Labor denies bungling Vic pokies sale

Labor denies it bungled the sale of Victoria's poker machine licences despite a report finding taxpayers were shortchanged by about $3 billion.

The auditor-general found last year's sale yielded about $3 billion less than the fair market value and there were serious shortcomings in the management of the auction.

Pubs and clubs paid $980 million to operate 27,500 poker machines over 10 years, equating to about a third of the total revenue they generate in a single year.

It also represented only about a quarter of the estimated fair market value for the electronic gaming machine (EGM) entitlements, which Acting Auditor-General Peter Frost gave a mid-point of $4.1 billion.

While the shake-up of the industry was partly designed to capture a greater share of its profits, the report found the auction conducted by the then Labor government largely failed in that area.

It blamed issues such as a lack of demand at auction and a low reserve for the failure to achieve a satisfactory financial outcome.

"Large venue operators, rather than the community, are the beneficiaries of this windfall gain," the report said.

Labor maintains it was dealt a dud hand by having to make significant compromises with the then coalition opposition to get a deal to break up the duopoly between Tatts and Tabcorp through parliament.

Labor's gaming spokesman Martin Pakula said the offer to buy the licences pre-auction - taken up by 248 of 391 clubs - had a significant impact on the auction's final value.

"When you take out something like two-thirds of the bidders from the auction process, undoubtedly that's going to have an impact on the total value of the process at the end," he told reporters.

Mr Pakula said Treasury estimated the auction would achieve $1 billion and the auditor-general's $4 billion estimate would have been expected if the duopoly was maintained.

Mr Pakula maintained the value to taxpayers went beyond the $1 billion upfront payment as the tax rate on each machine was also increased.

Premier Ted Baillieu said it was pure incompetence by Labor that led to one of the biggest financial disasters in Victoria's history.

"They got it wrong, they ignored warnings, they've cost taxpayers $3 billion," Mr Baillieu told reporters.

"This is one of the greatest financial debacles in Victoria's history and this falls directly to the Labor front bench and three quarters of the current leadership of the opposition."

Mr Baillieu said it was "absolute nonsense" for Labor to blame the coalition for its role in the industry overhaul.

The report found there were a series of shortcomings in the project's management, laying much of the blame on the Department of Justice (DoJ).

Mr Baillieu said he had full confidence in DoJ secretary Penny Armytage and blamed Labor ministers rather than departmental officials.

The Australian Hotels Association (AHA) said the auditor-general was "commercially naive" to think the auction could fetch $4 billion, in light of the economic conditions and uncertainty of future gaming machine revenues.

"The government did well to extract almost $1 billion through the auction," AHA Victoria chief executive officer Brian Kearney said.