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?

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As house prices fall across Australia, should we be worried for our economy?

Tue, 13 Mar 2018

This article first appeared on the Yahoo7 Finance website at this link: 


As house prices fall across Australia, should we be worried for our economy?

Are you a home owner?

If you are in Sydney, Perth and Darwin, you are losing money at a rapid rate.

In Melbourne and Canberra, prices are topping out and there is a growing risk that prices will fall through the course of this year. If your dwelling is in Brisbane or Adelaide, you are experiencing only gentle price increases, whilst the only city of strength is Hobart, where house prices are up over 13 per cent in the past year.

The house price data, which are compiled by Corelogic, are flashing something of a warning light on the health of the housing market and therefore the overall economy. For the moment, the drop in house prices has not been sufficient to unsettle the economy, even though consumer spending has been moderate over the past year.

The importance of house prices on the health of the economy is shown in the broad trend where the cities that have the weakest housing markets tend to have the slowest growth in consumer spending and are the worst performance for employment and the unemployment rate. The cities with the strongest house prices have strong labour markets and more robust consumer spending.

Trump could cause the next global recession: here's how

Wed, 07 Mar 2018

This article first appeared on the Yahoo7 Finance website at this link: 


Trump could cause the next global recession: here's how

The Trump trade wars threaten the global economy. This is not an exaggeration or headline grabbing claim, but an economic slump based on a US inspired global trade war is a distinct and growing possibility as it would dislocate global trade flows, production chains and bottom line economic growth.

Up until a few weeks ago, there was a strong enthusiasm for the economic policies of US President Donald Trump. Tax cuts and planned infrastructure spending were seen to be good for the US and world economies. US stocks and many around the rest of the world rose strongly, to a series of record highs. At the same time, bond yields (market interest rates) surged as the market priced in interest rate hikes and inflation risks from the ‘pro-growth’ policies. It was seen to be good news.

Very few, it seems, were worried about the consequences for US government debt and the budget deficit from this cash splash, especially when the US Federal Reserve was already on a well publicised path to hiking interest rates.

About a month or two ago, a few of the more enlightened and inquisitive analysts started to focus on the fact that the annual budget deficit under Trump was poised to explode above US$1 trillion with US government set to exceed 100 per cent of annual GDP.

A debt binge fuelled by tax cuts was a threat to the economy after the temporary sugar hit.