The Australian sinks to a new low on tobacco

Sun, 22 Jun 2014  |  

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).

Modesty prevents me from fully detailing my background, suffice to say that nearly a decade in Treasury, almost 15 years working in financial markets including stints as Chief Economist and heading global economic and market research in London, are among my highlights. Being asked to work as economic advisor to Prime Minister Julia Gillard was flattering and it was the opportunity of a lifetime to participate in the functioning of government and economic policy.

But that matters little, when the c-grade talent at The Australian have shown in story after story that they cannot understand national accounting concepts and the data produced by the Australian Bureau of Statistics.

The Ergas article is full of shrill unsubstantiated opinion. There are at least half a dozen unsubstantiated quotes and nowhere does Ergas refer to the data on the consumption of tobacco. He quotes from a TV series, Mad Men, to give an example of brand loyalty. Without a hint of substance, Ergas makes the claim that plain packaging "may actually boost consumption". Up might be down if you say it often enough but this Harvard lecturer would have more success putting a spirit level of the floor and say 'look, the earth is flat'.

There is a scintilla of light in what Ergas says when he notes that it is "difficult to isolate the effects of plain packaging" from excise increases on consumption levels, but that does not stop his rant that the packaging laws are not working.

He accuses me of making mistakes without noting anywhere where they are. Henry, if you can show a mistake in any thing I have written in this subject, I will correct the record immediately and buy you a cigar.

The editorial of The Australian is a "black is white", "up is down" and "the earth is flat" type lunatic insight on the issue. It suggests that the plain packaging laws which were designed to reduce the number of smokers and the amount they smoked that "on the evidence available so far this has not been the case".

Without reference to the ABS data, it makes the absurd and wrong claim that "in the year after the introduction of plain packaging it is possible that more cigarettes were sold and it is certainly the case that the rate of decline in tobacco consumption slowed".

Huh? Just to repeat, again, for the smoking fact deniers: the volume of tobacco consumed fell by 5.3 per cent between the December quarter 2012 and the March quarter 2014.

Minus 5.3 per cent.

Allowing for population growth, this means that per capita consumption is down by around 7.5 per cent.

And like many policies, there is a time lag between implementation and the full effect of the change to become apparent. Just wait a little longer for one of the intended longer run consequences of the plain packaging laws to work – that is discouraging people, especially young ones, from taking up the smoking habit.

But wait. What's this? The Australian editorial acknowledges this (unlike Ergas and Sloan) when it notes, "plain packaging might yet work. It is early days".

It is interesting that each of the recent annual reports or market updates from the big tobacco firms, Philip Morris, Imperial Tobacco and British American Tobacco, all highlight that one of the business risks it faces is reduced sales volumes from the plain packaging laws.

I wonder what these tobacco giants know about the impact of plain packaging that Ergas, Sloan and the intellectual nanny goats of the Australian don't.

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