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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2019-20 budget will be 'problematic': here's why

Wed, 20 Feb 2019

This article first appeared on the Yahoo Finance website at this link: 


2019-20 budget will be 'problematic': here's why

Word has it that the framing of the budget, due to be handed down by Treasurer Josh Frydenberg the day after April fools day (and around 6 weeks before the election), is more problematic than usual.

Problematic because there is some mixed news on the economy that will threaten the current forecast of a return to budget surplus in 2019-20.

Housing has gone into near free-fall, both in terms of prices and new dwelling approvals. This is bad news for GDP growth.  The unexpected severity of the housing slump is the key point that will see Treasury revise its forecasts for GDP growth, inflation and wages lower when the budget is handed down.

It will be impossible for Treasury to ignore the recent run of hard data, including the weakness in consumer spending and a generally downbeat tone in the recent economic news when it sets the economic parameters that will underpin its estimates of tax revenue and government spending and therefore whether the budget is in surplus or deficit.

This is the main driver for a cash rate CUT, and it'll happen soon

Wed, 13 Feb 2019

This article first appeared on the Yahoo Finance website at this link: 


This is the main driver for a cash rate CUT, and it'll happen soon

The prospect that interest rates will be lowered within the next few months is already starting to impact on the economy.

Here’s how.

Around the middle of 2018, financial markets were expecting the RBA to hike official interest rates to 1.75 or 2 per cent over the course of the next 18 months or so. If proof was needed that investors and economists can get it wrong, markets are now pricing in official interest rates to be cut towards 1 per cent over the next 18 months.

The about face has been driven by a raft of disappointing news on the economy, most notably the fall in house prices, the free-fall in new dwelling building approvals and a slump in retail spending growth.

Business confidence has also taken a hit and job advertisements have been falling for eight straight months. Ongoing low inflation and increasing signs of a slowdown in the global economy have simply added to the case for this dramatic change in market pricing.