by Denise Roche
In the last couple of days no less than two Ministers have dished out inaccurate comments about the supposed economic benefits of the SkyCity casino extension in exchange for a conference centre deal.
Minister of Economic Development Steven Joyce accused the Greens of not understanding the economics of the deal; and at the opening of yesterday’s Problem Gambling Conference in Auckland, Minister for Whanau Ora, Tariana Turia, suggested the deal had economic benefits that would outweigh the harm of increased gaming machines.
With all due respect to both of them, the deal simply doesn’t stack up. According to the Ministry of Economic Development’s feasibility study, the convention centre will likely provide $397 million in economic benefit to New Zealand over 20 years, offset by $277 million in economic costs. That’s a net benefit to the economy from the convention centre of $120 million over 20 years.
Now let’s look at the cost to the New Zealand economy of the 500 additional pokie machines SkyCity want in return for building and running the convention centre. The Ministry of Health’s most conservative estimate of the annual economic cost of problem gambling is $330 million (they actually suggest it could be as high as $1 billion). According to the Problem Gambling Foundation, three quarters of problem gambling can be attributed to pokies, so that’s $250 million a year minimum that pokies cost our economy.
The additional 500 pokie machines SkyCity want would result in an increase of 2.35% on the current nationwide muster, and Problem Gambling Foundation research shows pokie machine problem gambling is directly proportional to the number of machines. So that’s an additional cost to the New Zealand economy of $5.9 million a year from problem gambling. Over 20 years, that’s an additional cost to our economy of $118 million – almost exactly the same as MED’s net estimated economic benefit of the convention centre over that time.
If, at best, we’re losing as much as we’re gaining on this dirty deal between the Government and SkyCity what on earth is the point of it? The numbers don’t even go anywhere near describing the mayhem and misery that these machines can create for families and communities. They don’t go anywhere near explaining the awfulness of the harm they create. Pokies are a highly addictive product. They’ve been described by a former CEO of the Problem Gambling Foundation as the “crack cocaine of the gambling industry.”
I’m going to be asking what the advice from the Department of Internal Affairs was about this deal too. DIA is the agency in charge of regulating the casino, and there have been numerous incidences of loan sharking and money laundering that they’ve had to investigate in relation to SkyCity.
So if the SkyCity deal is not about economics, then the Government’s push on this comes down to ideology and political patronage. That they want to change the law for their big business mates because they can. Who wins from this?
Frankly, I am appalled that the Minister for Whanau Ora is prepared to sacrifice the well-being of Maori families for dodgy economic numbers. All the research shows that if you are poor, female and Maori you are more likely to have a problem with pokies than anyone else. Her inconsistency is even greater when you take into account that the Maori Party has a Private Members Bill about restricting the harm from pokies that is designed to allow communities more say over the number of pokies in their neighbourhoods.
Published in Economy, Work, & Welfare | Featured | Society & Culture by Denise Roche on Thu, February 23rd, 2012
Tags: convention centre, gambling, pokies, Sky City, steven joyce, tariana turia
More posts by Denise Roche | more about Denise Roche
on the trolls and those who are unable to keep on topic
Denise, here’s something you may be interested in. In 2005, Sky City made a $60,000 donation to the National Party (they also donated the same amount to Labour in that year).
Since then, there are no disclosed donations to National from Sky City. But I suspect that is likely because the Electoral Act changed with regard to the requirement to disclose donations.
Sky City could have donated $29,999 to National in each of the three years preceding last year’s election and we would be none the wiser, because political parties have to disclose only donations that exceed $30,000 over any twelve month period.
And I suspect, given Joyce’s determination to give them this deal, Sky City probably did something like that.
Unfortunately, we will never find out. Your point about political patronage is a good one.
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Denise says “That’s a net benefit to the economy from the convention centre of $120 million over 20 years.”
Wrong.
You are only counting the cost/benefit of running the actual convention centre.
You have completely ommited to count the additional $85 million per year that the report you link to says will be spent by conference attendees who would have otherswise not have visited New Zealand.
And there are also other intangible benefits to NZ by having high profile conferences, like new business links, new research and development links, new accademic links, new supporting businesses etc.
Yes – we need to do more about problem gambling – but it’s a problem we’ll still have with or without a new conference centre.
