Prime Minister Julia Gillard says pushing ahead with Andrew Wilkie's planned poker machine reforms would have failed the people who most need help with their gambling addiction.
But the prime minister's decision to snub the Tasmanian independent MP and run a one-year technology trial in the ACT has taken her government's parliamentary numbers back to a knife-edge.
Ms Gillard announced at the weekend that to address problem gambling the government will pay ACT clubs $37.1 million from February 2013 to host the trial, cover the cost of mandatory pre-commitment technology on poker machines and boost counselling funding.
The decision broke a signed agreement with Mr Wilkie, which helped deliver her minority government, to legislate for a national rollout of mandatory pre-commitment technology by May 8 this year.
Mr Wilkie has now withdrawn his support for the government, but said he would only back a no confidence motion against Labor in the case of serious misconduct.
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Ms Gillard's decision was welcomed by nervous Labor backbenchers who faced a backlash from club patrons.
"We can have all sorts of political argy-bargy and end up with nothing," Ms Gillard told ABC Radio on Monday.
"Or we could get a piece of legislation through the parliament that will deliver real change."
Mr Wilkie said he did not think Ms Gillard ever intended to honour her agreement with him, or did enough to convince MPs of his plan's merits.
Last week he met with WA National Tony Crook, who told him the government had only approached him once about supporting the legislation.
"He had barely been lobbied," Mr Wilkie told ABC Radio on Monday.
"So there is a prima facie case that the government was never going to honour it."
He said the reforms would still make a difference.
However, he will cease his weekly catch-ups with Ms Gillard and warned the government to tread carefully.
"It's a much more fragile one-seat majority than it had previously, there's been much said about (Speaker) Peter Slipper, (Labor backbencher) Craig Thomson - something else could happen," he said.
"The government would be quite foolish to burn me."
Mr Thomson, who faces police and Fair Work Australia investigations into his credit card use as a union official, said Mr Wilkie's plan would have "flown in the face of proper policy-making".
Opposition Leader Tony Abbott said the broken deal was "an act of betrayal".
"The prime minister began last year with an act of betrayal over the carbon tax and she's begun this year with an act of betrayal over poker machines," Mr Abbott told Macquarie radio.
He said the agreement with Mr Wilkie had been a "quasi-legal contract".
"For her just to tear it up because she knew she would face a leadership challenge from Kevin Rudd if she went ahead with it ... shows how completely untrustworthy, how utterly unreliable this prime minister is," he said."
