Economics
Gambling – a story of gutless governments, state and federal
Another report exposes the cost of our weak regulations on gambling. Every year Australians lose more than $3000 per household on gambling.
Australians lose $32 billion a year on legal forms of gambling. That’s $1200 per capita, the highest of any country in the world. It’s about $1600 per adult, or $3000 per household.
Those are some of the headline numbers in or derived from the Australian Institute of Family Studies report National Gambling Prevalence Study Pilot 2024, published on Wednesday.
These averages include the 35 percent of Australians who don’t gamble at all, and the 50 percent classified by the Institute as non-problem gamblers, whose gambling may be limited to the occasional lottery ticket or scratchie card. The Institute’s concern is focussed on the remaining 15 percent, whom they classify as low-risk (7.6 percent of adults), moderate-risk (4.8 percent), or high-risk (2.6 percent). The graphic alongside, copied from the report, focuses on the harm experienced by that 2.6 percent of adults.
The report also finds that in comparison with a similar study in 2019, more Australians are gambling (up from 57 percent to 65 percent), and more are at risk of harm from gambling (up from 11 percent to 15 percent). Men are significantly more likely than women to be at risk of harm from gambling, and First Nations Australians are at more risk than other Australians. The researchers also find that among regular gamblers people aged 18 to 24 are most likely to be at risk of harm from gambling,
The report’s figures on financial losses cover only the costs experienced by gamblers themselves. That is the gambler’s turnover, partially offset by the occasional win, or the amount on average the gambler’s finances are depleted after a gambling session. But there are many other costs associated with gambling, particularly problem gambling. These include the costs incurred by gamblers’ families, and the costs when gamblers try to compensate for their gambling losses by engaging in theft, for example.
A research project commissioned by the Victorian government and CQUniversity – The social costs of gambling to Victoria 2023 – estimates these costs for Victoria. The chart below shows the distribution of these costs. The direct losses – the losses reported in the Institute of Family Studies report – are those shown in the red segment of the pie chart. They are only a little more than a third of these total costs.
This is Victorian data, but there is no reason to expect that the national distribution of these costs would be markedly different.
These reports cover all gambling losses. Earlier studies indicate that about half of gambling losses are through gaming machines – “pokies”. The weekend before last Tim Costello had a Saturday Paper article – Why the pokies keep beating Australians – describing pushes by state governments and proposals by opposition parties to rein in poker-machine losses, through measures such as requirements that gamblers set limits on their own outlays before engaging in a gambling session. Costello describes how the Australian Hotels Association and the club lobbies reacted with threats of massive scare campaigns against the government or opposition party proposing such reforms. Permissive regulation over many years has allowed these lobbies to build large war chests to mount political campaigns, which means that their threats are credible and that political parties inevitably back down.
Because Costello’s most recent article, linked above, is about pokies and the state governments that are supposed to regulate them, he doesn’t mention the 2023 Commonwealth House of Representatives inquiry into online gambling and its report You win some, you lose more, known as the “Murphy report” in memory of its chair, the late Peta Murphy. In a press release published in June, Wesley Mission reminds us that the Commonwealth has still not acted on that report’s calls for a comprehensive ban on online gambling advertising, a crackdown on illegal betting platforms, and stronger consumer protections: No reform two years after Murphy report. The Australia Institute reports that although the Murphy proposals have very strong public support (> 75 percent), the Albanese government has timidly yielded to the sporting, media and gambling lobbies who oppose the reforms.
How about doing without private health insurance?
Although private insurance is the worst possible way to fund health care, successive Labor governments have allowed it to remain at high levels, contributing to high health care costs and to misallocation of health care resources.
Writing in The Conversation Terence Cheng of Monash University asks Should we scrap private health insurance rebates and direct the funding to public hospitals?
It’s a welcome contribution, because it reminds us that private health insurance (PHI) has become an established and unquestioned part of health funding. It is now more than fifty years since there has been a thorough assessment of its value (the 1969 Nimmo Report after which the Whitlam government introduced Medibank, the forerunner to Medicare.)
Anyone who recalls or reads about the political conflicts of last century might wonder why, when past Labor governments have striven to replace PHI with universal tax-funded health care, Labor governments of this century have given up the struggle.
