than 66 percent of venues will have their gaming machines reduced by less than 20 percent.

The Panel notes, however, that some venues will be required to undergo significant reductions in their number of gaming machines under the proposed cap level and model recommended by the Panel. The analysis indicated that there would be fewer than ten venues across Victoria that would be required to reduce their number of gaming machines by more than 40 percent. This equates to less than 5 percent of venues in the affected local government areas. The Panel appreciates that, for these venues, this will have a significant impact; however, the Panel considers the potential benefit of the reduced accessibility to gambling opportunities justifies the negative impact on these few venues.

Proportional reductions in gaming machine numbersThe Panel notes that the recommended model does not seek to ensure proportional reductions across regions, operators or venue types and this may cause concern for some stakeholders. The Panel considers, however, that to ensure that the reductions in gaming machine numbers have the greatest possible impact on accessibility of gambling opportunities—and, potentially, problem gambling—these reductions must come from the postcodes and venues with the highest intensity of gambling.

Implementation timeframeThe Panel recognises that the level of the regional cap, and the model for determining which venues’ gaming machines will be removed, will have a significant impact on some venues. It is important, therefore, that the implementation timeframe gives businesses an appropriate opportunity to adjust their structures and plans accordingly.

The Gambling Regulation Act specifies that the caps must be implemented no later than five years after the date of the direction issued by the Minister. In the first round, implementation occurred over three years.

Stakeholders generally supported a three year implementation timeframe. Darebin City Council noted that “a reasonable timeframe would be over a three year period, with proportional targets to be set in each year” (submission to Panel, p. 4). Hume and Glen Eira City Councils also supported a three year implementation timeframe.

A number of stakeholders called for a more rapid implementation timeframe. The Council of Gambler’s Help Services submitted that:

…the more rapid the implementation of caps is the more impact they will have as it will restrict the industry’s ability to compensate with other measures and in doing so provide communities with greater space to reduce their spend on gambling and hopefully engage with other forms of leisure and recreation. (submission to Panel, p. 7)

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Goulburn Valley Community Heath Service suggested that “time frames for the imposition of caps once the decision is made should be within three months. This would maximise any impact from the caps fairly rapidly” (submission to Panel, p. 3). The InterChurch Gambling Taskforce called for gaming machines to be removed “within a twelve month period, rather than the five year period that has been previously used” (submission to Panel, p. 4).

Many industry stakeholders—including Altona Bowling Club and Moonee Valley Racing Club—supported the implementation of regional caps over a five year period. This reflected broader industry support for long implementation timeframes by venue operators in consultation sessions held by the Panel.

The Panel’s analysis revealed that approximately 70 venues will be required to reduce their number of gaming machines by more than 20 percent. It is appropriate that these venues are given sufficient time to plan for the loss in revenue that may result from this reduction and to adjust their business structure accordingly. Many venues will also need to factor in existing finance arrangements.

Further, the two gaming operators will require time to develop proposals and applications to move gaming machines into areas that are below the cap density level of 8.0 machines per thousand adults. The processes for moving machines can be lengthy.

The Panel recommends a phased implementation process over four years. This period will enable gaming venues to plan for the loss of gaming machines and provide sufficient time for the operators to apply to move gaming machines to other venues.

To further limit the impact on venues, the Panel recommends that venues should only be subject to one removal process, with the total reductions required for a venue implemented at one time. Under this proposal, venues with the highest proportion of total reductions in gaming machine numbers would have the longest time to remove those machines. This will enable them to take advantage of existing revenue levels while developing business plans to adjust to the removal of gaming machines.

Recommendation 7The timetable for the reduction of gaming machines required to meet the universal cap be as follows:

• Where a venue is required to remove between 0 percent and 10 percent of its gaming machines, the machines must be removed within 12 months of the date on which the gaming operator receives a written direction from the VCGR.

• Where a venue is required to remove between 11 percent and 20 percent of its gaming machines, the machines must be removed within two years of the date on which the gaming operator receives a written direction from the VCGR.

• Where a venue is required to remove between 21 percent and 30 percent of its gaming machines, the machines must be removed within three years of the date on which the gaming operator receives a written direction from the VCGR.

• Where a venue is required to remove between 31 percent and 70 percent of its gaming machines, the machines must be removed within four years of the date on which the gaming operator receives a written direction from the VCGR.

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Chapter 9 Other implementation issues

9The ongoing role of local governmentBoth prior to and during the course of this review, local councils have had much to say about the concentration and location of gaming machines in their local government areas. Some councils have suggested that they should have more say in the placement of gaming machines in their communities.

