The Australian (weekend edition) has again gone hard on the tobacco issue with yet another editorial and the short-poppy Henry Ergas stepping in.
Like the dozen or so articles before them, these columns fail to acknowledge the indisputable fact that the volume of tobacco consumed is falling, including in the period since plain packaging laws were introduced in December 2012.
The editorial takes a weird slant on the issue with a critique of my credentials to analyse the economic data which reveal declining tobacco consumption. In setting the scene, it notes the "sharp minds" of Ergas who taught at Harvard (what subjects and for how long I wonder); Judith Sloan who they say is a former productivity commissioner (again not for long in this tax payer funded role) and Adam Creighton who is a former RBA economist (again, I wonder how long he was there and what role he performed in this tax payer funded role).
I have spoken to the ABS on the issue of the consumption of tobacco and all of my work on this issue is correct, accurate and spot on. Whilst this was never in doubt, I feel the need to take issue with the erroneous material that continues to appear in The Australian.
To his credit, The Australian's Adam Creighton has tried to get to the bottom on the consumption of tobacco issue that has dominated his paper in recent weeks. Apparently he spoke to the Australian Bureau of Statistics and was able to include several quotes from them when crafting his recent column. In using what was enlightening information from the ABS, Creighton however made a fundamental error when he tried to interpret that news.
This, of course, lead him to the wrong conclusions.
The Australian's campaign to torture and misrepresent the data on the volume of tobacco consumed in Australia seems to have had a final nail in the coffin with news from British American Tobacco, no less, that sales volumes in Australia are falling.
In their annual report which covers the period up to 31 December 2013, the BAT report notes:
Profit was up strongly as a result of higher pricing and cost saving initiatives, partially offset by lower volume."
What was that?
BAT saying "lower volumes"?
Oh I see. The volume of tobacco sold by BAT was lower in 2013, a picture that dovtails perfectly with the data from the Australian Bureau of Statistics. Who would have thought that?
Certainly not The Australian writers Christian Kerr, Adam Creighton, Henry Ergas, Judith Sloan, Sinclair Davidson, Chris Merritt, The Editorial writer or the person who puts together the cheeky Cut and Paste column.
See BAT annual report, page 32:
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 Australian has stories from Christian Kerr, Adam Creighton, Sinclair Davison and Chris Merritt in its paper today where they again largely ignore the facts on the consumption of tobacco and cigarettes from the Australian Bureau of Statistics. It seems like overkill when the facts on the matter are so clear, but at least some of the coverage seems to be a little bit nasty and personal.
The Kerr and Creighton article has as its focus a claim that the "anti-smoking measures are driving a boom in cheap cigarettes, with smokers buying more cigarettes from the lowest market segment". They cite Neilsen data to support this claim.
While the Neilsen data do not appear to be publicly available (I suspect The Australian would say it is commercial in confidence), I have no issue with this claim – it may or may not be correct. It is if correct, it does not refute the ABS facts which show a 5.3 per cent fall in the overall volume of tobacco consumed between the December quarter 2012 and the March quarter 2014. This is even if the volume of tobacco consumed has switched to cheap rather than expensive cigarettes.
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 cigarettes (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.
Judith Sloan, who is Honorary Professorial Fellow at the Melbourne Institute of Applied Economic and Social Research at the University of Melbourne and who has a Master of Arts with First Class Honours in economics from the University of Melbourne and a Master of Science in economics from the London School of Economics penned an article in The Australian today making four criticisms of my analysis of tobacco consumption, which appeared here https://thekouk.com/blog/the-australian-s-claim-on-tobacco-go-up-in-smoke.html#.U56tQsa26f0
My reply to each of those four items is below:
The evidence continues to flood in that the carbon price is weaving its magic in exactly the way it was intended. Greenhouse gas emissions in Australia are falling and it has driven a surge in energy production from renewable sources. There is no question in these two trends.
Now there more good news with indisputable proof that household consumption of energy is falling as consumers respond to price signals and knowledge about the benefits of energy conservation.
According to the national accounts, the volume of electricity, gas and other fuel ("energy") consumed by households peaked in the December quarter 2010. In the most recent data for the March quarter 2014, the volume of energy consumed by the household sector is 4.4 per cent lower than in the December 2010 peak. It's a recession in energy consumption!
It is staggering the slowdown in the Australian economy that is unfolding before our eyes.
I was slow to realise this, but the recent run of news has now converted me to interest rates on hold with a renewed bias to cut and I am now bearish on the Australian dollar. Indeed, a couple of low inflation numbers, a faltering GDP growth rate through to the September quarter and a touch more downside on commodity prices will likely see the RBA cut interest rates.
Here is what I am now seeing. In the last month or two, some slightly disconcerting signs have emerged about the pace of economic growth with a number of key economic indicators stalling or indeed, reversing.
It was obvious that 2014 kicked off on a strong note, a point confirmed in the recent national accounts that confirmed annual GDP growth at an above trend 3.5 per cent. I judged this to be the start of a break higher in trend growth and that as a result the RBA would need to hike rates. Thankfully they didn't do that because it seems there is a real risk GDP growth will slow in the next little while.
Last night, Australian time, US Treasury Secretary Jack Lew gave a speech where he openly welcomed the fact that the US economic growth momentum was "gaining traction". It was an optimistic outlook for the US which is only now genuinely emerging from the Great Recession of 2007-2009 which was brought on by a collapse in banking, insurance and the housing market.
In looking at the challenges ahead Lew noted, in comments oozing decency and empathy, that for the many people who were unemployed and those whose wages have stagnated, "this hardly feels like a recovery".
"The ultimate test for all of us will be how inclusive tomorrow's economy becomes and how widely our economic gains flow," he said. "The crisis we face today is the need to make sure the economy is expanding fast enough to support a growing middle class."
At about the same time Lew was discussing these issues of a stronger economy and fairness and equity, Australian Treasurer Joe Hockey delivered a speech which could not have been more at odds with Jack Lew's themes. Indeed, Mr Hockey's speech could have been penned by the US Tea Party fringe given its assault on equity and the contempt he showed for the less well off in society.
This morning's headline from the Australian Financial Review, no less, sums it up. "Joe Hockey slams welfare state".
When Prime Minister Tony Abbott meets with US President Barack Obama and senior officials from the US administration, the economy is likely to be front and centre of their discussions.
With this being the case, Mr Abbott has a wonderful chance to show off just how wonderful Australian economic conditions have been, how adroitly economic policy has been implemented in the last few years and how that is showing up in an economic expansion and fiscal settings that people in the US could only dream about.
Recent data confirm the Australian economy into its 23rd year of unbroken economic growth. This is in stark contrast to the US which endured recessions in 2001 and of course in the period from 2007 to 2009. "Australian's have forgotten how to spell 'recession'", Mr Abbott could quip, such is our economic success. The fiscal stimulus measures taken in during the global economic crisis, Mr Abbott could highlight, were a critical factor stopping Australia diving into a nasty recession with hundreds of thousands of jobs saved, new jobs created and financial stability maintained during these troubled times.