In the period known as postwar reconstruction, in 1945 the Chifley government proposed following the example of the UK to establish a program of universal tax-funded health care, free at the point of delivery. To this end it drafted a Constitutional amendment which would give the Commonwealth power to provide a wide range of social services, including health care.
But because the opposition and the medical lobby ran a hysterical scare campaign against “nationalisation” of health care, and “socialized medicine”, the government watered down the subsequently successful Constitutional amendment in such a way that it was precluded from operating a UK-style free health system.
The Menzies Government, elected in 1949, maintained support for private health insurance, mainly through providing tax deductions for PHI fees, which meant that the higher one’s income the cheaper was PHI, because the income tax scales were highly progressive.
It was not until 1972, when Labor regained office, that it had another chance to reform health funding, with its plan for Medibank, (not to be confused with the private health insurer with the same name). Again, there was a struggle, because the Coalition-controlled Senate blocked legislation to establish Medibank. But so determined was Labor to introduce Medibank that just 18 months after being elected it went to the extent of calling and winning a double-dissolution election, with Medibank as the prime issue. With Medibank in place, PHI coverage rapidly fell from around 80 per cent to 60 percent of the population.
Then the Fraser Coalition government, elected in 1975, restored support for PHI, and in 1981 it introduced a number of incentives virtually making PHI compulsory, thus pushing up PHI coverage once more.
The struggle was resumed with the election of the Hawke government, who saw health care as an important aspect of the social wage. Medibank was resurrected as Medicare, subsidies for PHI were wound back, and PHI coverage slowly fell to 30 percent.
But Medicare was still not embedded. True to ideological form, the Howard Coalition government, elected in 1996, introduced a huge range of incentives for PHI. The first measure was a surcharge on high income earners without PHI, followed by a rebate (initially of 30 percent), a massive advertising campaign (conveying the impression that without PHI one would have no cover), and a set of incentives to get people enrolled in PHI by the age of 30 so that they could subsidise older members.
As a result PHI coverage rose back to around 45 percent of the population, and has remained there since.
These shifts and trends in PHI cover are shown in the graph below.
While Labor in office this time has directed attention to GP services, it seems to have given up on the idea of universal hospital cover. The Rudd-Gillard government introduced some minor changes to hospital funding, but specifically ruled out reforming the basic design of PHI. While the Albanese government has been quite strong on financing GP and pharmaceutical services, it has done nothing to re-implement the original vision of universal, tax-funded hospital cover through Medicare as a single insurer.
This stability, and de-facto bipartisanship, seems to have taken PHI off the policy agenda. That’s unfortunate, because PHI is a costly and inequitable way to fund healthcare. Its administrative costs are high: of every $1.00 that passes through Medicare and the Australian Taxation Office 95 cents is spent on health care; of every $1.00 that passes through PHI only 84 cents is spent on health care. It’s a high-cost privatized tax.
The Coalition’s justification for supporting PHI was that as a separate stream of income for hospital services it would take pressure off public hospitals, but that argument has always been flawed, because where the funding goes, so do the resources, particularly medical specialists. PHI has been operating as a government subsidized queue-jumping service, and is almost certainly responsible for worsening queues for surgery in public hospitals.
Perhaps the worst aspect of PHI in Australia is the way it is structured to get people under 31 to commit to “lifetime cover”, the incentive scheme devised by the Howard government. For every year past age 30 that one does not have PHI, the premium for basic hospital cover rises by 2 percent. It’s a statistically lousy deal, because on average up to around age 65 those who hold PHI are net contributors to the PHI funds, while older people are net drawers from the funds. Like the income tax system generally, it involves those who are young and productive subsidizing retirees.
This year the direct cost of subsidies to PHI will be $7.8 billion. That’s recorded in the budget papers (Budget Paper 1). But that’s only half the subsidy: the other half is represented by the Medicare Levy Surcharge – that surcharge introduced by the Howard government for high income earners without PHI.
It doesn’t show in the budget papers, because it is framed as a penalty imposed on those who are well-off but don’t do their part by taking up PHI. But the other way of looking at it is as a subsidy for PHI.
