Author: Dr Alan Moran
Principal
Regulation Economics
A regulatory best practice expert, Dr Moran was formerly a senior official within the Productivity Commission and the director of the Office of Regulation Review (now named the Office of Best Practice Regulation). He has decades of experience in regulatory appraisals.
Government data shows the plain packaging requirement for tobacco products has backfired. Rather than reducing smoking rates, data indicates plain packagingcaused them to increase. This is because it undermines the value many consumers percievein premium priced brands. Those consumers experienced a de-facto price reduction. The lower price meant higher demand.
The assessment of the plain packaging regulations is an important test of the Government's regulation review procedures. These are designed to ensure regulation is efficient and effective. Waving through the review of plain packaging as compliant undermines the integrity of the process and seriously harms the governments dereugulation credentials.
Plain packaging of cigarettes and other tobacco products began in 2012 together with regulations requiring almost all cigarette packages to feature graphic anti-smoking warnings. Plain packaging largely eliminates brand identification.
In preparing the Post-Implementation Review (PIR), the Health Department has misrepresented plain packaging as a success. The fact is that in 2013, the year following the introduction of plain packaging, for the first time in a generation, Government surveys indicate that the proportion of adults who were smokers actually increased.
Similarly, teenage smokers showed an uptick, having previously been in steady decline. Contrary to the Health Department's claims in the PIR that recorded levels of tobacco consumption fell 3.4 per cent following the implementation of plain packaging, the department now acknowledges this to be inaccurate and volumes may have increased, perhaps significantly since there is evidence of growing sales of unrecorded illicit tobacco.
Similarly, in the the year following plain packaging's introduction, the ABS estimated price-adjusted spending on tobacco actually increased - again, a very rare occurence over recent years.
It is no coincidence that this break in a long established declining trend in the number of smokers occurred straight after the introduction of plain packaging.
Plain packaging meant cigarette packs no longer strongly depicted a brand, which guarantees quality and reinforces the consumer's ability to distinguish between products. As a result, fewer people saw benefits in paying a premium for particular brands and switched to cheaper supplies.
For those consumers, plain packaging represented a price decrease. Within a year or so, the cheapest priced segment's market share increased from 10 per cent to 28 per cent. Generally, price increases cause consumption to fall and, by the same token, lower prices bring increased consumption. Plain packaging is likely to have contributed to such an increase in tobacco consumption. The declining trends in consumption and the number of smokers resumed only following further tax hikes in December 2013 and September 2014.
Rather than addressing smoking levels - the core issue regarding the effects of regulation - the Department of Health focused on secondary indicators, such as calls to quit lines and perceptions of the packs' attractiveness. These are poor subsitutes for the hard data demonstrating that the regulations backfired and had a contrary effect to that which was planned.
The PIR process is designed to protect Australians against regulatory overreach. At its core is an assessment, based on the available evidence, of whether the regulation remains appropriate and of how effective and efficient it has been in meeting its original objectives. Each asssement is important to ensure government waste is avoided. Even more critical is the integrity of the process: consistent and rigorous appraisals are necessary to ensure confidence in this.
The objectives of plain packaging regulation were to reduce smoking rates. This objective was not met. It is damaging to the regulation review program and that the Office of Best Practice Regulation has acquiesced in allowing an anti-smoking philosophy to override sound analysis concerning the effectiveness of plain packaging in reducing smoking prevalence and consumption.
Principal
Regulation Economics
A regulatory best practice expert, Dr Moran was formerly a senior official within the Productivity Commission and the director of the Office of Regulation Review (now named the Office of Best Practice Regulation). He has decades of experience in regulatory appraisals.
Government data shows the plain packaging requirement for tobacco products has backfired. Rather than reducing smoking rates, data indicates plain packagingcaused them to increase. This is because it undermines the value many consumers percievein premium priced brands. Those consumers experienced a de-facto price reduction. The lower price meant higher demand.
The assessment of the plain packaging regulations is an important test of the Government's regulation review procedures. These are designed to ensure regulation is efficient and effective. Waving through the review of plain packaging as compliant undermines the integrity of the process and seriously harms the governments dereugulation credentials.
Plain packaging of cigarettes and other tobacco products began in 2012 together with regulations requiring almost all cigarette packages to feature graphic anti-smoking warnings. Plain packaging largely eliminates brand identification.
In preparing the Post-Implementation Review (PIR), the Health Department has misrepresented plain packaging as a success. The fact is that in 2013, the year following the introduction of plain packaging, for the first time in a generation, Government surveys indicate that the proportion of adults who were smokers actually increased.
Similarly, teenage smokers showed an uptick, having previously been in steady decline. Contrary to the Health Department's claims in the PIR that recorded levels of tobacco consumption fell 3.4 per cent following the implementation of plain packaging, the department now acknowledges this to be inaccurate and volumes may have increased, perhaps significantly since there is evidence of growing sales of unrecorded illicit tobacco.
Similarly, in the the year following plain packaging's introduction, the ABS estimated price-adjusted spending on tobacco actually increased - again, a very rare occurence over recent years.
It is no coincidence that this break in a long established declining trend in the number of smokers occurred straight after the introduction of plain packaging.
Plain packaging meant cigarette packs no longer strongly depicted a brand, which guarantees quality and reinforces the consumer's ability to distinguish between products. As a result, fewer people saw benefits in paying a premium for particular brands and switched to cheaper supplies.
For those consumers, plain packaging represented a price decrease. Within a year or so, the cheapest priced segment's market share increased from 10 per cent to 28 per cent. Generally, price increases cause consumption to fall and, by the same token, lower prices bring increased consumption. Plain packaging is likely to have contributed to such an increase in tobacco consumption. The declining trends in consumption and the number of smokers resumed only following further tax hikes in December 2013 and September 2014.
Rather than addressing smoking levels - the core issue regarding the effects of regulation - the Department of Health focused on secondary indicators, such as calls to quit lines and perceptions of the packs' attractiveness. These are poor subsitutes for the hard data demonstrating that the regulations backfired and had a contrary effect to that which was planned.
The PIR process is designed to protect Australians against regulatory overreach. At its core is an assessment, based on the available evidence, of whether the regulation remains appropriate and of how effective and efficient it has been in meeting its original objectives. Each asssement is important to ensure government waste is avoided. Even more critical is the integrity of the process: consistent and rigorous appraisals are necessary to ensure confidence in this.
The objectives of plain packaging regulation were to reduce smoking rates. This objective was not met. It is damaging to the regulation review program and that the Office of Best Practice Regulation has acquiesced in allowing an anti-smoking philosophy to override sound analysis concerning the effectiveness of plain packaging in reducing smoking prevalence and consumption.
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