Community Affairs Legislation Committee - 29 May 2012

Senator Richard Di Natale asked questions in this hearing about the government's proposed poker machine reforms.

Senator DI NATALE: Following on from the trial in the ACT, have we got an estimate of the total cost of implementing the trial?
Ms Cattermole: We have the offer that was made to ClubsACT to participate in the trial, which has a number of the elements we were speaking about earlier. In addition to that there are going to be, as we mentioned earlier, some procurement exercises around infrastructure, the design methodology and the evaluation. At this stage we are making sure that we do not have estimates in the public domain because we are going to be tendering for all of those elements. It is important that we allow the market to come back to us on each of those elements without having a ballpark that is readily available.
Senator DI NATALE: Not even a global ballpark?
Ms Cattermole: Not at this stage.
Senator DI NATALE: We discussed the issue of compensation at the last estimates. Have you developed any clear criteria about how we are going to provide compensation? At the last estimates it was a fairly general answer.
Ms Cattermole: The answer is the same. It is part of the offer that was made to clubs to participate. There is a participation fee and then there are some other elements around the venue assistance, which I can step you through if you wish.
Senator DI NATALE: The basis of the participation fee is just a proportion of revenue?
Ms Cattermole: That is correct.
Ms Carroll: It is 20 per cent of the 2010-11 revenue for the clubs.
Senator DI NATALE: Okay. I do not think I had that figure last time. It is 20 per cent of the—
Ms Carroll: The 2010-11.
Senator DI NATALE: Thank you. Have you developed any documentation that you are going to be providing to clubs who participate?
Ms Carroll: We have been developing the materials and working internally and with the ACT government. So those materials are being developed on an ongoing basis.
Senator DI NATALE: Is there anything that we are able to see?
Ms Carroll: Not as yet because we are still in negotiations.
Senator DI NATALE: There was an issue about Labor Party affiliated clubs participating in the trial. I cannot remember where that got to. Are there any Labor Party affiliated clubs that will be participating?
Ms Cattermole: To the extent that we are hoping that all clubs in the ACT will participate, the answer to that would be yes.
Senator DI NATALE: So there were not any exclusions designed around those clubs in particular?
Ms Cattermole: We sought external advice from an external accounting firm on the means by which we could ensure that any perceived issues that might arise were appropriately covered off. We have had that advice and we will be adopting everything that is in it.
Senator DI NATALE: That advice was?
Ms Cattermole: There were a range of matters.
Ms Carroll: There were a range of things about the accounting treatment and those sorts of things.
Ms Cattermole: For example, that clubs would sign a statutory declaration to make clear that that funding was reserved only for the purposes of the trial. Another aspect of the advice was that we should maintain separate bank accounts to quarantine any of the funds related to the trial. It is that kind of thing—a range of financial and accounting mechanisms that would ensure that it is transparent. We will also have an independent financial auditor auditing the trial. Obviously we would be seeking to ensure that all of those things are audited— submitting of quarterly accounts and so on. There are a whole range of things, all of which will also be transparent and auditable.
Senator DI NATALE: Do we have an estimate of what it is going to cost us to make every machine in the country mandatory precommitment ready by 2016?
Ms Cattermole: There are probably two elements in terms of the legislation. From the end of 2013, manufacturers will be required to make that capability. They will build that capability into the new machines. In terms of the—
Senator DI NATALE: Have we got a cost that is essentially the cost that has been deferred to industry?
Ms Cattermole: I do not have anything that I can provide to you immediately. Certainly, manufacturers have indicated that they are in a position to be able to respond and build that capability within that time frame. In addition there is the building of the precommitment system through the legislation. For the regulatory components of that there will be a supervisory levy to administer the act and that will cover the regulation of that component.
Senator DI NATALE: How much is the networking going to cost?
Ms Carroll: Most states and territories have their central monitoring systems, so some of the central monitoring systems would be easily able to—for example, in Queensland, as we understand it—adapt to the precommitment environment.
Senator DI NATALE: There are other states that are not quite—
Ms Carroll: That is right. Victoria, which is already moving to a precommitment environment, will be ready. In the other jurisdictions that do not have sophisticated central monitoring systems, we understand that most of them are in the process. For example, we understand that New South Wales is due to go out to tender for its central monitoring system in the next year or so.
Senator DI NATALE: Who bears that cost? That will be up to each individual jurisdiction?
Ms Carroll: Yes. Obviously they bear the upfront costs but they have a mechanism for the venues to actually pay some fee into that central monitoring system.
Senator DI NATALE: Do we have an estimate of what it is going to cost the industry, a total estimate by 2016 to have every new machine mandatory precommitment ready? Do we have an estimate of what that would cost the industry?
Ms Carroll: We do not at the moment.
Ms Cattermole: We will take that on notice.
