Ms Sloan and the volume of tobacco consumed

Mon, 16 Jun 2014  |  

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

My reply to each of those four items is below:

Ms Sloan claims that my work includes "expenditure figures [that] do not allow us to know precisely what has happened to quantity."

Well, the figures do allow us to precisely let us know what is happening to the consumption of tobacco and cigarettes. Sorry Ms Sloan, but the figures I used are the chain volume or quantity measures, as was stated several times in the initial post, which is, by definition the VOLUME of tobacco and cigarette consumed by the household sector on a quarterly basis back to 1959. This is a pretty basic misunderstanding for Ms Sloan when it comes to the construct of the national accounts by the Australian Bureau of Statistics.

Next Ms Sloan claims I was wrong because "through most of 2013, total spending on cigarettes rose... we can be reasonably confident the number of cigarettes consumed rose in 2013."

Well, if we sum the volume of tobacco consumed in 2013 versus 2012, we find that consumption fell 0.9 per cent. To be sure, the quarterly data are choppy, but it is pretty clear the amount of tobacco consumed in 2013 fell when compared with 2012 (and every single year compared to 1960, by the way).

I am not sure whether it is useful to go further after this embarrassment for Ms Sloan...but I will.

The third item that Ms Sloan uses to try to discredit my findings it to suggest "while it is true expenditure on cigarettes fell in the first quarter of this year, it needs to be borne in mind that the rate of excise on cigarettes rose sharply, by 12.5 per cent, in December last year". Well, yes! And plain packaging had been in for over a year and presumably a few smokers had successfully given up due to plain packaging. Not sure if Ms Sloan realises this actually supports my analysis showing a reduction in tobacco consumption, but hey. Whatever.

And finally, the lame arse excuse of the decade - Ms Sloan claims that "the seasonally adjusted figures are subject to substantial revision". Well, um, yes, um, of course they are but what if the ABS revised consumption lower? Plain packaging will have been even more successful that first thought. Ms Sloan claims that "the March figure will almost certainly be adjusted to show a smaller decline". Huh? What? It is curious in that our Professorial Fellow of Economics has stooped to arguing for a data revision which may or may not happen to support her argument yet at the same time acknowledging there may be "a smaller decline". Um, an own goal it would appear.

And I am happy to see the next year or two or three of data to see that rebound in tobacco consumption Ms Sloan obviously hopes to see. I suspect she'll be wrong...again.


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Why are Bill Shorten and Labor scared to run on the economy?

Tue, 21 Mar 2017

This article first appeared on The Guardian website at this link: 


Why are Bill Shorten and Labor scared to run on the economy?

The dust is settling from the Western Australian election and there are some implications for the way the federal Labor party should conduct itself from now until the next election if it is to enhance its chances of winning.

For the Liberal party, the lessons are clear. It might sound trite to mention it but its electoral success will depend almost exclusively on its ability to deliver materially better economic conditions between now and election day.

For Labor, the task is easier. It needs to take the initiative on the economy, economic policy, the budget deficit and government debt and highlight how poor the Coalition has been in most aspects of economic managements since the 2013 election.

In those three-and-a-half years of the Coalition being in charge of the economy and budget, growth has been sluggish despite favourable conditions in Australia’s major trading partners. The Australian economy should be stronger because of the welcome news of the Australian dollar falling sharply in recent years, which has provided a boost to domestic economic conditions. What’s more, interest rates have been cut to record lows, yet the economy has been struggling to register annual GDP growth near 2.5%, the unemployment rate is the same as when the Coalition won the 2013 election, wages growth has plummeted to a record low, and the government debt has grown significantly faster than during the previous Labor government, which of course included the fiscal stimulus measures that kept Australia out of recession.

Ever since the mid-1990s, the Labor party has been reluctant to run hard on issues to do with the economy. For some reason, it is riddled with self-doubt that stems, it appears, from the high interest rates of the late 1980s and early 1990s, and its proactive use of budget debts and moderate debt accumulation during the global crisis to ensure Australia kept growing and to protect an estimated 200,000 jobs.

A $2 billion national building snow job

Sat, 18 Mar 2017

Prime Minister Malcolm Turnbull reckons his Snowy Hydro $2 billion investment is a “nation building project”.

Yes, that is what he said. Really. Turnbull think a one-off $2 billion government infrastructure project is “nation building”.

Let’s look at $2 billion in the context of the Australian economy.

In the December quarter 2016, Australia’s GDP was $435,445 billion dollars (seasonally adjusted). This works out at $4,769 billion a day which makes the $2 billion snow job about 10 hours GDP.

Useful? Sure!

Nation building? Ha!

By 2020, Australia’s GDP will be around $510,000 billion a quarter and $2 billion will be akin to about 8 hours GDP.

Here’s what elese $2 billion is now days.