Australians are now turning to illegal leaf tobacco to tackle the cost of living crisis and avoid higher cigarette taxes, says a professor.
Australia’s new Bureau of Statistics released data this week showing spending on alcoholic beverages and tobacco fell 4 per cent in the year to July, based on bank transaction data.
This happened even before excise duties on cigarettes were increased.
This contradicts orthodox economic theory that demand is inelastic, that spending on addictive products stays the same no matter how much the price rises.
But Mark Wooden, an economics professor at the University of Melbourne who has studied drug addiction among long-term homeless people, said smokers were more likely to be poor and turned to cheaper substitutes like leaf tobacco, some of which is sold illegally or grown without a licence. .
“You will find that the most inelastic demand will be among the poorest in our community who smoke the most,” he told Daily Mail Australia.
“They find ways to circumvent these expenses.
“For someone who smokes heavily and has been smoking for the last 40 years of their life, it’s very hard to quit.”
Australians are now turning to illegal leaf tobacco to tackle the cost of living crisis and avoid a cigarette tax hike, says a professor (stock image)
Australia’s new Bureau of Statistics released data this week showing spending on alcoholic beverages and tobacco fell 4 per cent in the year to July, based on bank transaction data (image of stock)
With ABS data based on online banking transactions, linked to instant payments, it is likely that the data did not collect illegal cash transactions for illegal chops.
“Who knows how this is reflected in these data sources? It’s illegal, so I guess it’s not even in there,” Professor Wooden said.
READ MORE: Minister of Health announces ban on flavored vapes
The sale of flavored vapes will be banned in Australia as part of a massive crackdown on e-cigarettes.
Federal Health Minister Mark Butler announced a ban on flavored vapes, limiting them to prescription pharmacies.
It is illegal to grow or manufacture tobacco products without a license, with the Australian Revenue Service prohibiting their cultivation for personal use.
In previous months, spending on alcohol and tobacco had increased, rising 1 percent a year in May and 2.4 percent in the year to June.
“Obviously we don’t really see alcohol and tobacco as essential, but for the person who is addicted to it, it is essential,” Professor Wooden said.
But it appears consumers changed their spending on cigarettes even before tobacco taxes rose on September 1, when excise duty per stick weighing less than 0.8 grams rose to $1.24335, up $1.16435.
For a pack of 30 cigarettes, that works out to an extra $2.37.
“If you smoke, chances are that when the price goes up you’ll get bored and then you’ll keep smoking and get poorer,” Professor Wooden said.
“Tobacco taxes are extremely regressive, they really hurt the poor.
“But, of course, it’s a socially unacceptable activity, so we don’t care about them as a society because we think we’re helping them.”
Professor Wooden said a higher excise duty on cigarettes was more likely to deter young people than to encourage long-time smokers to quit.
“What we’re really doing with these taxes is maybe preventing new people from adopting them,” he said.
“Young people: they have not become as dependent, it will represent a much heavier tax for them, they have less access to alternatives, to cheap circuits – to local tobacco.”
A pack of 25 Marlboro Reds now costs $60.95 at Coles, while a carton of Chesterfield Gold costs $287.
Tobacco taxes will be increased by 5% per year for the next three years, starting September 1, in addition to regular indexation to inflation, in an effort to discourage people from taking up the habit death from lung cancer.
Health Minister Mark Butler announced the measure in the May budget, aimed at raising $3.3 billion over four years, including $290 million in GST payments that will go to states and territories.
However, leaf tobacco is not subject to the same excise duty as cigarettes, but the government has indicated that it wants a uniform approach to tobacco taxation.
Australians continue to spend more on basic necessities, with food spending up 1.5 per cent in the year to July, while healthcare costs climbed 6.2 per cent.
Australian Bureau of Statistics data released this week shows spending on alcoholic beverages and tobacco fell 4% in the year to July, based on bank transaction data (pictured, a bar in Sydney).
In previous months, spending on alcohol and tobacco increased, rising 1 percent a year in May and 2.4 percent in the year to June.
The Reserve Bank of Australia on Tuesday left interest rates unchanged at 4.1 percent, their highest level in 11 years, for the third consecutive month.
But the 12 interest rate hikes since May 2022 have led to a 63 percent increase in monthly mortgage repayments for a variable loan.
Rate hikes are having some effect on inflation, with the consumer price index moderating in July to an annual rate of 4.9 percent, the lowest level since February 2022 and down from 5.4 percent from June, based on the official monthly measurement.
Inflation is still well above the Reserve Bank’s target of 2 to 3 percent, but is well below the December 2022 level of 8.4 percent.