The Victorian Local Governance Association stated that “there is little real local input to decision making on whether electronic gaming machine gambling in communities is appropriate within local government itself…” (submission to Panel, p. 6). A number of councils suggested that regional caps should be incorporated into the State Planning Policy Framework to allow local governments more input into the process of setting caps and monitoring the movement of machines (Greater Geelong City Council Submission, p. 5). Frankston City Council advocated for local government gambling policies to be included in municipal strategic statements to give local government planning control over the gaming machine caps (submission to Panel, p. 2).

In 2002, the Government made an election commitment to amend the Victoria Planning Provisions to require that a planning permit be obtained for all new gaming venues and for all increases in the number of gaming machines at an existing venue. The Government has advised the Panel that it is currently drafting these amendments

and it anticipates the new requirement for a planning permit will come into operation early in 2006. The Panel supports the implementation of this election commitment.

The Panel also notes that councils, as planning authorities under the Planning and Environment Act 1987, already have significant powers in relation to gaming venues and gaming machines in their local government area. A council may prepare planning policies about the use and development of all or part of the local government area, including policies about gaming venues and gaming machines. A policy allows a council to set out specific requirements for where gaming premises may be located and the matters that should be considered when assessing an application for a planning permit. These policies can, for example, encourage or discourage gaming venues in particular streets or areas.

If these policies are included in the local planning policy framework in a planning scheme, they can provide guidance to industry and give weight to a council’s decision on a planning permit application. They will also be given weight by the Victorian Civil and Administrative Tribunal if an appeal is lodged against a council’s decision refusing a planning permit.

A number of councils have already included planning policies in relation to gaming venues in their planning schemes. The City of Melbourne outlined its gaming venue planning controls in its

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submission to the Panel. The Melbourne Planning Scheme sets out the Council’s policy to discourage any further increase in gambling, particularly in residential areas. Councils such as Moyne and Boroondara have also included gaming venue planning policies in their planning schemes.

Further, under the Planning and Environment Act 1987 and the Victoria Planning Provisions, a council may consider the social and economic effects of gaming as part of its assessment of a planning permit application. If councils consider these issues, they might feel less need to make a submission when the VCGR is considering a new gaming venue application, or an application to increase the number of machines at an existing venue. It is hard to imagine a council granting a planning permit to a new gaming venue and then making a submission that the VCGR should not approve that same venue.

The Panel strongly recommends that all councils consider developing a gaming machine policy and including this policy in their planning framework. The Panel considers that the development and implementation of such policies will enable local government to take greater responsibility for, and control of, the gaming activity in their local area and to protect their vulnerable communities.

Recommendation 8That the Victorian Government encourages all councils to develop a local gaming machine policy—to be included in their local planning framework—that outlines the factors the council will take into account when considering a gaming machine planning permit application.

Resourcing the Victorian Commission for Gambling Regulation The extension of the regional caps policy to impose a universal cap on all local government areas at 8.0 gaming machines per thousand adults will result in approximately 1 872 gaming machines being removed from 19 local government areas. The extended policy also means, however, that 60 local government areas will be below the cap of 8.0 gaming machines per thousand adults and that venue operators and the gaming operators may wish to relocate gaming machines removed from regions

above the cap to venues in areas that are below the cap.

As described in chapter 1, the Gambling Regulation Act requires that VCGR approval be obtained before gaming machines can be installed at a new venue or where additional gaming machines are to be installed in an existing venue. This requirement will apply where a venue or gaming operator wants to move gaming machines from one venue to another, or from one local government area to another, as a result of the extended caps policy.

When carrying out its statutory responsibilities, the VCGR is required to consider a range of matters, including the social and economic impact of the proposal on the community of the local government area. Stakeholders presented the Panel with a great deal of evidence regarding the current processes for approving the movement of gaming machines across Victoria.

Tattersall’s provided evidence that showed that the average time taken for an application to be determined, including the time taken to develop the application prior to submitting it with the VCGR, is approximately 18 months.

Tattersall’s submitted that a lack of some clarity in the Gambling Regulation Act (regarding exactly what applicants are required to provide) combined with the burden of proof imposed on the applicant “has resulted in the approval process becoming highly legalistic” (submission to Panel, p. 37). Further, the increased complexity adds considerable time to the development of each application. Tattersall’s estimated that it takes an average of nine months to develop an application. The evidence provided by Tattersall’s was also reflected in the comments of venue operators during the consultation sessions.

