Some Hokey Pokey on Pokies

 

A big story today is the news that poker machine revenue in Queensland rose, in annual terms, by 7% in May and 12% in June.

In a wonderful case of correlation equals causation, the Federal Government’s compensation for the carbon tax is being cited as the reason for this lift, with people allegedly spending their “windfall” on pokies rather than using it for something else.  I see the price of eggs in China rose in May and June – was that a result of the carbon tax compensation?

A quick look at a few facts suggests that the rise in poker machine revenue may have little to do with the carbon tax compensation.

According to the official retail trade data from the ABS (a very good proxy for people’s propensity to spend or save), retail spending in Queensland rose by 6% in the year to May (5.6% in original terms, but I’ve rounded it to match the numbers used in the media today).  This is just 1% shy of the growth in pokie turnover in the comparable period.  Statistically, the different between pokie turnover and retail spending is nothing.

The June retail spending data are not released yet, but I’ve got a sneaking suspicion that the annual growth in Queensland will be close to double digits.  We’ll see.

What is also ignored in the analysis today is the fact that household cash flows in the May and June period got a nice boost by a sharp fall in petrol prices and interest rate cuts from the RBA.  I have no idea whether the extra dollars in people’s pockets as a result of these two events saw people drop a few extra dollars into pokies or not… but neither does Senator Xenophon or anyone else.

Suffice to say, the link between the carbon tax compensation payment and the rise in pokie revenue may simply be coincidental.

I must loudly and clearly state that poker machines are a horrid invention and the less people use them, the better.  Like any dreadful disease, I would love to see them disappear form the face of the earth – this is no defence of poker machines, rather a defence of common sense economics.

My quite ridiculous spoof article a few days ago that linked the $28 billion rise in household wealth due to higher house prices in the fortnight since the carbon tax started was a case in point.   There is no correlation between the carbon tax and house prices and therefore household wealth.

None.  Zero.  Zilch.

I hope the people who presented a quite strong critique of that article apply the same blow torch to yet-to-be-proven correlations between the carbon tax compensation and the rise in poker machine turnover.

It might be true that people in Queensland and elsewhere did spend a disproportionate amount of their carbon tax compensation on poker machines… but then again, it might not.

In the High Court of economics, I need more evidence before I make a decision either way.