What’s the problem?
Tobacco consumption continues to have serious health and economic impacts for individuals, their families and society.
Each year in Australia tobacco still kills more than 15,000 people and has more than $31.5 billion in health and economic costs.
Results from the 2013 National Drug Strategy Household Survey show approximately 12.8 per cent of Australians - or around 2.5 million people - smoke daily.
The costs of smoking also continue to weigh down on the economy and on the budget through its adverse health effects and associated costs to the healthcare system.
The $31.5 billion in economic and social costs is more than triple the amount of revenue raised by the Commonwealth from tobacco excise, which stood at around $8.3 billion for the last financial year.
Under the previous Labor Government, as part of the National Tobacco Strategy 2012-2018 COAG committed to reduce the national adult daily smoking rate to 10 per cent by 2018 and halve the Aboriginal and Torres Strait Islander adult daily smoking rate (from 47.7 per cent in 2008).
Significant progress has been made. In 2007-08 the baseline in the agreement was a national daily smoking rate of 19.1 per cent of the population. Now, 12.8 per cent of Australian adults smoke on a daily basis.
Labor’s proud history in tackling tobacco
Australia has been a world leader in tobacco control, pioneering measures such as advertising bans and plain packaging that have driven smoking rates to record lows, and our policies being adopted as best practice internationally.
World Leading Plain Packaging Reform
Tobacco consumption has fallen 16.8 per cent in the almost three years since Labor’s plain packaging laws came into effect.
According to the latest National Drug Strategy Household Survey, daily smoking declined significantly between 2010 and 2014, from 15.1 per cent to 12.8 per cent.
Labor stared down the ferocious legal attacks from big tobacco, and this is now inspiring the rest of the world to follow this major advance in public health. Britain and Ireland are following Australia’s lead and have voted to introduce plain packaging from May next year with the entire European Union expected to soon follow.
Evidence suggests that increasing the price of a packet of cigarettes is amongst the most effective ways to decrease rates of smoking, especially for younger Australians. This is why when in Government Labor introduced four 12.5 per cent excise increments from 1 December 2013. Combined with plain packaging measures these increases will save thousands of Australian lives.
Why further changes are needed
While the excise and taxation contribution to cigarette costs have increased following Labor’s tobacco excise measures in office, they remain well below other comparable nations.
The World Health Organisation considers that raising tobacco taxes to more than 75 per cent of the retail price for tobacco products is amongst the most effective and cost-effective tobacco control interventions
Figure 1 Global cigarette taxation comparison – selected countries
Note: this data is drawn from the most recent international WHO comparison available. It does not take into account the already legislated 12.5 per cent increase in Australian tobacco excise. This is likely to take Australia’s taxation percentage to approximately 63 percent.
WHO calculates that Australia’s tax contribution was 57 per cent of the retail price of a packet of cigarettes in 2014. The tax contribution in Australia to a pack of cigarettes remains below that of the United Kingdom, France, and New Zealand and well below the at least 75 per cent that is levied by 33 other countries globally.
A Shorten Labor Government will further curtail Australia’s biggest preventable cause of disease and death by raising tobacco excise to bring it in line with world’s best practice.
If a Shorten Labor Government is successful at the next election Labor will introduce four annual 12.5 per cent increases in excise on:
- 1 September 2017;
- 1 September 2018;
- 1 September 2019; and
- 1 September 2020.
Following the four 12.5 per cent increases in excise, taxation as a proportion of the retail price of a packet of cigarettes will sit at around the World Health Organisation’s target of 75 per cent of the retail price.
Estimates suggest that in Australia these measures should lead to tens of thousands more Australians quitting smoking and that number again will smoke less than they otherwise would for every excise increase contained in this package.
Targeting revenue measures
Labor’s approach realises that raising the relative cost of something that is unhealthy – like smoking – will reduce its use.
By increasing excise rates on tobacco, Australians, especially younger Australians, will be further encouraged to never take up smoking which imposes $31.5 billion in social and economic costs in Australia each and every year.
The Abbott/Turnbull Government is offering an alternative – a GST that will raise the cost of things like fresh food, health and education, all things which generate positive spillovers for the economy and society at a whole.
Labor’s approach is about using the tax system to promote, not penalise, healthy behaviour.
The policy has been independently costed by the Parliamentary Budget Office to raise $3.8 billion over the current forward estimate period and $47.7 billion over the medium term.
When providing its costings, the PBO considered behavioural changes that are likely to result from the change in policy.
If you smoke and would like to quit, call the Quitline today on 13 78 48.
 Based on Parliamentary Budget Office assumptions and International Agency for Research on Cancer research which indicates that roughly half of the quantity impact of price on tobacco changes results in quitting, and roughly half results in remaining smokers smoking less frequently.