A number of local governments raised issues about the cost of preparing submissions to the VCGR. Brimbank City Council indicated that “the cost to a council for a response that includes locally based research, expert witnesses and legal representation can be upwards of $20 000 per submission” (submission to Panel, p. 1).

Hume City Council estimated that researching and developing submissions to the VCGR required resources totalling 25.5 days in council staff and consultant time. The Council noted that this estimate of resources is low because staff have developed a

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high level of expertise as a result of the number of recent submissions they have prepared. “It should be borne in mind that a greater level of resources may be required by a council for a first-time submission or for applications presenting issues of greater complexity, where specialist skills may be required” (Hume City Council submission, p. 3).

The Panel considers that there is potential for this report’s recommendations to generate significant additional workload for the VCGR in respect of its statutory licensing functions. While it is not possible to estimate what this workload would be, the timetable for removing excess gaming machines (as recommended in chapter 8) will result in approximately 200 gaming machines being removed in the first 12 months of implementation, with approximately 300 and 630 gaming machines removed in the second and third years respectively. This might result in a significant workload for the VCGR should the operators choose to relocate these machines to other gaming venues.

The Panel considers that it is imperative for the successful implementation of the extended regional caps policy that the VCGR is able to process and determine these applications as expeditiously as possible. The Panel recommends, therefore, that the Government examine whether the existing resources of the VCGR are sufficient for this purpose.

Recommendation 9That the Government ensures that the VCGR has sufficient resources to implement the extended regional caps policy. This includes having the resources to expeditiously determine all applications for approval to move gaming machines from one venue to another.

Population growthThe population for Victoria is set to grow by an average of 1.0 percent per year between 2006 and 2011. With the number of gaming machines in Victoria (outside Crown Casino) fixed at 27 500, this growth in population will result in a lower density of gaming machines across Victoria. By 2011, the overall density of gaming machines in Victoria will be approximately 6.69 machines per thousand adults. As populations increase in capped regions, the overall density of gaming machines will fall to below the capped level of 8.0 machines per thousand adults.

Population growth was an issue raised by many stakeholders. Venue operators advocated a cap limit providing for increases in machine numbers in response to population growth. Other stakeholders suggested that the caps policy be reviewed regularly to allow for an adjustment that takes into account an area’s population growth.

Tattersall’s submitted that “any regional cap policy should acknowledge the propensity for circumstances and regional data to change over time”, noting “population shifts, supply and demand changes or a range of economic variables can occur, which dictates that Ministerial Directions should be flexible” (submission to Panel, p. 32).

Periodic review of the cap levelUnder the Gambling Regulation Act, the VCGR must conduct a review of the limits set by regional caps at five year intervals. The Panel understands that the purpose of this review is to determine whether the level of the cap is still appropriate and whether adjustments to the cap should be made.

The Panel has recommended that the new universal cap be implemented over a four year period. We recommend that no review of the regional cap limit should occur until the cap has been fully implemented. The Panel considers, however, that a review of the regional cap to adjust for population growth will continue to be warranted. There is no reason why the current legislative provision should be changed.

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Conclusion

The growth of gaming machines in Victoria since their introduction in 1992 is of significant concern to many in the community. Since coming to office in 1999, the Bracks Government has implemented a comprehensive strategy to minimise the negative impacts of gambling. This review has focused on one aspect of the Government’s strategy: regional caps on electronic gaming machines.

Gaming machines are not distributed evenly across all areas of Victoria. In the course of this review, the Panel found that there is a concentration of gaming machines in areas of higher socio-economic disadvantage. It is necessary, therefore, to implement measures to ensure a more even distribution of gaming machines.

The first round of regional caps was introduced in 2001. The impact of these caps is unclear. Research and evidence provided by stakeholders suggest that the scale and scope of the regional caps in the first round were not of a degree that would induce a shift in the way gaming machines are distributed; the caps were unlikely to make gambling opportunities less accessible.

Despite the lack of conclusive evidence to prove that caps on the number of gaming machines in a region will reduce the incidence of problem gambling, the Panel considers there to be a strong case for maintaining and extending Victoria’s regional caps policy because it will reduce accessibility and expenditure in vulnerable communities.

To this end, the Panel has sought to recommend a regional caps policy that addresses the flaws identified in the first round of regional caps and is of a scale and scope that will lead to a shift in the distribution of gaming machines. By focusing on postcodes and venues with high gaming intensity, the Panel hopes to maximise the impact of the extended regional caps to reduce the accessibility of gambling opportunities in vulnerable communities. The Panel considers that the regional caps policy recommended in this report will be an important step in protecting vulnerable communities from harm from gambling.

