The Impact of Vertical Fiscal Imbalance on Gambling Policies in New South Wales, Australia: The Rise of the Poker Machine

ABSTRACT This study traces how gambling in Australia changed from a simple form of leisure, enjoyed by all social classes in colonial times, to a billion‐dollar industry driven by political and economic imperatives. Using a case study, it links vertical fiscal imbalance (VFI), caused by changes to the state‐federal taxation structure, to the development of the New South Wales (NSW) government's ongoing reliance on gambling taxation, especially via the liberalisation of poker machines. It is argued that, as revenue sources tightened after the Second World War, the rush to poker machine gambling taxation accelerated, thereby creating a pattern of relying on such income to address state revenue shortfalls, that have seldom been linked to VFI and subsequent gambling policies. Drawing on a range of primary sources, including official Hansard records from parliamentary debates, media reports and industry publications, this analysis makes a unique contribution to the history of the political economy of gambling in Australia. Importantly, it aims to provide new insights into the state's role in addressing current policy failures in reducing poker machine gambling harm in NSW and suggests that a change in federal–state funding arrangements is required to reduce VFI and prevent gambling‐related harm.