Smoking levels continue to plummet

Wed, 19 Dec 2018  |  

This article first appeared on the Yahoo Finance website at this link: https://au.finance.yahoo.com/news/smoking-levels-continue-plummet-210432040.html 

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Smoking levels continue to plummet

Some good news on health – Australians are smoking less with the amount of tobacco consumed dropping to a record low in the September quarter 2018, and this includes data back to 1959 when Australia’s population was about 60 per cent below the level of today.

The peak consumption of tobacco came in the mid-1970s. Since then, there has been an unrelenting fall, with the timing of the downturn broadly coincided with the increasing prominence given to the link between smoking and early death and a range of government regulations aimed at reducing smoking rates.

Most recently, the introduction of plain packaging laws, together with hefty increases in excises – taxes in other words – has continued to drive the consumption of tobacco lower. The decline in the volume of tobacco consumed in Australia has crashed a staggering 24.4 per cent since the plain packaging laws were introduced at the end of 2012. This is despite population growth of around 8.5 per cent over that time.

Factors other than the introduction of plain packaging laws were also driving smoking levels lower – as noted, the sharp rise in excise taxes, many years of health awareness, tobacco advertising bans, restricting smoking in public places and even the fact many smokers have died and therefore are not buying tobacco products are all driving smoking to record lows.

Many of these changes are government regulations, taken against the wishes of the tobacco companies and tobacco retailers and reflect a government commitment to improve the health of the population. Since 1975, Australia’s population has roughly doubled, yet the volume of tobacco consumed has plummeted by more than 65 per cent.

All of this goes to show that well crafted government regulation can achieve desired outcomes.

Let’s think of a few other issues where government regulation might work.

Obesity could easily be reduced if there was a tax on sugar, a massive awareness campaign highlighting healthy lifestyle choices, restrictions in junk food advertising and even plain packaging on food products that make people fatter. This mix of policies would work.

In a different area, the number of road death have been reduced over the past few decades with drink and drug driving laws, speed cameras, greater enforcement of speed limits, seat belts, higher fines and awareness campaigns such as stop, revive, survive all impacting.

Then there is climate change.

A price on carbon would see carbon emissions fall, and government funding of renewables would accelerate the path to lower carbon emissions as wind and solar accounted for an increased share of electricity output. It is only political will or the lack thereof that is keeping Australia’s per capita carbon output among the highest in the world. Sometimes, the general population is annoyed at the level of government intervention in the economy and their day to day lives. Extra costs, red tape and compliance issues are indeed annoying when the government implements policy wide-reaching regulatory changes.

But sometimes the government gets the policy setting right.

The strategy to reduce and hopefully eliminate smoking is one of those times. There should be consideration to using a similar approach to target other areas which will improve living standards.

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It’s time to end the “strong economy” propaganda

Thu, 20 Jun 2019

This article first appeared on the Yahoo Finance website at this link: https://au.finance.yahoo.com/news/its-time-end-strong-economy-propaganda-230414837.html 

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It’s time to end the “strong economy” propaganda

For the last year or so, it has been obvious to anyone with an open mind that the economy is in trouble. Unfortunately, the government and the Reserve Bank not only ignored this growth slump, but they ran a propaganda campaign saying the economy was “strong”, that unemployment would keep falling and wages growth was poised to pick up.

It might have been politics that lead the RBA and Treasury to this view with the recent election swinging on the economic credentials of both major parties. Ahead of the election, the RBA and Treasury were loathe to undermine the government with an honest assessment of the rapidly spreading economic problems.

It is possible that the forecasts were a simple error, which sometimes happens when an external shock hits the economy.

Either way, things are so bad in the economy right now that forecasters are rushing to out-do each other on how low interest rates will go in this cycle. Some are canvassing negative interest rates, printing money or the need for a fiscal policy boost if the economy remains in its economic funk.

Time will tell.

The range of forecasts that where regularly produced by the government (Treasury) and the RBA up until very recently were unambiguously optimistic. The forecasts ignored all hard data on the economy, which suggests it may have been a political strategy to remain upbeat, rather than it being a clumsy forecasting error.

An update on my house price bet with Tony Locantro

Thu, 20 Jun 2019

This article first appeared on the Yahoo Finance website at this link: https://au.finance.yahoo.com/news/house-prices-are-still-dropping-but-bottom-sight-210000929.html 

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An update on my house price bet with Tony Locantro

It is difficult to think of a bigger issue that gets Australians fired up than house prices.Regular readers will know that back in September 2018, I made a bet on house prices with Tony Locantro, a fired-up Investment Manager with Alto Capital in Perth.

Tony wont mind me saying this, but he is what is called an ‘uber bear’ on house prices – he reckons prices are grossly inflated and are overdue to collapse. On the other hand, I reckon there is a cycle and that after the surge up to 2017, house price falls were inevitable, but that the decline would last only a couple of years and would not be too severe.

The bet was framed around a peak-to-trough fall in prices of 35.0 per cent in either Sydney, Melbourne or the 8 capital cities measure used by the Australian Bureau of Statistics. If prices fell by more than 35 per cent at any stage from the peak until the end of 2021, Tony would win, if the fall was less than 35 per cent, I would win.

Simple.

That background is important because the ABS just released the official dwelling price data for the March quarter 2019.

In the quarter, dwelling prices fell 3.0 per cent in the 8 capital cities and dropped 3.9 per cent in Sydney and 3.8 per cent in Melbourne.