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References

Livingstone, C 2001, Regional Caps on Poker Machine Numbers—Impacts, Potential Impacts and Issues, Australian Institute for Primary Care, La Trobe University, Melbourne.

Marshall, D, McMillen, J, Niemeyer, S and Doran, B 2004, Gaming Machine Accessibility and Use in Suburban Canberra: a detailed analysis of the Tuggeranong Valley, Centre for Gambling Research, Australian National University, Canberra.

McMillen, J and Marshall, D 2004, 2003 Victorian Longitudinal Community Attitudes Survey, Centre for Gambling Research, Australian National University, Canberra.

Neal, P, Delfabbro, P and O’Neil, M 2004, Problem Gambling and Harm: A National Definition, South Australia Centre for Economic Studies and Department of Psychology, University of Adelaide.

O’Neil, M 2005, Study of the Impact of Caps on Electronic Gaming Machines, South Australia Centre for Economic Studies, University of Adelaide.

Productivity Commission 1999, Australia’s Gambling Industries, Report No.10, Canberra.

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Appendix A Submissions received by the Panel

Altona Bowling Club

Amstel Golf Club

Australian Hotels Association (Victoria)

Ballarat City Council

Banyule City Council

Banyule Community Health Service

Bass Coast Shire Council

Baw Baw Shire Council

Benalla Rural City Council

Bethany Community Support

Borderlands Cooperative

Brimbank City Council

Bruandwo Pty Ltd

Campaspe Shire Council

Casey City Council

City Memorial Bowls Club (Warrnambool)

Clubs Victoria Inc

Colac Otway Shire Council

Council of Gambler’s Help Services

Country Women’s Association of Victoria

Darebin City Council

Duty of Care Inc

East Gippsland Shire Council

Financial and Consumer Rights Council

Frankston City Council

Gambler’s Help Southern

Geelong Branch of the Greens

Geelong Catholic Social Justice Committee

Glen Eira City Council

Goulburn Valley Community Health Service

Greater Dandenong Council

Greater Geelong City Council

Greater Shepparton City Council

Hume City Council

Indigo Shire Council

InterChurch Gambling Taskforce

James Doughney

John Hartnett

Kingston City Council

Latrobe City Council

Lord of the Isles Tavern

Mac’s Hotel

Macedon Ranges Shire Council

Mansfield Shire Council

Maribyrnong City Council

Maroondah City Council

Melbourne City Council

Melbourne Racing Club

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Monash City Council

Moonee Valley City Council

Moonee Valley Racing Club

Moreland City Council

Municipal Association of Victoria

North Ballarat Sports Club

Northern Grampians Shire Council

Peter Loney MP, Member for Lara

Queenscliffe Borough Council

Queenscliff Bowling Tennis and Croquet Association Inc

Relationships Australia and Child and Family Services

Seagulls Nest (Williamstown Football Club)

Stonnington City Council

Tattersall’s Gaming Pty Ltd

Taylor Hotel Nominees

The Junction Tabaret

The Sunshine City Club

Uniting Church in Australia—Skipton St and Mount Pleasant Congregations

Victorian Local Governance Association

Wangaratta City Council

Wellington Shire Council

Wesley Footscray Outreach

Whitehorse City Council

Wyndham City Council

Yarra City Council

Yarraville Club Inc

Submissions provided on a confidential basisBallarat Basketball Association Inc

Ballarat Football League Social Club

Portarlington Golf Club

Racing Victoria Ltd

Returned and Services League of Australia

Tabcorp Holdings Ltd

Taverner Hotel Group

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Appendix B Consultation sessions