So you might try to trick us that the economc benefit to NZ is only $6m per year, but can only do that by omitting the additional $85m per year that conference attendees will spend.
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It’s interesting how concern for the well being of community is forgotten when there is a good deal. A bit like when someone forgets their partner and children before playing the pokies.
“The numbers don’t even go anywhere near describing the mayhem and misery that these machines can create for families and communities. They don’t go anywhere near explaining the awfulness of the harm they create. Pokies are a highly addictive product. They’ve been described by a former CEO of the Problem Gambling Foundation as the “crack cocaine of the gambling industry. I’m going to be asking what the advice from the Department of Internal Affairs was about this deal too. DIA is the agency in charge of regulating the casino, and there have been numerous incidences of loan sharking and money laundering that they’ve had to investigate in relation to SkyCity.”
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It is you rather than Denise who is engaging in the trickery here, photonz1. Your trick is to do the same thing the High Court recently criticised the Overseas Investment Office and two Government Ministers for doing in the Crafar Farms case – apply an invalid counterfactual.
The correct counterfactual should be “with or without” the Sky City deal, which is what Denise has done, not “before and after” it, which is what you are doing. Your argument presumes the convention centre won’t be built without the Sky City deal. Of course, that is patently false.
For instance, the Government could stump up the cash itself to build the convention centre, at an annual increased cost in Government debt servicing of about $17m, and all the same indirect economic benefits such as increased tourist spending you cite will occur just as they would under the Sky City deal, but without the social and economic harm caused by an increase in problem gambling that will result from the Sky City deal.
Incidentally, that is the sort of thing I think governments should do to stimulate a flagging economy and create jobs, but our current Government for ideological reasons won’t do.
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Toad says “Your argument presumes the convention centre won’t be built without the Sky City deal. Of course, that is patently false”
Then comes up with the idea that taxpayers should fork out $300 – $400 million – as if it’s a guaranteed backup.
It’s the Green solution to everything – get someone else (taxpayers) to pay.
And as you point out with your fairly low estimate of interest, we’d be $17m per year WORSE off than the amount Denise is already complaining about.
Regardless of whether the country benefits from Sky building a new convention centre, or even if it’s build or not, doesn’t change the fact that we will STILL have a problem gambling issue that need to be fixed.
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No challenge to the issue I raised about him using an invalid counterfactual though.
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Nonsense. (I should have said, ‘more nonsense’).
I could name dozens of green solutions to problems large and small that don’t involve getting someone else (taxpayers) to pay.
“Everything”! – amateur.
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Anyone notice it is not working.
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Couldn’t agree more.
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taod says “No challenge to the issue I raised about him using an invalid counterfactual though.”
No need to.
You already blew your own arguement to pieces by showing us we’d be $17m a year worse off – even if tourist spending is ignored.
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You are confusing the Government accounts with the economy as a whole.
If the Government spends $17m more in debt servicing (and some of that will comes back through increased tax take) to better the New Zealand economy by $85m, I would say that is money well invested, just as governments invest in public health and education to better their national economies.
Sure, the Government can get the same $85m benefit to the economy through the Sky City deal and spend nothing directly. However, there will be indirect resultant costs to Government of arrests, incarcerations, unemployment, and poor physical and mental health, and resultant costs, both social and economic, to New Zealand society and economy as a whole from a substantial increase in problem gambling.
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toad says “You are confusing the Government accounts with the economy as a whole”
No – that’s what Denise did.
She took the only cost/benefit of the owner of the conference centre, ommited the additional $85m spending – and claimed this was the benefit to the economy.
Now you are saying the costs of extra gambling of $5.9m (Denise’s figure) will be larger than the extra interest cost of $17m (your figure).
Last time I looked 17 was more than 5.9.
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I’ll try again – if it doesn’t get through I think I’ll give up photonz1. Sometimes I think you deliberately try to confuse readers with figures.
The $5.9 million annual cost Denise refers to under the Sky City deal is a cost to the New Zealand economy from problem gambling. Some of it will be borne publicly, and some of it by companies and individuals.
The $17 million has nothing to do with Denise. It is my estimate of the debt servicing costs to the New Zealand government in the hypothetical situation if the government were to build the conference centre itself.
So you are trying to compare apples with oranges.
