Poker machines play a major role in redistributing income away from those with the least and towards those with the most. According to the Productivity Commission the social cost of poker machines is approximately $4.7 billion per year. Perversely, those who profit most from this most inequitable of income distribution devices often justify the existing regulatory regime on the basis that a small portion of the money lost in poker machines is spent on building sporting and community facilities in some areas. Just why the money lost by problem gamblers should be the primary source of revenue for improving sporting ovals is, however, typically left unsaid.

A number of inquiries have recommended reform to the way poker machines are regulated in Australia in recent years however the election of the minority Gillard Government in 2010 gave impetus to such calls for change with Senator Nick Xenophon, Andrew Wilkie and Senator Richard Di Natale all supporting specific reform proposals. Perhaps unsurprisingly, the gambling industry has responded more critically to proposals to reduce the money lost in poker machines than the representatives of the disadvantaged communities that the machines are alleged to contribute to. Indeed, the gambling industry has suggested that the introduction of reforms such as 'mandatory pre-commitment' technology or setting a maximum poker machine bet a $1 would cost between $2.5 and $5 billion to implement.

This paper argues that such estimates, when linked to the actual reforms being proposed, are so exaggerated as to be fanciful. The paper begins with a brief overview of the poker machine market in Australia. The second section of the paper outlines the methodology on which the $5 billion cost estimate is based. The third section provides a critique of the method used by supporters of the gambling industry to generate their $5 billion estimate. The final section provides new estimates of the likely cost of the proposed poker machine reforms and concludes that the likely cost of policy reform would be around one tenth of that being suggested by some opponents of gambling reform.