Normally, neither governments nor economists are fans of monopolies. Monopolies restrict production to draw higher prices on what they sell. State competition authorities discourage monopolies.

Except, that is, when governments decide that a product is more bad than good. Then, the traditional results can turn upside down. Restricting output of something bad might be good!

Governments see gambling more as vice than as harmless fun. So, the TAB gets a monopoly on sports betting and Lotto New Zealand gets a monopoly on lotteries like Powerball and Keno.

Lotto’s monopoly means that tickets are not a very good bet. Lotto takes in far more money from punters than it pays out to winners. After covering its costs and paying its taxes, its profits are distributed to various worthy causes.

Making Lotto a bad bet might discourage punters from gambling more than the government might want.

If you had competing lotteries, punters would pick the one with the best payouts. Better payouts mean more punters. If gambling is bad, monopoly, in that sense, could be good.

But there is another problem with monopolies that is often forgotten. A monopoly that has no threat of being taken over by new owners can get flabby.

Firms worried about existing or potential new competitors must run a tight ship. And managers of companies that can be taken over need to worry that they might be replaced.

But state-owned businesses with no chance of take-over face none of those pressures – and Lotto New Zealand looks decidedly flabby.

I am a former Chief Financial Officer of South Australian Lotteries. Normally, a lottery’s operating costs should be no more than 4% of its total revenue. In the 2024 fiscal year, 6% of Lotto New Zealand’s revenue went to operating costs – 50% more than the benchmark. It has one hundred and twenty-three employees, more than half of whom earn more than $100,000.

If Lotto New Zealand’s costs were lower, it would have more money to pay to the government in tax or to distribute to the community groups benefitting from lottery grants.

The TAB is different. While it has a monopoly on sports betting, it auctioned the right to run the betting operation. This kind of ‘franchise auction’ encourages better performance.

Government has no natural advantage in running a lottery. Competitive pressure to be the lotto operator could produce better results – and make everyone a winner.