The $85 million you talk about is a benefit to the New Zealand economy Some of this would accrue to the government, and some to private companies and individuals, and it would happen whether Sky City built and operated the convention centre or the New Zealand government did, or someone else did.
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I agree.
Pokey machines (outside of casinos) generate valuable funding for the communities in which they operate, and short-sighted officials are always ready to find ways of constraining the numbers unreasonably. We need to reverse this downward trend. Not a free-for-all, but reasonable growth, set at the national level, to remove the ability of minor officials to tinker.
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toad – you stuffed your own arguement right at the start when you argued that the taxpayer losing $17m was better than gamblers losing $5.9m – for the same benefit.
Even if taxpayers paid out $5.9m to refund additional gambling loses – we’d still be $11m better off every year.
We’d be better off to take the Sky deal, spend a few million more to help problem gamblers, and save the other $10m+ to pay off debt/spend on social services etc.
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“The Ministry of Health’s most conservative estimate of the annual economic cost of problem gambling is $330 million (they actually suggest it could be as high as $1 billion). According to the Problem Gambling Foundation, three quarters of problem gambling can be attributed to pokies, so that’s $250 million a year minimum that pokies cost our economy.”
This is the total cost of the problem pokie gambling. Anywhere between $250M and 750M pa. Note Denise used the lower estimate, not the average – that is $500M.
“The additional 500 pokie machines SkyCity want would result in an increase of 2.35% on the current nationwide muster, and Problem Gambling Foundation research shows pokie machine problem gambling is directly proportional to the number of machines. So that’s an additional cost to the New Zealand economy of $5.9 million a year from problem gambling. Over 20 years, that’s an additional cost to our economy of $118 million – almost exactly the same as MED’s net estimated economic benefit of the convention centre over that time.”
So the apportioned cost is $6M to $18M, an average of $12M pa. This cost does not even quantify the issue of loan sharking and money laundering as an economic cost – laundering P money and illegal (gang) brothel money for example.
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As to the alternative option, which should guide the government in negotiations.
The cost of borrowing $300M is $15M per annum. But against this cost is ownership return (annual profit) – but as the loan is to be repaid let’s call that an equivalent to principal repayment.
The government gains from the $85M of spending – about $10M in GST and about $7M in company profit (companies about $14M in tax paid profit).
This covers government borrowing cost.
Besides there are probably plenty of other businesses that might tender for a public-private partnership to fund a convention centre. Or the government could float a half share in the convention centre.
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Yeah, and it has just occurred to me that if Denise had gone for the upper estimate by the Ministry of Health of the annual cost (to the economy, not the government) of problem gambling – i.e. $1 billion – that results in an additional economic cost due to pokie problem gambling for the SkyCity deal of around $17 million. That’s the same figure as I estimated would be the annual debt servicing cost of the Government just fronting the cash and building and operating the conference centre itself.
But you can’t win with photonz1 around. If Denise had used the top estimate from the Ministry of Health he would then have accused her of cherry picking. He’ll obfuscate and misrepresent figures and data until we all give up trying to challenge his assertions. When she uses the most conservative figure, he misuses that to argue that the SkyCity deal is the best one economically, and ignores the social damage caused by the increased problem gambling that will occur.
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toad – when your finally realise your figures have blown your own arguement, what do you do?
Triple your figures to a billion dollars, and disregard the fact that the total annual take from pokies doesn’t even reach a billion dollars, but is $150 million less than that.
And that $849m into pokies comes from ALL gamblers – Not just the 0.3-1.8% with a problem.
Yes, there are problems that need to be addressed. But the main problem with pokies is with the 90% that are in clubs and pubs, with far higher concentrations in the poorest suburbs.
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They are not toad’s figures, but the range of estimates of the Ministry of Health. Try and keep up with the info in the starter post.
“The Ministry of Health’s most conservative estimate of the annual economic cost of problem gambling is $330 million (they actually suggest it could be as high as $1 billion).
You say the main problems are with gambling in “poor areas”, you mean you think problem gambling is only done by poor people …
“DIA is the agency in charge of regulating the casino, and there have been numerous incidences of loan sharking and money laundering that they’ve had to investigate in relation to SkyCity.”
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And it’s about $5B that is invested into pokies (less winnings to the c$850M figure).
While pokie spending is about 46% of all gambling (over $10B), “according to the Problem Gambling Foundation, three quarters of problem gambling can be attributed to pokies”.