Date SessionThursday, 28 April 2005

Ballarat venue operators Town Hall Ballarat

Ballarat community stakeholders Town Hall Ballarat

Friday, 29 April 2005

Shepparton venue operators Greater Shepparton City Council

Thursday, 12 May 2005

Warrnambool venue operators Warrnambool Civic Centre

Warrnambool community stakeholders Warrnambool Civic Centre

Friday, 13 May 2005

Geelong venue operators City Hall Geelong

Geelong community stakeholders City Hall Geelong

Wednesday, 1 June 2005

Moreland venue operators Moreland Council Offices Coburg

Thursday, 2 June 2005

Hume and Whittlesea venue operators Whittlesea Civic Centre South Morang

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Wednesday, 8 June 2005

Melbourne City venue operators Office of Gaming and Racing Melbourne

Dandenong venue operators Greater Dandenong City Council Springvale

Wednesday, 27 July 2005

Brimbank venue operators Municipal Offices Sunshine

Hobsons Bay venue operators Altona

Thursday, 28 July 2005

Darebin venue operators Darebin City Council Preston

Monash and Casey venue operators Monash Council Offices Glen Waverley

Wednesday, 3 August 2005

Moonee Valley venue operators Clocktower Centre Moonee Ponds

Maribyrnong venue operators Maribyrnong Council Footscray

Wednesday, 17 August 2005 Gambler’s Help clients Parliament House Melbourne

Community consultation sessionA separate consultation session was held for metropolitan community stakeholders on Wednesday, 4 August 2005 at the Office of Gaming and Racing. The Panel invited 32 community stakeholders to attend consultations sessions on the day but only ten stakeholders were able to attend. Representatives of the following organisations attended the session:

• Gambler’s Help Northern

• Gambler’s Help Eastern

• Gambler’s Help Southern

• The Salvation Army

• Chinese Gambling Concern

• Free Yourself Program

• Working Women’s Health

• Wesley Footscray Outreach

• Northern Community Care.

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Appendix C Panel meetings with organisations

Australian Hotels Association

Ballarat City Council

Benalla City Council

Brimbank City Council

Clubs Vic

Communities Acting on Pokie Problems

Council of Gambler’s Help Services

Country Women’s Association of Victoria

Crown Casino

Darebin City Council

Financial and Consumer Rights Council

Frankston City Council

Greater Dandenong City Council

Greater Geelong City Council

Greater Shepparton City Council

Hume City Council

Kerrie Cross, Responsible Gambling Advocate

Kingston City Council

Latrobe City Council

Maribyrnong City Council

Michael O’Neil, Director, South Australia Centre for Economic Studies

Monash City Council

Moonee Valley City Council

Moreland City Council

Municipal Association of Victoria

Queenscliffe Borough Council

Queenscliff Bowling, Tennis and Croquet Association

Racing Victoria Ltd

Tabcorp Holdings Ltd

Tattersall’s Gaming Pty Ltd

Uniting Church of Australia

Victorian Commission for Gambling Regulation

Victorian Council of Social Service

Victorian Local Governance Association

Warrnambool City Council

Whittlesea City Council

Wyndham City Council

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Appendix D Researchers contacted by the Panel

Professor Max Abbot, Pro Vice-Chancellor and Dean, Faculty of Health and Environmental Sciences, Auckland University of Technology

Professor Alex Blaszczynski, Gambling Research Unit Director, School of Psychology, University of Sydney

Dr Paul Delfabbro, Senior Lecturer, Department of Psychology, University of Adelaide

Dr James Doughney, Senior Lecturer Applied Economics, Victoria University

Dr Nerilee Hing, Senior Lecturer, School of Tourism and Hospitality Management, Southern Cross University

Mr Charles Livingstone, Senior Research Fellow, Australian Institute for Primary Care, Faculty of Health Sciences, La Trobe University

Professor Jan McMillen, Director, Centre for Gambling Research, Australian National University

Mr Michael O’Neil, Director, South Australia Centre for Economic Studies, University of Adelaide

Dr Keis Ohtsuka, Senior Lecturer, Department of Psychology, Victoria University

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Appendix E Comparison of vulnerability rankings using three indicators applied in first round regional caps

Table 1 Local government area vulnerability rankings in first round

Gaming Expenditure machine per adult density per rank adult rank SEIFA rank Overall rank Local government area

City of Maribyrnong 2 2 1 1

City of Greater Dandenong 6 3 2 2

City of Latrobe 4 11 7 3

Shire of Bass Coast 3 14 8 4

City of Darebin 14 9 4 5

Shire of East Gippsland 7 25 9 6

City of Warrnambool 5 15 25 7

City of Hobsons Bay 12 22 13 8

City of Ballarat 8 19 21 9

City of Melbourne 1 1 47 10

City of Hume 25 13 12 11

City of Whittlesea 31 4 17 12

City of Brimbank 33 16 5 13

City of Greater Geelong 13 23 20 14

City of Wyndham 15 6 45 15

City of Moonee Valley 21 8 38 16

Rural City of Mildura 24 34 10 17

City of Moreland 35 29 6 18

City of Greater Shepparton 27 28 16 19

City of Monash 16 5 50 20

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Table 2 Local government area vulnerability rankings at 30 June 2005

