Racing industry 'must prepare for TAB sale'
The “fragile” WA racing industry must prepare for the likely sale of the TAB by immediately engaging with the State Government to ensure its financial future, according to an independent report to be released today.
Ray Gunston, who was previously enlisted to guide Essendon through its AFL supplements scandal, is in Perth outlining his industry-funded report into the potential privatisation of the TAB.
He said increased competition in the Australian wagering market meant the State’s three codes must prepare for change.
“It's still a government decision, but ultimately it's likely - if it's not now – that at some stage they will say, 'Well it's probably not the asset for us to be in',” Mr Gunston said.
“It's probably a financial motivation at the moment given where they're at. The industry needs to know what it needs into a privatisation process to ensure it's sustainable.”
The former long-time chief financial officer of Victoria’s Tatts Group said his comprehensive, three-month analysis showed that while the industry was being well-managed by Racing and Wagering WA, even slight changes to its dynamic could cause serious problems.
His report was commissioned by the WA Racing Representative Group following RWWA's record annual distribution of funds to the industry of $124.19 million.
“I spent a lot of time talking to all the participants and what comes out of that is that there's not a lot of fat anywhere in the industry,” he said.
“When I use the term fragility, it's really around the fact that if you jolt that system there is no buffer for it. It's quite
clear that the industry has been dealing with increased costs well above the distribution levels. And if you look at certain parameters such as breeding and numbers of trainers, that's been declining.
“So you're in a position, fundamentally, where the industry is sort of fitted to the current funding level, but it you were to jolt that with any significant reduction to the overall funding, it's going to hurt the industry.
“For the handful who do well, there are a lot who don't and that's the fragility of the thing. It could all cave in pretty quickly.”
Mr Gunston said a concerning reality was that a handful of people who had made their wealth external from racing were strong financial contributors.
He also said the WA TAB’s over-performance – where it showed growth of 28 per cent between 2008-09 and 2012-13 compared to just 5 per cent nationally in the same period - was partly fuelled by what he described as a “catching-up” process in comparison to the rest of Australia in recent years. He anticipated that would last for up to five more years.
“That over-performance will eventually dissipate because you can't over-perform forever,” he said.
Mr Gunston said his report was designed to educate the industry on the challenges, particularly as the Government had put the potential TAB privatisation on its asset sales agenda.
While it was not his intention to recommend to the Government whether or not the TAB should be sold, he was adamant that it would be detrimental to the WA racing industry for it to consider itself a prospective buyer.
He said it was impossible to estimate a potential sale price for the TAB until the Government outlined specific details on any decision to sell.
He also warned the industry not to pre-meditate any decision on privatisation until it had effectively engaged with the government over the issue. The government also needed to be aware that shrewd buyers would be circling its asset.
Mr Gunston said he could see a model where RWWA could still manage the industry even if the TAB was privatised, as long as a solid funding model was instituted as part of any sale deal.
WA Trainers' Association president Michael Grant agreed with Mr Gunston's assessment that the “calibration” of the industry was fragile. He said he hoped the government would use the report as a trigger to engage with the industry so that both parties had a clearer understanding of what privatising the TAB would mean for them.
"We hope this is the ignition point for the government to start that engagement point with the industry,” Mr Grant said.