The thing about government making a deal to enable an increase in pokie machines (another 500 on top of an existing 20,000) is it nuetralises any government attempt to confront the wider pokie problem. After all the government does not have any attempt to confront is does it …
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On the topic of the economic cost of gambling, the Oz Institute of Criminology looked at financial crime (those with access to money) related to problem gamblers.
http://www.aic.gov.au/documents/D/D/1/%7BDD19845F-E242-440C-955D-CDD46CB1A257%7Dtandi256.pdf
Then tens of millions of dollars can be lost by professionals.
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Thank you for these exact statistics. Articles like this are a vital part of checks and balances.
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And now we have 5 kids locked in a car in the SkyCity carpark while their parents play the pokies. How much more of that will happen if Sky City get another 500 pokies under this deal?
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There is a way to manage problem pokie gambling and that is to adapt the machines so they can only be played via use of a payment card. People apply for a user card and are limited to loading a maximum amount onto the card in any one week.
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FFS, on Close Up tonight it was revealed the parents blacked over the vehicle windows to prevent the kids inside being seen.
And Sky City didn’t pick up anything suspicious about that when the vehicle entered their carpark? Well, of course not, because egress is all electronic and there is no actual person monitoring their carpark entrances.
Surely, given the highly addictive nature of gambling, and pokie gambling in particular, some host responsibility should be required to be exercised – even if it does mean Sky City have to employ a few staff to monitor their carparks to ensure this sort of thing does not happen.
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Amazing. I’ve heard polititians scrambling to blame Skycity as much as they can.
But they haven’t said a single word of criticism – not one – of parents who lock five young children in a car in an underground carpark.
Incredible they think if parents do that, it’s ok to shift the blame onto someone else.
Just like when someone has four kids to four fathers who have all left, all the blame goes onto the govt for not dishing out enough taxpayer dollars.
And there’s total silence about doing anything to stop such an appalling situation in the first place.
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Toad,
Come to Manurewa and you see unsupervised kids in cars (usually vans and people movers) ALL the time.
One way to soak up the unemployed, patrol the streets of the impoverished parts of town and take into care all the unsupervised kids.
Wont take long to fill up any and all spaces in kids care facilities.
Mind you the Greens would call this “oppression” and targetting of a particular racial group who have a propensity to have older siblings looking after the babies in our car parks.
Surely it is the parents responsibilty to maintain the safety of their children? Why is it all of a sudden the private car park owner responsibility?
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And Toad,
This from Sky City
http://www.stuff.co.nz/national/6499342/Kids-locked-up-as-parents-gambled-at-SkyCity
So for every 251K cars, one has unattanded children. And you want a private car park owner to employ at least 4 staff (24/7 coverage) just for the one in 251K event?
Yeah right.
Mate, sheet home the responsibility where it belongs, the parents.
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Gerrit – you don’t know that it is a one in 251k event. The staff found 7 incidents. How many more would they have found if they had more staff looking?
Trevor.
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Trevor
True, and no more correct then your assumption that having staff to walk the car park will “spot” any more.
So who is responsible? The private car park owners or the parents who went to a great deal of trouble to blacken out the windows to ensure the kids were not spotted?
Should ALL car parks require a person on patrol for events like this?
Those irresponsible parents could quite easily parked in the downtown or the Aotea car parks and walked the short distance to the casino.
Should those be patrolled 24/7?
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Trevor and Toad,
More details here
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10788981
So the one in 251K occurence is pretty accurate.
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@Gerrit 10:56 PM
I suspect that is because Manurewa has one of the highest concentrations of pokie bars anywhere in the country. If anything,they are an even worse scourge than casinos.
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Toad,
Any numbers on the pokie bars? Factual references?
My bet says it is no higher in Manurewa then any other part of the country.
Three that I know of in Southmall. How many in St Helliers?
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photonz1, Gerrit – Of course the parents are responsible. But I am the last person you should be lecturing about gambling and personal responsibility, because I have been very close to problem gambling myself. You see, my wife had a pokie gambling problem – a big one. Big enough to accumulate $50K in overdraft and credit card debt over about 3 years. Big enough to cost us the investment property that was meant to be part of our retirement savings, and big enough to almost cost us our marriage. And it was only when it came to that, that she sought help. She’s worked through the problem now, but that hasn’t brought back the substantial chunk of our retirement savings that were lost.
