September 01, 2009 | Graham

What is the relationship between tobacco price and consumption

The Preventative Health Taskforce has just delivered its report to the government and recommends increasing the price of tobacco.
Sounds more or less reasonable to me on economic principles, except that I do know that demand for tobacco is “inelastic”, which is a fancy way of saying it doesn’t respond well to price signals.
Then while driving home I heard one of the experts on Australia Talks complain that out of an unnamed 18 countries Australia has the 16th cheapest cigarettes.
Run that by me again. I thought I knew that Australia had one of the lowest smoking levels in the developed world, and if that is the case at the same time that we have some of the cheapest cigarettes, why the level of confidence amongst “health experts” that putting their price up will lead to a decline in their use? We’re seem to be doing pretty well with a low level of price.
So I decided to do some basic investigations.
WHO has compiled an “atlas” of smoking per capita as at 2002. I could only find two developed nations with smoking levels below Australia’s 19.5%. They were Sweden 19.09% and Portugal 18.7%.
The report is not available from the Taskforce’s website yet (their What’s New page was last up-dated on the 16th April) and neither it seems is their media release. There is a June report there, which you can access from this page.
So I can’t see what they have based their assessment on, but according to News the report says:

“The price of cigarettes has not kept pace with the price of many other products and services,” the report says.
“If cigarettes in Australia were to cost as much as they do in Ireland, around $20 for a pack of 30, they would still be cheaper than the price of three hours in a city parking station, a quarter of a tank of petrol in a small car, an outing to a movie with a treat from the snack bar or one music CD download. “

So I checked the smoking rate in Ireland, which is being held up as an example. Bad example, it turns out. 31.5% smoke in Ireland – a rate more than 50% higher than ours. So much for cigarettes at $20 a packet being a panacea.
I’m beginning to suspect that the relationship between smoking and the price of tobacco is pretty tenuous. To be sure you’d need to do a full survey across the world and the information doesn’t appear to be available on the web.
What I can say, looking at the web, is that the only countries who in 2002 met the aspiration of the taskforce that only 10% of the population should be smokers were:

  • Haiti 9.7%
  • Libya 4.0%
  • Nigeria 8.6%
  • Oman 8.5%
  • Rwanda 5.5%
  • Senegal 4.6%
  • UAE 9.0%

Seems to me that cultural factors and perhaps absolute poverty (rather than the cost of the product) are the things which ultimately drive cigarette smoking levels.
If I were a smoker, I’d feel persecuted by this particular recommendation.

Posted by Graham at 9:00 pm | Comments (9) |
Filed under: Australian Politics


  1. Yes. Smokers seem to be given a particularly hard time.
    What about picking on drunks for a change …and I don’t mean just teenagers.
    If Australian society has a particular problem with a drug it is alcohol not tobacco.

    Comment by Jennifer — September 1, 2009 @ 10:02 pm

  2. Possibly the worst piece of research by AB ever.

    Comment by Patrick B — September 2, 2009 @ 12:39 pm

  3. They do pick on drunks as well. I just didn’t hear any statistics that as obviously had holes in them. And junk food gets a look-in. Won’t be any dangerous things left to do soon.

    Comment by Graham Young — September 2, 2009 @ 2:01 pm

  4. Or, here’s a better idea, how about you allow people to run their lives and make choices for themselves, rather than try to impose your views onto them.
    You know, personal responsibility, that sort of thing.
    Radical suggestion I know.

    Comment by Tim Andrews — September 3, 2009 @ 8:53 am

  5. I basically agree with you Tim, although I also think one has to take into account the modelling effects of behaviour. A parent doesn’t smoke in a void, and children may well model them, so free choice is never completely free.
    Just checked-out your blog. On the Della Bosca front you might be interested in commenting on I have a number of the same concerns as you about that affair.

    Comment by Graham Young — September 3, 2009 @ 10:12 am

  6. Thanks – good discussion there; I really need to read OnlineOpinion more often I know!
    In any event, I’m planning a follow up when I have a bit more time, and to try to link together various points that have been made.

    Comment by Tim Andrews — September 3, 2009 @ 12:03 pm

  7. Here is a link to the preventative health task force report:
    Just had a glance at it but there seems to be quite a bit of evidence that raising the price of cigarettes is an effective way of reducing consumption (and the links all seemed to be to reputable journals).
    While it does seem like raising taxes on smokers is a government favourite simply because it’s the only tax increase that they will get applauded for, I think the fear of the “nanny state” around this issue is overplayed my many commentators.
    Afterall, tobacco companies have spent years and year and billions of dollars trying to convince people to smoke – it’s going to take quite a bit of effort by the health authorities to counter that, let alone overcome it.
    I was a smoker for eight years, and although I “knew” the harm I was doing I don’t think it was until I began working as a health journalist that I knew it in a really meaningful way. Maybe I was just particularly stupid, but I think that when you don’t know a lot about science or medicine it can be hard to really understand the full extent of the many dangers of smoking.

    Comment by Amy — September 12, 2009 @ 2:03 pm

  8. I think that the price of tobacco is getting high enough for people to start growing hydoponically themselves.
    Prohibition of alcohol produced moonshine and sly grog.In the 90’s recession many people brewed their own grog with the aid of brewer agents who just had the customers supply their own bottles and have a nominal involvement in the brewing process.This produced beer of a very high quality with no taxation.
    The nanny state must end soon since the more repsonibility you remove from the individual,the more irresponsible they become.We all learn through the anvil of experience and Govt as the major protector of the individual is a recipe for disaster.

    Comment by Arjay — September 12, 2009 @ 10:34 pm

  9. Thanks for the link Amy, they have got their act into gear eventually and posted the report. Haven’t had time to read it yet, but they have a high hurdle to clear to prove that increasing price is going to decrease consumption significantly, compared to addressing other factors. I’ve seen plenty of reputable academic studies in my time that aren’t worth the paper the grant application was written on. In this case, no matter what some small scale studies might say, the international comparisons say that something other than price is the main driver of tobacco consumption.

    Comment by Graham Young — September 13, 2009 @ 11:28 am

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