How Windfall Income Increases Gambling at Poker Machines

Hielke Buddelmeyer and Kyle Peyton

The Economic Record, 2014, vol. 90, issue 289, 236-248

Abstract: type="main" xml:id="ecor12094-abs-0001">

In December 2008 and March–April 2009, the Australian Government used fiscal stimulus as a short-run economic stabilisation tool for the first time since the 1990s. In May–June 2012, households received lump-sum cheques as compensation for the introduction of the Carbon Tax scheduled for 1 July 2012. This article examines the relationship between these financial windfalls and spending at electronic gaming machines (EGMs) using data from 62 local government areas in Victoria, Australia. The results show large increases in spending at EGMs during the periods when Australian households received economic stimulus cheques. We estimate increased spending at EGMs in December 2008, for example, amounted to 1 per cent of the total stimulus for that period. These findings are consistent with behavioural models of consumption and demonstrate the relative power of framing windfall income as a bonus rather than rebate, especially when targeted at particular sociodemographic subpopulations. Our analysis also calls into question the conventional wisdom that large portions of government payments end up in poker machines.

Date: 2014
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