KEY POINTS:
Hollywood legend has it that Margaret Dumont, the magnificent straight-woman in the Marx Brothers comedies, played her part so brilliantly because she never understood most of the jokes that were bounced off her character by Groucho. Among the more memorable lines was the concluding throwaway from Groucho at the end of A Day at the Races. Paraphrasing, Groucho turns to Dumont and declares: "Marry me my dear and I will never look at another horse." It's the ultimate Marx Brothers reflection on gambling and domesticity.
In Australian life, gambling is perhaps the only subject that can provide headlines in either business or politics or sport. Racing, in particular, can even dominate the social pages, especially on Melbourne Cup Day which, to borrow Mark Twain's accurate summation, "blots out" all other activity.
Perhaps this explains why so many Australian journalists are to be found at race meetings, watching Kiwi horses take home the prizes.
In Australia in recent times, there have been three great gambling stories, at the point where politics, business and sport intersect.
The first concerns online betting company Betfair.
A recent decision of the Iemma Labor Government awarded Betfair the right to establish in New South Wales.
The Tasmanian Labor Government had granted this concession a year or two ago and so the NSW Government argued that it was simply bringing the global betting service, in which James Packer's PBL holds a commercial interest, under the jurisdiction of state gaming laws.
But interest was sparked by what had been discussed at a private dinner between the Premier and Packer. And, the critics asked, what of the Premier's two close mentors and friends, Graham Richardson and Peter Barron, both of whom have had associations with PBL over the years? Pressure in Parliament has resulted in a review, with the Government saying Betfair will have to "stack up". The story has everything: power, money, influence (real or perceived or alleged), politics and punting.
But the Premier can legitimately point to another decision of the NSW Government, also related to gambling, which occurred only during the past 10 days and which seems to have gone against PBL. Star City, Sydney's Casino, has been guaranteed exclusive casino rights for another decade for an upfront payment of A$100 million ($119 million).
Strong rumours were circulating that PBL wanted to establish a second casino in NSW, perhaps in the Hunter Valley or up on the Tweed River on the far north coast. It all came to naught, while the State Treasury had a windfall.
For gaming is big business in NSW.
TAB operations turnover is some A$5 billion, with bookmaking for sports betting now approaching A$100 million and for racing about A$600 million.
For gaming, the figures are even more striking. Club gaming has an assessed profit of A$3.5 billion, mostly from poker machines, with assessable tax calculated at nearly A$600 million.
Tax revenue was more than A$400 million in 2006 from hotel gaming, off an assessed profit of A$1.6 billion. And from the Star City Casino, gross gaming revenue is more than A$600 million.
No wonder the Treasury takes such a close and abiding interest in policy.
This brings us to the Melbourne Cup and the link with the Australian sharemarket. Remarkably, the Cup appears to have an impact on investor behaviour and thereby on economic activity.
In a recent column in the Australian, Alan Woods drew attention to a paper published by economist Andrew Worthington in June in Economic Papers. It was entitled "National Exuberance: A Note on the Melbourne Cup Effect in Australian Stock Returns". For a dry economic journal, this was intriguing research.
Worthington endeavours to take out of his calculation other stockmarket anomalies which have been identified, such as the effect of the different days of the week, to arrive at the Cup's impact. On the basis of closing stock prices over the years 1961 to 2005, his findings are fascinating. As Woods wrote: "Stockmarket returns on Melbourne Cup Day are not only significantly higher than on any other Tuesday in November, but also higher than any other Tuesday of the year.
"In short, the Melbourne Cup is associated with abnormally high returns on the Australian Stock Exchange. On Melbourne Cup Day in 2005 alone, the Cup was associated with abnormal gains of more than A$2 billion."
It's interesting to speculate on the reasons for this, but Worthington essentially comes down to the Cup exuberance factor, leading Australians to punt not only at Flemington but on other possibilities as well.
It is a truism, however trite, that Australia remains a nation of gamblers: at the track, in the markets and even among leading politicians.
This brings us to the biggest gamble of all in very recent Australian history. This was the Howard Government's decision to punt during the election campaign on the Reserve Bank's deliberations on interest rates. Interest rates have become the third rail of Australian politics - electrified and deadly.
To recap: In 2004 John Howard promised to keep interest rates low. He continues to argue that his Government has done a better job than Labor alternatives, even though interest rates hit 22 per cent when he was Treasurer under Malcolm Fraser. Interest rates are an issue now more broadly interpreted by the electorate as an indicator of economic management.
On Tuesday, Melbourne Cup Day, the Reserve Bank met. Its decision was announced on Wednesday and interest rates have again risen by 0.25 percentage points to bring the cash rate to 6.75 per cent. For a Government struggling to survive, this is grim news indeed.
The PM and the Treasurer are now arguing that they are best equipped to manage the economy as uncertainties loom on the horizon and as the interest rate climate deteriorates.
It's original, but the punters seem unconvinced, especially in the mortgage belt seats like Dobell or Robertson or Lindsay in NSW, where "mortgage stress" and defaults on loans have grown as political and economic issues.
As every experienced gambler knows, the House always wins over time. The taxman wins in any gaming or racing contest. It is for this reason that states and territories depend so heavily upon gaming revenue.
On interest rates, the Reserve Bank won this week by demonstrating its independence in lifting rates even in an election year. How big a loss its decision will prove for the Howard Government is yet to be seen. But Australians do not have long to wait.
Howard backed Mahler in the Melbourne Cup, which came in third. He suggested mischievously that Kevin Rudd should pursue "me too" politics and do likewise.
Rudd's original selection was scratched, whereupon he drew a replacement starter in a sweep while campaigning and then backed it to win with a $10 bet. The horse was Efficient, the winner. Luck is indeed a fortune.
* Stephen Loosley, a former federal president of the Labor Party and Australian senator, chairs business advocacy group Committee for Sydney
