Cigarette Smoking and Unemployment Issues in Australia - Economic Analysis

Running Head: Economic Analysis
Cigarette Smoking and Unemployment Issues in Australia
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Economic Analysis 2
Comparing Rate of Cigarette smoking between Australia and New Zealand
The rate of smoking in Australia as at 2016 was 12% lower than its peak but still
considerably high. Measures are continually being put in place to lower this to the desired 10%.
In New Zealand it currently stands at 16% down from 25% in 1997 (Smokefree.org.nz, 2018).
The New Zealand’s rate of smoking is falling while it’s rising for Australia. In both cases there
are more male than female smokers with the older generation preferring the more expensive
brands. In developing countries cigarette smoking is on the rise as no real efforts have been put
by the respective governments to curb this practice. In the developed countries thanks to
legislative efforts there is a decline in the rate of cigarette consumption.
Effect of excise tax on cigarettes.
Elasticity of demand refers to the responsiveness of demand to changes in the factors
affecting it such as price. When demand is inelastic it means that a unit change in price has little
or no effect on the quantity demanded. Its graph is vertical. Commodities that have inelastic
demand include necessities and addictive’s such as cigarettes in this case (Surbhi, 2016).
Imposing excise tax on cigarettes has the effect of raising the price of cigarettes as the tax burden
is passed on to the consumers. However given the inelastic demand for cigarettes other than
higher revenue for the government there is no significant change in cigarette smoking as targeted
by the move. This measure would only be effective if the demand for cigarettes were elastic.
Graph: Exercise Tax on cigarettes
Price S + Tax
S
P2 b
P* d
P1 c
D
Q2 Q* Quantity
Supply shifts from S to S + Tax; tax revenue raised after the imposition of tax is area P2P1cb.
Buyers pay a higher price P2, sellers receive a lower price P1. There is a deadweight loss bcd.

Economic Analysis 3
Cost versus benefits analysis
The only good thing that comes out of cigarette smoking for the government is the tax
revenue that they collect from cigarette consumption. Cigarette smoking is laden with so much
negative externalities such as health concerns for both the smokers and third parties and
monetary ramifications. Smokers not only incur cigarette purchases costs but due to their
exposure they incur higher health, mortgage and life insurances as well as lower pensions as
some firms deduct some amount from the pay of smokers. Smokers have a lowered immunity
thus are more likely to suffer premature death which not only affects the family but the economy
as well since it is a loss of skilled manpower.
Age takes a toll on a person's health and more so a smoker’s health. Smokers are pre exposed to
diseases such as lung cancer as well as lowering their immunity. Assuming it is not already too
late, for the sake of a golden old age smoking cessation is paramount. Cigarettes do not come
cheap so cutting of its consumption could lift a weight off from pension.
Policies adopted to reduce smoking
There has been a ban on cigarette smoking in public places such as 10m within children’s
playground, 4m radius to public buildings pedestrian access points, spectator areas of
recreational centers as well as in swimming complexes. It is also illegal to smoke in a car in the
presence of a child of less than 16 years. Organizations have also brought this to their
workplaces by prohibiting smoking in the workplace, (Davidson and Silva, 2017)
Tobacco smoking advertising prohibition. The ban on tobacco advertising is aimed at reducing
the number of new smokers in the economy. It aims at deterring those who could have been
attracted to attempt smoking from persuasive advertisement. It has no effect on the already
existing smokers as they are already hooked and know where and what brand of cigarettes to use.
Legislation on plain packaging.
As advertising of tobacco products is laden with many restrictions, the industry has
resorted to product branding to ensure that they stay on top of the game, to attract new clients as
well as maintain their current customers. However, plain packaging makes the cigarettes look
less appealing and have at least 75% graphic health warnings. This is aimed at discouraging
people from taking up smoking, discouraging those who have quit from relapsing and
encouraging those smoking to quit, (Davidson and Silva, 2017)
Effectiveness of plain packaging of cigarettes on smoking rate.