Tobacco costs the Australian economy more than it's worth

24 October 2009

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A new report commissioned by the Cancer Council Western Australia debunks tobacco industry arguments that higher tobacco taxes will be detrimental to the Australian economy.

Weighing the evidence: Evaluating the social benefits and costs of the Australian tobacco industry is the first independent analysis of economic arguments the tobacco industry has put forward in its defence over many decades.

Director of the Cancer Council Western Australia's Tobacco Program, Denise Sullivan said the report assessed the economic impact of both the tobacco industry and public health measures aimed at reducing tobacco use.

"The tobacco industry frequently employs economic scare tactics when policymakers are considering measures for reducing demand for tobacco, such as increases in taxes on the sale of tobacco," Ms Sullivan said.

"This report provides the evidence that there would be few, if any negative economic consequences in further measures to curb tobacco consumption in Australia."

The report was produced by internationally renowned health economists, Professors David Collins and Helen Lapsley.

"Overall, the study found that the tobacco industry provides no net gains to the Australian economy, and that tobacco control measures do not cause economic harm," Professor Lapsley said.

"A fall in demand for tobacco, while significantly affecting the tobacco industry, will have very little, if any, negative economic impact. Indeed, it is possible that the overall impact would be mildly positive."

Professor Collins said the tobacco industry analyses of their contribution to the Australian economy were flawed.

"The industry fails to take into account healthcare costs imposed on the community for the treatment of illnesses caused by tobacco," he said. The report has shown that the economic contribution of the tobacco industry is around $1 billion a year, substantially less than the estimated social costs of smoking which is a staggering $31 billion a year.

"Clearly tobacco tax revenue paid by the tobacco industry itself does not cover the social costs of tobacco consumption," Professor Collins said. Professor Lapsley said the number of jobs dependent on the tobacco industry was also overstated.

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