Senator DI NATALE: I want to go to the issue of dollar bets. We raised it at the last estimates. Have you done any work on what it would cost to implement dollar bets on every new machine—per machine?
Ms Cattermole: We spoke about this before. Perhaps I can go through it further. The analysis we have done is the same one we have spoken about before. That was a cost around what one would need to do to make all the changes to the software that would be needed to implement dollar bets in Australia. To be clear, that is a software change. On the advice that we have had, it is a change that would need to be made to every game that currently exists, as there is no game currently in existence that would meet those software requirements. Our advice also is that those software changes could only be made at the machine. They could not be made remotely.
As we might have talked about before, there has been some discussion, even by the Productivity Commission, that it might be possible for that to be done remotely. Our advice is that it could only be done at each machine and that it would require a software change to each game on each machine. And it is on that basis that our costing was done. It is on the same basis now, which is that we know there is a per-software amount to make that change, multiplied by the number of machines that would need to be changed. That is essentially every machine.
Senator DI NATALE: The comparison between making new machines dollar bet ready versus mandatory precommitment ready?
Ms Cattermole: They are quite different because the mandatory precommitment capability is a capability in relation to the machine. In terms of manufacturers making changes, that is a change to the way they will make the machines themselves. In relation to preparing for dollar bets, to have dollar bet capability as a maximum, it is a change to software. So it is quite a different process.
Senator DI NATALE: I recognise that. I am interested in the cost.
Ms Cattermole: The cost estimate is the one that we have—
Senator DI NATALE: Per machine? Per new machine? I am interested in whether there is a comparison between making a new machine mandatory precommitment ready versus making it dollar bet ready.
Ms Carroll: Essentially, as we understand it, the new machine could be made precommitment ready and then, if the software were already available and approved, that software could be designed to operate with a new machine. We could take on notice having a look at the question you are asking, but we do not have in front of us costings that go to those particular components.
Senator DI NATALE: One of the things we talked about at the last estimates was the question of a time line. In fact we now have a time line of 2016. Has there been any work done on making all machines dollar bet ready by 2016?
Ms Cattermole: I am not sure I can add anything more to our discussion today and last time. In terms of the dollar bet issue, we have costed what we know. What we know are the things I have just described. There are real challenges with costing around a software replacement cycle, because the advice we have had is that it is incredibly hard to find such a cycle in which software changes are done. There is not a really obvious cyclical nature to software changes. You would have to go to each machine and change each piece of software that exists on each machine. That is the advice.
Senator DI NATALE: Who was the advice provided by?
Ms Cattermole: What we have costed is what we know.
Senator DI NATALE: Who was the advice provided by?
Ms Cattermole: We have trawled through all of the areas that we could possibly seek advice from. We have an independent technical expert. We have also sought advice from industry. We held some workshops on low intensity late last year that included a range of industry and regulatory experts. Obviously the Productivity Commission itself made commentary on dollar bets. We have looked at as many of the information sources as we could and have sought advice in relation to that. The totality of what we have been able to ascertain is what I have described.
Senator DI NATALE: I do not understand that the Productivity Commission could come up with the recommendation that the dollar bets can be phased in over time and yet you are saying there is no cycle upon which you could phase in dollar bets?
Ms Carroll: The key is that what the industry tells us is that there is not a natural cycle. What we do understand also from the industry and from state and territory governments is that there is a software approval cycle that happens through the state regulatory systems. Each new piece of software has to go through an approval process with the state and territory government regulators. As we understand it, at present there are about 2,000 games approved each year. In thinking about needing to have new games approved, there is also a mechanism for those games that have to go through an approval process et cetera. There are no simple logistics to say that there is a replacement cycle every two years, five years or 10 years. You can therefore account against the cost. As Ms Cattermole said, we have come up with the amount which we discussed last time on the dollar bets, which was primarily focused around software changes. We have not factored any hardware changes into those costs. Some machines would not actually be able to take a new piece of software because they would be too old to take the new software. What we have been trying to do is to think about the different component parts. It is not an easy piece of work.
Senator DI NATALE: It was very easy in Victoria. The bet limits in Victoria were dropped from $10 to $5— very quickly, very straightforwardly and with no outcry from industry. I am still very confused as to why it is such a challenge to be able to do that at a national level and yet in Victoria we managed to achieve that with a minimum of fuss and no outcry from industry. We have old machines in Victoria. Can you explain why it is so difficult to go from $5 to $1 and yet it was very easy to go from $10 to $5?
Mr Glare: With the Victorian example, our advice is that it was relatively simple because the $5 maximum bet games already existed on those machines, whereas, as Ms Cattermole said earlier, our advice is that currently there are no games in Australia that are capable of taking $1 bets. In Victoria the $5 game already existed in a lot of machines, so it was a much reduced workload.
Senator DI NATALE: I think I am out of time. I will put the rest on notice.