Tobacco fact deniers are at it again

Thu, 19 Jun 2014  |  

As far as I can tell, only two pieces in today's The Australian on the tobacco issue, but both squarely aimed at muddying the debate on the decline in the volume of tobacco consumed by households in Australia.

Let's have a look at what they are saying.

The editorial in The Australian suggests that I was "defending the effectiveness of the [plain packaging] laws' because I had "a stake in their introduction".

There are a couple of issues here. The Australian's Adam Creighton kindly sent me an email yesterday, where he asked, "did you have any involvement in the development of the plain packaging policy when you were working for Julia Gillard?" My reply was "No - I had zero input as it was a health issue, not economic."

For some reason, The Australian editorial chose to ignore this. What my stake in the issue is remains a mystery.

The other issue is that I have not defended the plain packaging laws. While I think most policies aimed at reducing smoking are worthwhile, I merely noted that the ABS data on the household consumption of tobacco highlighted, in no uncertain terms, the embarrassing errors in Christian Kerr's story in The Australian of 6 June 2014. The volume of tobacco consumed is falling. I did note the plain packaging laws, plus the excise increase, as factors that may account for the obvious fall in consumption.

The editorial then moves on to defend the industry data that was the trigger for the Kerr story – data that no one other than those working at The Australian have seen. I have asked to see the data so I can enhance my knowledge of the issue but so far, have not been able to view it. The secrecy that surrounds this industry data – which was the basis of the story – is enlightening. I suspect the data are shonky and The Australian is embarrassed to release them for fear they will raise questions about the survey sample and its timing, among other things.

The editorial then goes to note that in looking at the volume of tobacco consumed, "Koukoulas cites Australian Bureau of Statistics figures on tobacco consumption."

Um... well, what other reliable, accurate and timely data on the volume of tobacco consumed are publicly available?

It then cites Economics Correspondent Adam Creighton's story (who previously worked for Tony Abbott, and is something not disclosed in his article) that "those ABS figures do not refute sales figures from the industry which show a rise in total cigarette sales last year amid a dramatic shift from branded cigarettes to discount lines".

This data torture is extreme and as I noted in yesterday's blog, "To help the smoking fact deniers, here is a little illustration about what might be going on. In Period One, consumption of tobacco is 50 expensive and 50 cheap cigarettes (100 in total). In Period Two, consumption shifts to only 25 expensive yet 70 cheap cigarette (95 in total). Clearly, the overall consumption of tobacco has fallen 5 per cent with a big switch to the cheaper product. This may well be happening if the data cited by Kerr and Creighton is correct and leaves the ABS data and my analysis untouched."

The bottom line is that overall consumption of tobacco is falling, even if there is a shift from expensive to cheaper brands. This is the key point.

In reference to the Media Watch story on the topic on 16 June 2014, The Australian's editorial then is generous enough to suggest "The ABC, of course, is free to publish Koukoulas, just as we and some of our sister organisations occasionally do." 

It then suggests my connection to "Gillard-era policies" should be disclosed. It usually is in the many TV and radio interviews I give, but on this matter, The Australian is putting up a smokescreen for the issue at hand – the consumption of tobacco – as it then tries to bad mouth me suggesting my "analysis is not orthodox but hails from the partisan fringe of economics."

The editorial then cites that in December 2012 I argued that "it is still more likely than not that there will be a surplus in 2012-13". Well, any quick google search can confirm that around the same time The Australian was also pushing hard for the budget return to surplus. The Australian and I were at one on fiscal policy it seems. The reasons the surplus did not materialise have been widely documented and are clearly not the point in the debate on the declining consumption of tobacco.

