National Drug Strategy
National Drug Strategy

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

3. Aggregate results

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The total social costs of drug abuse

This section summarises the overall social costs of drug abuse, classified by type of drug. Table 1 summaries the total costs. Commentary on the costs attributable to individual drugs is complicated by the joint nature of some crime costs. It is also complicated by the need to adjust for interactive effects arising when some health conditions are causally related to the consumption of both alcohol and tobacco.

Table 1, 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%

Notes: Health-related cost components in final column have been adjusted by 2.18% to take account of drugs interaction. As a result of rounding, totals may not correspond exactly with the sums of their individual components.

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Of the total social costs 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 $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).

Tables 2 and 3 provide full details of the tangible and intangible cost components of total costs. As is explained in Section 4 below, care needs to be taken to avoid double counting some of the tangible costs of crime. Accordingly, for comprehensive estimates of aggregate crime costs, readers should consult Section 4.

Table 2, Tangible social costs of drug abuse, 2004/05


Alcohol
Tobacco
Illicit drugs
Alcohol and
Total
Total adjusted
illicits
for interaction
together
($m)
($m)
($m)
($m)
($m)
($m)
Labour in the workforce
Reduction in workforce
3,210.7
4,969.5
889.4
9,069.5 8,872.1
Absenteeism
367.9
779.6
733.5
1,880.9 1,840.0
Total
3,578.6
5,749.1
1,622.9
10,950.5
10,712.1
Labour in the household
Premature death
1,423.9
9,156.4
458.5
11,038.8 10,798.5
Sickness
146.9
686.7
37.0
870.6 851.7
Total
1,570.8
9,843.1
495.5
11,909.4
11,650.2
Total paid and unpaid labour costs
5,149.4
15,592.2
2,118.3
22,859.9
22,362.2
Less consumption resources saved
1,611.3
7,583.1
469.5
9,663.9
9,453.5
Total net labour costs
3,538.0
8,009.1
1,648.9
13,196.0
12,908.7
Healthcare (net)
Medical
540.7
158.4
104.7
803.8 786.3
Hospital
662.2
223.4
86.5
972.1 950.9
Nursing homes
401.2
(177.3)
6.2
230.1 225.1
Pharmaceuticals
297.6
77.3
375.0 366.8
Ambulances
74.8
36.6
4.4
115.8 115.8
Total healthcare
1,976.7
318.4
201.7
2,496.8
2,445.0
Road accidents n.e.i.
2,202.0
527.6
2,729.6
2,729.6
Fires n.e.i.
63.0
63.0
63.0
Crime n.e.i.
Police
747.1
1,716.9
320.2
2,784.2 2,784.2
Criminal courts
85.8
146.8
28.0
260.7 260.7
Prisons
141.8
348.6
146.6
636.9 636.9
Property
67.1
445.4
144.6
657.1 657.1
Insurance administration
14.3
94.6
30.7
139.6 139.6
Productivity of prisoners
368.0
892.1
387.7
1,647.9 1,647.9
Total crime
1,424.0
3,644.5
1,057.8
6,126.3
6,126.3
Resources used in abusive consumption
1,688.8
3,635.6
892.7
6,217.1
6,217.1
Total
10,829.5
12,026.2
6,915.4
1,057.8
30,828.9
30,489.8
Proportion of total unadjusted tangible costs
35.1%
39.0%
22.4%
3.4%
100.0%

Notes: n.e.i. = not elsewhere included. As a result of rounding, totals may not correspond exactly with the sums of their individual components.
Numbers in brackets are negative.


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Tangible costs attributable to alcohol in 2004/05 were $10.8 billion, to tobacco were $12.0 billion, and to illicit drugs were $6.9 billion. Alcohol and illicit drugs acting together to cause crime contributed a further $1.1 billion. Labour and health costs constituted the major cost component for alcohol. Workforce costs were a large component of tobacco tangible costs. Crime costs comprised a very high proportion of illicit drug costs.

Table 3, Intangible social costs of drug abuse, 2004/05


Alcohol ($m)
Tobacco ($m)
Illicit drugs ($m)
All drugs ($m)
All drugs adjusted for health interaction ($m)
Loss of life
4,135.0
19,459.7
1,204.7
24,799.5
24,259.6
Pain and suffering (road accidents)
353.6
69.7
423.4
423.4
Total intangible costs
4,488.7
19,459.7
1,274.5
25,222.9
24,683.0
Proportion of unadjusted total intangible costs
17.8%
77.2%
5.1%
100.0%

For intangible costs, except for pain and suffering of road accident victims, only the value of loss of life (to be precise, the loss of a year’s living) could be estimated. Intangible alcohol costs were $4.5 billion, tobacco costs $19.5 billion, and illicit costs $1.3 billion. The predominance of intangible costs attributable to tobacco is a direct result of the high level of premature mortality caused by smoking.

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The budgetary implications of drug abuse

The full report presents estimates of the budgetary implications of drug abuse that is its impact upon public expenditures and revenues at both national and state/territory levels. However, the estimates relate to the budgetary impact of drug abuse, not drug consumption. Furthermore, they incorporate estimates of the revenue losses resulting from drug-induced morbidity and premature mortality. Results are presented for the budgetary impact of drug abuse for the Australian Government and state governments separately for each type of drug.

Alcohol tax revenue in 2004/05 exceeded alcohol-attributable costs borne by the public sector by $1.4 billion. The Australian Government accrued an alcohol-attributable surplus of $1.8 billion, while the state governments were in deficit to the tune of $387 million.

Tobacco tax revenue in 2004/05 exceeded tobacco-attributable costs borne by the public sector by more than $3.5 billion. Of this surplus $2.7 billion accrued to the Commonwealth and around $800 million to state governments.

By their nature, illicit drugs yield no tax revenue. Their production or importation by a clandestine industry renders taxation impossible. Indeed, overall tax revenue is reduced (by an estimated $299.5 million in 2004/05) because drug-attributable mortality and morbidity reduce revenue from general taxes on income and consumption. At the same time, the consumption of illicit drugs imposes substantial costs, particularly crime costs, on the public sector. In 2004/05, public sector outlays attributable to illicit drugs, together with revenue losses amounted to almost $2.7 billion, of which 84 per cent was borne by state governments.

The introduction of the GST in 1999 removed the states’ ability to tax tobacco and alcohol, except through the GST, causing a significant adjustment of taxing powers between the two levels of government. The Australian Government is now the major beneficiary of the tax revenue from tobacco and alcohol.

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