Smoking fact deniers - out in force

Wed, 18 Jun 2014  |  

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.

Kerr and Creighton then note that "several tobacco companies are now offering "loosies" — and an extra cigarette or two in packets of 20 or 25 — to attract customers". If so, this increase in volume (get it guys, volume of tobacco) would be captured in the ABS consumption data. Nothing here.

In an implicit admission of the error of the initial Kerr story and a concession that all of my analysis is indeed accurate and correct, Kerr and Creighton note "total consumption of cigarettes was slightly lower over the whole of last year than in 2012. There was a dramatic fall in cigarette consumption in the March quarter of this year."
Two point four cheers (seasonally adjusted, volume terms) for Kerr and Creighton – maybe the message of facts from the ABS is sinking in! These are the numbers which show the volume of tobacco consumed. Yes! Hooray!

In a space filling second half of the article, Kerr and Creighton cite Mark Connell from British America Tobacco Australia on a number of fronts including the shift to cheaper brands. Also mentioned was the old fall back of 'illegal cigarettes' plus the greater use of roll your own. But they make the mistake of quoting Mr Connell saying "ABS data is based on consumption expenditure. That's money spent on cigarettes, not volume". Whoops. Wrong Mr Connell – as noted ad nauseum, the ABS data are volume data of consumption of tobacco. This ignorance of understanding data makes it hard to be sure whether the other 'facts' cited have any credibility.

Next, Senior Fellow from the IPA, Sinclair Davidson, joins the fray with an edited version of his recent blog piece reproduced in the newspaper. Davidson offers nothing new other than the fact that Media Watch's demolition of the original Kerr article claiming tobacco consumption has risen, was based on the 'naive reliance on ABS statistics". Well, um, slagging ABS data is a bit like slagging the Bureau of Meteorology for bad weather.

The ABS produce the most accurate, unbiased, comprehensive data set on the volume of tobacco consumed each quarter, Australia wide. Naive? No. Accurate I would suggest. Davidson then draws from the Judith Sloan play list in her weak effort on the topic earlier this week saying the data are subject to revision (what if the revision is downward?) and he also refers to the possible switch to cheaper brands. As noted above, that could be happening and the ABS data would be picking that up. Davidson again, despite his bluster, shows a poor knowledge of the national accounts concepts used to produce the data that go to make up the national accounts.

In the third column of the issue in today's newspaper (I must be hitting some raw nerves at The Australian and IPA), Legal Affairs Editor Chris Merritt sticks his bib in to note that the Media Watch story on Monday did not disclose the fact that that for a 10 month period up to July 2011, I was economics advisor to Julia Gillard. He implies there is something wicked or sinister in that fact, especially as it relates to the issue of plain packaging and the consumption of tobacco.

It is not clear what point Merritt is trying to make – does my former employment make the data I use incorrect? Does it give any credence to the work of Kerr or the tobacco firms sponsoring research to try to prove plain packaging is not working? Certainly not.

It looks like a lot of muck throwing to me, but whatever. I'll take that as a compliment.

The hypocrisy of Merritt's article is that The Australian does not disclose that Adam Creighton was once economics advisor to Tony Abbott. 

As the hypocrisy oozes from Merritt's keyboard, he then fails to note that Christian Kerr worked for the Liberal Party in the 1996 election campaign, was an advisor to Liberal Party Ministers Amanda Vanstone and Robert Hill in the Howard government and was advisor to South Australian Liberal Premier John Olsen. Kerr does not disclose this on his LinkedIn profile, for some strangle reason.

I don't care what people's previous employment was – everyone has to earn a living. It is the factual errors, obfuscation and attempts at distraction in their work that bothers me. On that score, they only highlight their nakedness.

And here is a final note. A bet on offer to Kerr, Creighton, Davidson, Sloan or Merritt. I will wager that when we get the ABS measure for the household consumption of tobacco and cigarettes for the December quarter 2014, it will show lower consumption than for ANY quarter in 2012 or 2013. To be clear, it is the chain volume measure, seasonally adjusted, household consumption of cigarettes and tobacco, currently Table 8 of the national accounts. The data are likely to be published in March 2015. Any takers? Or do they know that I am right and the policies to reduce tobacco consumption are working?

comments powered by Disqus


Change of view on interest rates

Fri, 24 May 2019

Having been the only economist to correctly anticipate an interest rate cut from the RBA when close to 50bps of interest rate hikes were priced in to the market last year (See Bloomberg 17 August 2018), I have agonised over the exact months the cuts would be delivered and then how many rate cuts would be needed to reflate the economy.

Recently, I was of the view that the RBA would need to cut 100bps from now, to a level of 0.5%, but I did so with relatively low confidence. This is why I recommended all clients to close their long interest rate positions on 17 April 2019 (when the implied yields were 1.10% for the mid 2020 OIS; 1.35% on 3 year yields and the Aussie dollar was just over 0.7000 at the time).

Like in most good trades that were massively in the money, I left a little money on the table while I reassessed the outlook.

Since calling for interest rate cuts from the RBA, a lot of water has passed under the bridge, especially in the last few weeks.

Events mean I am changing my view on interest rates and have been placing / will be looking to implement new trades.

Watch out Australia: There's a flood of dismal economic news on the horizon

Wed, 01 May 2019

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


Watch out Australia: There's a flood of dismal economic news on the horizon

The Australian economy is in trouble and Scott Morrison and the Liberal Party government need to come clean and acknowledge this and outline a framework how this period of economic funk is to be addressed if they win the 18 May election.

The Liberal Party is campaigning in the election on a “strong economy” and being “good economic managers”, bold claims that fly in the face of the latest score card for the economy.

That scorecard shows a flood of what is, frankly, disappointing or even dismal economic news. Australia is going through a very rare recession in per capita GDP terms and last week saw data showing zero inflation in the March quarter. Contribution to these indictors of economic funk is the fact that well over half a trillion dollars of householder wealth has been destroyed as house prices have tumbled.

Add to that the fact reported by the Australian Office of Financial management last week that gross government debt is $543 billion, almost double the level that the Coalition government inherited in September 2013, and the scorecard is looking very ratty indeed.

As the ad man used to say, “but wait, there’s more”.