In 2022-23, of the 4.0 million Australians with incomes above $90 000 (the threshold for the surcharge in that year), only 0.8 million paid the surcharge. These were mainly reasonably well-off people who made the moral choice to share their health care costs with all Australians rather than taking PHI, but were penalised for it. The other 3.2 million well-off taxpayers who had PHI enjoyed a $7.5 billion break for opting out of Medicare.
What’s even worse about the surcharge is that very well-off retirees can easily arrange their affairs so that that their taxable income stays well below the threshold for the surcharge ($101 000 this year).
It’s extraordinary that a government claiming to be guided by social-democratic principles, and that has acknowledged the problems of intergenerational injustices in our tax and other economic arrangements, can justify ongoing support for PHI.
Cheng’s paper touches the surface of health funding, but it raises questions that the government seems to be too timid to ask.
The Optus outage – blame the economists who corporatized telecommunications
Around 30 years ago Australian policymakers decided to break up our well-functioning utilities, and enforce competition in markets where competition doesn’t work. That’s the context to understand the Optus Triple-zero failure.
The Optus Triple-zero outage has raised a justified amount of indignation in the media, calls for the CEO to quit, and suggestions for procedural and technical fixes, but perhaps we need a more basic structural reform of telecommunications.
There are two Conversation contributions on the Optus failure. Mark Gregory of RMIT University describes the outage and puts it in the context of a history of failures in Telstra and Optus that led to Triple-zero outages: Optus Triple Zero outage has left multiple people dead. A telecommunications expert explains what went wrong – and how to fix it. Helen Bird of Swinburne University of Technology suggests a number of procedural fixes, starting with full and open implementation of recommendations following Optus’s Triple-zero failure in 2023: Should the Optus chief quit? These 5 fixes would do far more to stop another 000 failure.
The ABC’s Michael Atkin calls for the establishment of an official “triple-0 custodian”, and stronger requirements for telcos to report outages. Australians can't trust the triple-0 network after 13-hour Optus outage results in deaths.
A thorough analysis, focussing on the company’s business practices, is in a post by ABC business correspondent David Taylor: Three Australians lay dead as investors of Optus's parent company Singtel were buying up its shares. He describes a company with a poor record of dealing with customers – it has just been hit with a $100 million fine for its predatory sales practices in 2023 – and has under-invested in infrastructure.
He reveals that customers were telling staff at an offshore call centre about the failure, but those staff had no protocol for alerting staff in Australia. Offshore call centres are useful for solving routine problems and customer misunderstandings, but because their staff have limited decision-making authority they act as a block when customers have serious problems to report.
Multiply by 3
The Greens have issued a suitably indignant media statement, accusing Optus of “putting profits before safety”, and calling for a regulatory response.
But a more basic question is to ask how we have come to have three competing cellphone networks, one of which (Vodaphone) is largely confined to urban regions, while the other two, Optus and Telstra, have more coverage. Telstra comes closer to covering the whole country: you can compare Telstra and Optus coverage maps.
What benefit do we gain from having that second and third network, operating in a corporate competitive model? Do the benefits of competition outweigh the cost of duplicated physical infrastructure, large advertising expenditures, and the need for a complex set of regulatory arrangements? For all their hype, these companies are simply providing a basic commodity in two strengths of vanilla – 4G or 5G.
In the 1990s Australia embarked on a vigorous campaign of privatization and establishment of competitive markets, having little regard for the situations where certain services may be better provided by well-managed monopolies operating on a utility model, rather than by firms that prioritize profit-making.
In the utility model the customer is seen as someone to be served; in the corporate model the customer is simply a source of revenue. In the utility model a certain level of redundancy is seen as system backup; in the corporate model it is seen as waste. In the utility model a financial surplus is something to be invested in innovation and improved services; in the corporate model shareholders have the first call.
If that sounds old-fashioned, it is, because it’s based on the idea that competition in the form of having a number of firms in a market is a means of achieving lower prices and innovation. It is not an end in itself and there can be other ways to achieve those same ends.
How Australians are living – the HILDA Survey
Contrary to the idea that we’ve all been doing it tough since the pandemic, our material living standards are holding up, but our satisfaction with life, indicated by levels of reported psychological distress, is falling.
Every year the Household, Income and Labour Dynamics in Australia Survey brings more data about the ways Australians are living, drawing on an ever-lengthening longitudinal database.
