National Drug Strategy
National Drug Strategy

The costs of tobacco, alcohol and illicit drug abuse to Australian Society in 2004/05

Executive Summary

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This report is the fourth study by the present authors of the social costs of drug abuse in Australia. It presents estimates of the costs of alcohol, tobacco and illicit drugs for the
financial year 2004/05, the most recent year for which all relevant data are available. The production of this report was preceded by an extensive scoping study, including an invitational workshop with other researchers in related areas.

The costs presented here are net costs and, consistent with previous studies, a conservative approach to estimation was adopted. In general, lower cost alternatives were always selected where appropriate alternatives existed. The results are summarised in the following four tables. The first table provides a summary of the overall results of this study.

Total social costs of drug abuse, 2004/05

Alcohol ($m)
Tobacco ($m)
Illicit drugs ($m)
Alcohol and illicits together ($m)
All drugs ($m)
All drugs adjusted for health interaction ($m)
Tangible
10,829.5
12,026.2
6,915.4
1,057.8
30,828.9
30,489.8
Intangible
4,488.7
19,459.7
1,274.5
25,222.9
24,683.0
Total
15,318.2
31,485.9
8,189.8
1,057.8
56,051.8
55,172.8
Proportion of unadjusted total
27.3%
56.2%
14.6%
1.9%
100.0%
Source: Table 35.

Note: health-related cost components in final column have been adjusted to take account of drugs interaction.


Of the total social cost of drug abuse in 2004/05 of $55.2 billion, alcohol accounted for $15.3 billion (27.3 per cent of the unadjusted total), tobacco for $31.5 billion (56.2 per cent), and illicit drugs $8.2 billion (14.6 per cent). Alcohol and illicit drugs acting together accounted for another $1.1 billion (1.9 per cent).

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The second table presents estimates of selected individual categories of tangible drug abuse costs.

Selected tangible drug abuse costs, 2004/05

Alcohol ($m)
Tobacco ($m)
Illicit drugs ($m)
Alcohol and illicit drugs combined ($m)
Crime
1,611.5
3,840.5
1,261.0
Health (net)
1,976.7
318.4
201.7
Production in the workplace
3,578.6
5,749.1
1,622.9
Production in the home
1,571.3
9,843.1
495.5
Road accidents
2,202.0
527.6
Fires
136.4
Source: various tables in Section 6.

The third and fourth tables compare constant price estimates (that is, estimates adjusted to eliminate changes in the general price level) of the social costs of tobacco and illicits respectively between 1998/99 and 2004/05. As a result of revisions to the underlying epidemiological information concerning the health effects of alcohol, it is not possible to make a comparison over time of alcohol costs.

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Comparison of constant price estimates of the social costs of tobacco abuse, 1998/99 and 2004/05, at 2004/05 prices

Tobacco 1998/99 ($m)
Tobacco 2004/05 ($m)
Tobacco (per cent change)
Tangible
9,184.8
12,026.2
30.9
Intangible
16,315.2
19,459.7
19.3
Total
25,500.0
31,485.9
23.5

Source: Table 49.

The real social costs of tobacco abuse are estimated to have risen during the period 1998/99 to 2004/05 by 23.5 per cent (consisting of a 30.9 per cent increase in tangible costs and a 19.3 per cent increase in intangible costs). Although smoking prevalence has been falling steadily, the lagged effects on health and on the workforce of smoking in the past have meant that the overall social costs of smoking continue to rise. As these lagged effects work their way through the system, and assuming that smoking prevalence continues to decline, real smoking costs (adjusting for the effects of inflation) can be expected eventually to fall very significantly.

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Comparison of constant price estimates of the social costs of illicit drugs, 1998/99 and 2004/05, at 2004/05 prices

Illicits 1998/99 ($m)
Illicits 2004/05 ($m)
Illicits (per cent change)
Tangible
6,182.8
6,915.4
11.8
Intangible
1,172.9
1,274.5
8.7
Total
7,355.6
8,189.8
11.3

Source: Table 50.

The real social costs of illicit drug use are estimated to have risen between 1998/99 and 2004/05 by 11.3 per cent (consisting of an 11.8 per cent increase in tangible costs and an 8.7 per cent increase in intangible costs). The report also presents a partial disaggregation of the mortality and morbidity costs of illicit drugs by type of drug (see Table 24 to Table 29 inclusive).

Some of the costs of involuntary smoking have again been identified and it remains apparent that a high proportion of these costs are imposed on the young. In 2004/05, under 15 year olds accounted for 25 per cent of all deaths attributable to involuntary smoking, 96 per cent of attributable hospital bed days and 91 per cent of attributable hospital costs (see Table 23).

The report identifies the impact incidence of drug abuse upon the household, business and government sectors.

The alcohol and tobacco tax arrangements which were implemented with the introduction of the GST in 2000 have had a significant effect on the budgetary impact of drug abuse (that is, drug-related taxation revenue less drug-related government expenditures). This is shown in the following table.

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The impact of drug abuse on federal and state budgets, 2004/05

 

Alcohol

Tobacco

Illicit drugs

Federal ($m)

State ($m)

Federal ($m)

State ($m)

Federal ($m)

State ($m)

Net revenue

3,075.4

976.5

2,864.1

937.4

(299.5)

0.0

Expenditure

1,272.6

1,363.8

154.8

104.7

127.5

2,264.8

Revenue less expenditure

1,802.8

(387.3)

2,709.3

832.7

(427.0)

(2,264.8)



Sources: Table 39 to Table 47 inclusive.

Note: figures in brackets are negative.


Consumption of alcohol had a positive effect on the federal budget but negative effects on state budgets, while tobacco consumption had positive effects on both federal and state budgets. Since illicit drugs yield no tax revenue directly (while causing a reduction in general tax revenues) illicit drug abuse had a negative effect upon both federal and state budgets.

Finally, the report makes recommendations for data collection and research to better inform future economic evaluation of policy effectiveness.

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