Dramatic tobacco decline a drag on strong economy

The tobacco industry has been hit by the heaviest declines on record amid otherwise strong economic growth for the nation, the latest figures show.

Treasurer Joe Hockey may have described the national accounts figures released Tuesday as a "terrific set of numbers", but tobacco and cigarette consumption has taken a dramatic tumble, according to the Australian Bureau of Statistics. 

Household tobacco consumption and expenditure has fallen 10.1 per cent over the past 12 months.
Household tobacco consumption and expenditure has fallen 10.1 per cent over the past 12 months. Photo: Tamara Voninski

Household tobacco consumption and expenditure volume fell 10.1 per cent over the past 12 months, and 17.5 per cent in the past two and a half years, according to the seasonally adjusted data. 

The past three quarters have each recorded more than a 3 per cent drop in the volume of  tobacco consumed nationally, falling 3.8 per cent between January to March 2015 alone.

For the first time NSW tobacco expenditure dropped below $1 billion, sitting at $988 million in the last quarter, the state-by-state breakdown showed.

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The decline corresponds with the two 12.5 per cent tax hikes introduced over the past two years, and the plain packaging legislation implemented on December 1, 2012.

"The simple message is cigarettes expenditure continues to fall as a result of those measures," a spokesperson for the statistics agency said.

A historic look at tobacco consumption shows Australian households had more than halved the amount of money forked out for tobacco since the 1980s, dropping from $8.2 billion in December 1981 to $3.1 billion in March 2015.

University of Sydney Professor of Public Health Simon Chapman said the dramatic drop was vindication of government policies designed to curb cigarette smoking, including plain packaging, excises and public health campaigns.

"It's a spectacular fall that just goes to show these policies continue to work years after they were introduced," he said. 

Professor Chapman rubbished suggestions that the fall in cigarette spend would harm the economy.

"Smokers aren't hiding the money they're not spending on cigarettes under their mattresses. They're spending it on other things," he said.

The national tobacco lobby argued the figures were misleading, and did not reflect a true decline in tobacco consumption, just a drop in the money spent on cigarettes.

British American Tobacco Australia argued that smokers were choosing to buy cheaper brands, or source tobacco on the black market.

"People are literally walking into their local shop or service station and asking for the cheapest pack available," said the group's head of corporate affairs Scott McIntyre.

But economist Stephen Koukoulas said this was not the case.

"The ABS numbers would capture that," said Mr Koukoulas following his analysis of the national data consultation with the ABS.

"Whether you're buying a kilogram of cigars or a kilogram of cheap cigarettes for all intents and purposes the same amount of tobacco is being consumed," he said. 

"What we're seeing in the numbers is confirmation of a cumulative fall in tobacco consumption," he said.