The 2025 survey covers 10 topics. The first 3 – households and family life, household economic wellbeing, and the labour market – are a standard set that tend to confirm what is revealed in regular ABS statistics. The other 7 topics covered this year – retirement, housing insurance, bodily pain, psychological distress, blood donation, friendships and time stress – cover data that one not might find elsewhere, and provide extra insights into our wellbeing.
Households are changing – we’re having fewer children, households are getting smaller, men’s and women’s roles in work and in households are converging, as are men’s and women’s incomes.
We are becoming increasingly relaxed about what may be called “non-traditional” lifestyles – men and women living together without marrying, rights for homosexual couples and so on.
As an aside it would be revealing if Americans were asked the same set of attitudinal questions as HILDA puts to Australians, because it is hard to imagine 78 percent of American women and 77 percent of American men agreeing that “it is alright for an unmarried couple to live together even if they have no intention of marrying”.
The rate at which we have been accepting this and other departures from “traditional” attitudes suggests it’s not just the effect of people with harder attitudes dying – a cohort effect. The evidence from HILDA is that our attitudes are changing in the direction of greater tolerance towards people’s lifestyle choices. Our agreement with the statement “homosexual couples should have the same rights as heterosexual couples” has risen by 30 percentage points in 8 years, for example.
There is not much in the HILDA data that indicates a general “cost of living crisis”, but it is clear that for the last 10 to 15 years disposable incomes have stopped growing. The pre-Covid boost fizzled out. The HILDA disposable income data, shown in the graph below, aligns with data from other sources.
The HILDA report reveals that one reason disposable incomes have flattened is that since about 2010 the average tax rates for full-time workers have risen, quite significantly.
Other HILDA data shows that the people least likely to have experienced a deterioration in their financial situation are retirees, while those most likely to have experienced a deterioration in their financial situation are young people with mortgages and children. Both carry strong messages about intergenerational equity.
In relation to public finance there is a section tracing people’s receipt of, and reliance on, government cash benefits. The data contradicts the opposition’s claim that we are becoming more reliant on government handouts: over this century so far we have become less reliant on government cash benefits.
A particularly useful feature of longitudinal studies is their ability to tell not only how many people are in poverty (a figure picked up in many snapshot surveys), but also how long people are spending in poverty. An increasing proportion of people experiencing long-term poverty is an indicator of a growing “underclass”, likely to develop into groups experiencing intergenerational poverty. HILDA data on the duration of poverty confirms that there are people with long spells in poverty, but it reveals no sign that the proportion is worsening.
Some Australians are well-housed
The less encouraging trends relate to psychological distress, and reports of social disconnection and loneliness. Reported psychological distress has risen across all age groups. It is highest and has risen most strongly among people age 15 to 24, particularly among young women. Psychological distress levels started to rise around 2015, peaked with Covid pandemic, and have hardly eased since. The better our material conditions, particularly our housing security, the less likely we are to experience psychological distress. Unsurprisingly the researchers find a close correlation between loneliness and psychological distress.
Related HILDA series show that our “perceived quantity of friends” is falling, assessed by our agreement of otherwise with the statement “I seem to have a lot of friends”. Our responses on that indicator correlate positively with our engagement in social activities and negatively with our mental health.
Although both men and women report that the number of friendships is falling, their lifetime experiences are quite different. For both men and women there is a steep fall on this indicator after around age 20, corresponding with the end of formal education, but for men it keeps dropping until around age 50 before recovering, while for women it slowly recovers over their lifetime.
The HILDA series on bodily pain goes into detail on age and gender differences in experiences of pain. The results are unsurprising: as we age we are more likely to report experiencing bodily pain. Therefore as the population ages reports of pain are likely to rise, but even when the data is age-adjusted there has been a noticeable increase in people reporting bodily pain over this century so far.
As with other data on wellbeing, it is not possible to wrap them together in one conclusion pointing to improving or deteriorating conditions, but there is a tendency for journalists and others to focus on negative indicators. A group of researchers from the University of Melbourne have a Conversation contribution concentrating on the psychological aspects of this year’s survey: Fewer friends, more time stress: the essential charts from this year’s HILDA survey.