July 12th 2003

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Articles from this issue:

COVER STORY: Will Telstra sale complete Liberals' takeover of Nationals?

EDITORIAL: The states' gambling addiction

WEST PAPUA: Rising US concern over Indonesian army killings

AGRICULTURE: Factory closure linked to stalled sugar reforms

STRAWS IN THE WIND: Counter-culture / Houses divided against themselves / Oil theories

DEFLATION: Is the world economy sailing into unchartered territory?

Partition of Kashmir? (letter)

Something rotten ... (letter)

Senate 'obstruction' (letter)

WORLD ECONOMY : The market is unpredictable

INTERVIEW: Cross-fertilisation the key to a vibrant world

SOUTH AUSTRALIA : Sex Education course leaves parents fuming

FAMILY: Tax splitting comes in from the cold

BOOKS: The West and the Rest, by Roger Scruton

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The states' gambling addiction

by Peter Westmore

News Weekly, July 12, 2003
One of the least noticed changes in Australian society over the past 25 years is the explosion of gambling. From around $1 billion in 1975, it is estimated to be worth around $16 billion today. In the decade of the 1980s, Australian gambling expenditure rose $3 billion. In the next decade, it rose $9 billion.

The traditional forms of gambling in Australia - horse and harness racing, and lotteries - have recorded relatively modest increases over the past 25 years. The lion's share has occurred in the expansion of casinos and gaming ("poker") machines, which make up around 75 per cent of the total.

Little wonder, then, that the issue of gambling addiction - disguised by the euphemism of "problem gambling" - has become a major public issue, directly affecting around 10 per cent of the country's population. Its legacy is evident in bitter family disputes, marriage breakdown, personal and business bankruptcies.

The explosion of gambling in Australia has been vigorously promoted by state governments which, since the 1980s, have voraciously expanded their income from "discretionary" taxes, such as gambling taxes and stamp duties.

In fact, state governments are now so committed to the expansion of gambling that the government-sponsored advertising campaign directed at so-called "problem gambling" can only be seen as a cynical attempt to divert attention away from their responsibility for creating the problem in the first place.

The other major growth area in government income has been stamp duty. According to figures tabled in the recent NSW Budget, for example, stamp duty revenue rose $800 million to $3.5 billion, 25 per cent of the total state budget, due to the inexorable upward rise of the property market. Many home buyers are paying $15,000 to $20,000 in stamp duty alone.

The impact of high stamp duty, coupled with the tax treatment of residences, has caused home prices to skyrocket, making home ownership virtually impossible for most single income families - and even for many two-income families. Even a Financial Review editorial recently called for an end to negative gearing for housing, to short-circuit spiralling prices.

Not unexpectedly, the position of families is going backwards, as was recently recorded by the ING-Melbourne Institute survey, which found that five per cent of families were going further into debt, and a further 40 per cent were unable to save.

While there are a number of reasons for governments' increased reliance on gaming taxes and stamp duties, two of them deserve special mention: the loss of income following privatisation of government utilities, and the virtual abandonment of any policy for the development of primary and secondary industries.

One consequence of the sell-off of government utilities is that these entities, now operating in the private sector, produce profits for their shareholders, rather than provide services to the community.

The obvious consequences have followed. Large industries were able to negotiate cuts in energy charges, but household prices have risen inexorably. The large energy supplier, AGL, recently secured approval to increase domestic gas prices by around 9 per cent in New South Wales.

Less obviously, the abandonment of any coherent industry policy over the past twenty years has meant the decline in Australian primary and secondary industries. The effects of this are seen in a grave imbalance between rising imports and exports, the mounting foreign debt, and growing dependence on foreign borrowing to keep the Australian economy afloat.

It has meant a dramatic reduction in the size of Australia's manufacturing industry, now estimated to generate just 11.5 per cent of Australia's national income, compared to an average 19.5 per cent of the economies of the developed industrial nations of the OECD.

In fact, among OECD countries, Australia has the smallest manufacturing sector of any country except Greece, and the smallest proportion of the workforce in manufacturing except Turkey.

If Australian manufacturing was at the average of the OECD countries, it would generate an extra $50 billion a year in output, and employ an additional 500,000 people.

As Australia's manufacturing base has declined, it employs fewer Australians and generates substantially less wealth, and therefore pays less in corporate taxes.

The erosion of the tax base has caused governments to shift the burden increasingly to indirect taxes, such as the GST, while the states have turned towards discretionary taxes such as gaming and stamp duties. The effect has been to increase the tax burden on individuals and families.

The key to lifting the tax burden on individuals and families is to expand the tax base by expanding the manufacturing sector. This is not only good for families, but for society as a whole. In his book, Beyond Meltdown, the economist Peter Brain noted that since 1945, the strongest economic growth occurs when manufacturing industries produce about 25 per cent of a country's national income.

The development of a national policy to expand both primary and secondary industries is necessary to the economic independence of the country, and the economic viability of Australian families.

  • Peter Westmore is President of the National Civic Council

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