Gambling with stimulus payments: feeding gaming machines with federal dollars

In late 2008 and early 2009 the Australian Federal Government introduced a series of economic stimulus packages designed to maintain consumer spending in the early days of the Great Recession. When these packages were initiated the media suggested that the wide-spread availability of electronic gaming machines (EGMs, e.g. slot machines, poker machines, video lottery terminals) in Australia would result in stimulating the EGMs. Using state level monthly data we estimate that the stimulus packages led to an increase of 26 % in EGM revenues. This also resulted in over $60 million in additional tax revenue for State Governments. We also estimate a short-run aggregate income demand elasticity for EGMs to be approximately 2.