The Australian's insinuation that my views are somehow less worthy because I am partisan ignores a range of other facts that they could have asked me about. Just days after the September 2013 election I argued in the News Limited owned Business Spectator that Treasurer Hockey should start tightening fiscal policy before year end. Go early, have a mini-budget of sorts and not wait the eight months to the May 2014 budget for fiscal action. Some early "money in the bank" was my idea for newly elected Treasurer Mr Hockey to follow - getting some of the tough decisions out quickly and taking early steps to get the surplus. I even offered a few policy ideas on how to do it. With the miserable 2014 budget we have just seen, I suspect Mr Hockey wishes he had taken my advice.

In the same publication I wrote that government assistance to the car industry should be phased out which is some advise Treasurer Hockey obviously agreed with and followed.

The paper also ignores the fact that I am an advocate for considering reform of the GST – perhaps broadening its base and raising the rate – something the Liberal Party were keen to highlight in the 2013 election campaign, but now seem open too. I can see I am ahead of the pack again when it comes to policy reform.

The paper then ignores the fact that I consider the income tax hike on high income earners and the indexation of petrol to be decent policy changes even if in their current form, they raise precious little money.

The paper also ignores my strong advocacy of a suitably flexible labour market, one which sees wages growth moderate when unemployment rises and vice versa, that encourages productivity growth and rising incomes in the longer run. A little like the conditions currently prevailing in the labour market.

I am about good economic policy and fact based analysis.

And a couple of other issues – I am happy to disclose that in my business dealings, I have received, coincidently, the same financial return for doing work for the Liberal Party as I have from the Labor Party.

Me partisan? Maybe, maybe not. An advocate of sound, facts based policy and looking at issues with hard data? Definitely.

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Punitive approach to restraining welfare costs lazy and short-sighted

Fri, 20 Nov 2015

This article first appeared at The Guardian at this link: 


Punitive approach to restraining welfare costs lazy and short-sighted

The discussion being driven by the Turnbull government that there are ‘too many people on welfare’ has as its driver a framework to make it harder for people to get such payments. It is about eligibility for the payments that is dominating the government’s plans for who will be on welfare in the years ahead.

According to Christian Porter, social services minister, annual government expenditure on welfare is estimated to rise from $157bn to $277bn in a decade. The vast bulk of these payments will go to aged pensioners, the unemployed and the disabled. When looking at this increase, Porter says there is a serious issue of how we pay for it and how we make the welfare system sustainable.

Porter’s approach is squarely on making it harder for people to get “generous” welfare payments. In his sights is a tightening of the tests for the unemployed to receive the Newstart allowance and for those unable to work to receive the disability support pension.

Let’s be honest here. This is lazy policy and looks at using punitive measures rather than limiting the supply of people who will need welfare support in the years ahead. Rather than tackling the welfare “time bomb” this way, it is possible to lower spending on welfare by encouraging economic growth, productivity and decency. What about reducing unemployment, encouraging more self-funded retirement and helping those with a disability through a mix of employment opportunities and preventative health care?

What is missing from our economic commentary?

Thu, 19 Nov 2015

This article first appeared on Yahoo7 Finance at this link: 


What is missing from our economic commentary?

If you listen too much to the financial news at the moment you would be very worried about Australia’s economic future. This is because so much of the focus is on the collapse in commodity prices.

The price of iron ore, coal, copper, gold and most other commodities are at or near six, seven or eight year lows. What is missing in much of the commentary on the economy, and something that is almost always overlooked, is the simple fact that commodity prices are still well above the levels prevailing from 1992 to 2004, a time of strong economic expansion.

In many cases, today’s low commodity prices are still double, triple or even quadruple late 1990s levels. The 12 year stretch of a strong economic growth up to 2004 was clearly supported by factors other than stratospheric commodity prices and a mining investment frenzy.

Looking back at that period of economic history saw consumer spending, generally buoyant construction activity and the early stages of a surge in services – finance, education, health and tourism – support the economy. Fast forward to today and despite lower commodity prices, it is clear that the economy is still growing, a reasonable amount of jobs are being created and those factors are occurring with low inflation and very low interest rates.