Gaming Expenditure machine per adult density per rank adult rank SEIFA rank Overall rank Local government area

City of Maribyrnong 2 2 2 1

City of Greater Dandenong 3 4 1 2

City of Latrobe 10 3 6 3

City of Darebin 8 13 8 4

City of Brimbank 5 28 3 5

City of Hume 9 23 5 6

City of Ballarat 12 9 21 7

Shire of East Gippsland 25 5 13 8

Shire of Bass Coast 17 12 17 9

City of Melbourne 1 1 48 10

City of Whittlesea 6 38 7 11

City of Warrnambool 15 6 32 12

City of Hobsons Bay 21 16 16 13

City of Greater Geelong 22 17 20 14

City of Greater Shepparton 29 25 9 15

City of Moonee Valley 7 19 39 16

Shire of Wellington 26 7 33 17

Rural City of Mildura 34 22 10 18

City of Monash 4 15 52 19

Rural City of Benalla 35 10 27 20

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Appendix F Case study: determining venues from which to remove gaming machines in capped regions

Case study After applying the universal cap of 8.0 gaming machines per thousand adults, local government area XYZ has to reduce its number of gaming machines by 200, from 1 000 to 800 (20 percent). Area XYZ has five postcodes with the following distribution of machines:

Table 1

Postcode Current number % of of gaming gaming machines machines

1 0 0

2 200 20

3 400 40

4 300 30

5 100 10

TOTAL 1 000 100

Postcode 1 has no gaming machines and postcode 3 accounts for 40 percent of the total number of machines in local government area XYZ. Table 2 shows the proportion of gaming machines, the average expenditure per machine and the variance from that average for each postcode.

Postcodes 3 and 4 in local government area XYZ have above average expenditure levels of approximately 42 and 24 percent respectively. Applying the weighting factor of 33 percent to those postcodes’ expenditure variance levels means that an extra 14 percent of gaming machines will be withdrawn from postcode 3 (33 percent of variance 42.2 percent) and 8 percent from postcode 4 (33 percent of variance 24 percent).

When this is added to the share of gaming machine proportions existing in this local government area, the proportion of the gaming machines to be removed from postcodes 3 and 4 are 54 percent

Table B

Weighting factor Share of Average (33% of the machines to % of gaming expenditure per % variance above average be withdrawn Postcode machines gaming machine from average expenditures) (hotspots)

1 0 $0 0 0

2 20 $190 -15.5 0

3 40 $320 +42.2 14 54

4 30 $280 +24.4 8 38

5 10 $110 -51.1 0

TOTAL 100 $225 0

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and 38 percent respectively. Postcode 3 (40 percent of the local government area’s gaming machines), for example, has an above average expenditure per machine level that—when the weighting factor is considered—means an extra 14 percent is applied, giving a total of 54 percent. So 54 percent of the local government area’s gaming machines to be removed (200) will come from postcode 3.

Collectively, postcodes 3 and 4 will account for 92 percent (or 184 machines) of the gaming machines to be removed (200) from local government area XYZ.

How do we apportion the remaining gaming machines to be removed?Eight percent of gaming machines to be removed (16 machines) have to come from postcodes 2 and 5. The basis for the removal of gaming machines from postcodes that have a lower than average expenditure level is the comparative shares of the total local government area’s gaming machines. Postcode 2 has twice the gaming machines of postcode 5. The method is illustrated in Table 3.

Table 3

Postcode % of gaming Share of machines in local remaining 8% government area machines

2 20 2/3 of 8% = 5.33%

5 10 1/3 of 8% = 2.67%

TOTAL 30 8%

Using the relative shares of gaming machines, postcode 2 will lose 5.33 percent of the gaming machines to come from the local government area XYZ (200 machines). Postcode 5 will lose 2.67 percent.

Table 4 summarises the removal by postcode area as a result of applying the model. It also shows the before and after gaming machine numbers in each postcode.

In local government area XYZ, the 200 gaming machine reduction will come from all postcodes with gaming machines, but a greater relative proportion will come from those with a higher level of average expenditure per machine. Simply put, the gaming machines will come from areas with higher levels of gaming intensity.

Table 4

Number of % Share of gaming Number of gaming Number of gaming gaming machines machine removals machines to be machines Postcode (before cap) (n=200) removed (after cap)

1 0 0.00 0 0

2 200 5.33 11 189

3 400 54.00 108 292

4 300 38.00 76 224

5 100 2.67 5 95

TOTAL 1000 100.00 200 800

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