Yet she is an otherwise responsible and rational person. Pokies are not just addictive, they are deliberately designed to be addictive. And people who are addicts don’t behave rationally or responsibly – they are consumed by their addiction, and nothing else matters.
Parents leaving kids alone in cars to go gambling is just one example (albeit a pretty extreme one) of that. Yes, you can blame it on parents acting irresponsibly, but a lot of the blame lies with the gambling industry marketing a highly addictive product that causes them to do so.
Personally, I’d like to ban pokies completely, but I know that is not practical in the short term because so many sports clubs, chartered clubs and community organisations are reliant on pokies for their survival.
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@Gerrit 7:47 AM
Pokie venues in Manurewa:
ACES BAR UNIT T 185 GREAT SOUTH ROAD, MANUREWA
BELLBIRD ARMS 13 MCANNALLEY STREET, MANUREWA
CLENDON TAVERN AND RESTAURANT UNIT H2 6 ROBERT ROSS PLACE, CLENDON
HAPPY DAYS 898 GREAT SOUTH ROAD, MANUREWA
MANUREWA COSMOPOLITAN CLUB 6-10 ALFRISTON ROAD, MANUREWA
MANUREWA RSA 2/8 MAICH ROAD, MANUREWA
TRUSTY FULLBACK UNIT Z 185 GREAT SOUTH ROAD, MANUREWA
WEYMOUTH COSMOPOLITAN & SPORTS CL0UB 151 SYKES ROAD, MANUREWA
WOODY’S SPORTS BAR 220 GREAT SOUTH ROAD, MANUREWA
Pokie venues in St Heliers: None. Although there is one close in Mission Bay:
KILALA RESTAURANT 10/35 TAMAKI DRIVE, MISSION BAY
Source info here
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Toad,
3 in Southmall. Aces, Trusty Fullback, Woodies Sports Bar.
You included 3 chartered clubs and 2 taverns not located in Southmall as pokie bars.
Happy Days is located closer to Manukau then Southmall. Clendon is even further away.
Suprising you did not include the bars near the womens prison along Roscommon Road, or the ones in the Manukau CDB.
If you include far flung places from Southmall such as Clendon and Manukau, please add all the Panmure-Glenn Innes ones to the St Heliers quota.
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PhotoNZ is absolutely bang on the money. There is nothing inherently evil about pokie machines; thousands of people gamble responsibly up and down the country, raising money for good community causes.
Unfortunately, there are a few bad apples, the “problem gamblers”. These people bring a massive risk to the communities of New Zealand, because lobby and pressure groups, both local and national, persuade citizens that it is the pokies that are to blame, rather than the problem gamblers. This then results in councils being pressured into adopting “sinking lid” policies in relation to pokie machines, and this in turn becomes detrimental to the funding of community groups.
Anyone genuinely interested in pokie machines can get information on them from the Department of Internal Affairs website [here]. Outside of casinos, all pokie machines must be operated by a corporate society and the machines used to raise money solely for community groups and non-commercial purposes.
Each of the gaming machine trusts has a website, where one can get chapter and verse on their purposes and where the money goes.
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Toad says ” If anything,they are an even worse scourge than casinos.”
Correct. I read stats last week saying the level of problem gambling is higher in pubs and clubs than in casinos, and worst of all in pubs and clubs in poor areas.
The problem with irresponsible parents leaving kids in cars is not new, and not restricted to pokies. In the past it was common outside the TAB, and thousands of pubs (in the days before pokies).
Toad – thanks for sharing your story. I know someone with s similar situation who unfortunately went further down that road, and lost everything including family, her well paid job, and she ended up with a criminal record and narrowly escaped imprisonment.
Toad says “Personally, I’d like to ban pokies completely,.. “.
I wouldn’t have a huge problem with that either. But it probably won’t happen so we need to look at measures to limit the damage. Like time restrictions, money limits, etc. I’d rather see the pokies JUST in casinos.
And I’m sure we can do a lot more in regards to problem gambling. We’re starting to see tv adverts about getting help, but we don’t have any education to make people realise the money though pokies flows in one direction.
It comes back to our 100% of our teenagers (over generations) leaving high school without having been taught even the most basic financial lifeskills.
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