This research study would focus on the impact of smoking rates in the Australian economy and the cost of the economy. In the words of Sun & Daniels (2014), the negative externality of smoking which is the root cause of the market failure has been critically evaluated, and the effectiveness of the initiative of Australian Government’s for diminishing the smoking rates through the process of plain packaging has been assessed in this research study. Moreover, relevant charts, tables, and graphs have been used sources of evidence to represent the analysis in a significant manner.
Rates of smoking and cost to the economy
From the current study of the Australian Bureau of Statistics (ABS), it can be inferred that increase in smoking rates in Australia is considered as a serious threat to the country as mainly young generations are severely affected for that along with the increase in cost of the nation and decrease in social benefit of the economy. According to the social survey report of Aboriginal and Torres Strait Islander, both males and females are identified as daily smokers within the age group of 15 years (Department of Health | Tobacco Control key facts and figures, 2016). However, the report of the survey would deduce that the rate of smoking in both the cases is continuously decreasing from the year 2002 to 2015. Previously, the rate of male smokers was 41% in 2002 which is declined to 38.9% in the year of 2015, and the percentage of female smokers has fallen from 43% to 36% in the year of 2015 (Department of Health | Tobacco Control key facts and figures, 2016).
Figure 1: Smoking rate of Australia in different age groups
Source: (Health behaviors and other risks to health (AIHW), 2016)
Furthermore, the young generations of Australia are very much addicted to the smoking; though the rate of smoking has declined from 39% to 31% in the year 2015 within the age group of 15 to 24 years. In addition, as per the health survey of ABS, approximately 12.7% people within the age group of 45 years smoked on a daily basis; since 52.6% people never smoked in the life (Department of Health | Tobacco Control key facts and figures, 2016). Apart from this, the tendency of smoking is higher in the remote and outer regional of Australia compared to the major cities and inner regional areas.
Table 1: Rate of smoking of male and female in different years
Source: (Gender Indicators, Australia, Jan 2013, 2016)
Figure 2: Bar diagram of male and female smokers in different years
Source: (Gender Indicators, Australia, Jan 2013, 2016)
From the above dataset of male and female smokers in Australia in different years, a bar diagram has been provided in this context to get a clear view of rate of smoking in this above-concerned country.
In this perspective, due to increase rate of smoking, the cost of the economy rises in a significant manner. The increase in smoking rate would enhance the social cost and health cost of the nation leading to the death rate of the economy which increased from 19429 in the year 1999 to 14901 to the year of 2005 (The costs of smoking - Tobacco In Australia, 2016).
Figure 3: Tangible and Intangible cost of the economy
Source: (The costs of smoking - Tobacco In Australia, 2016)
From the above figure, the associated cost of smoking namely tangible and intangible cost is presented in this context, which is linked with the labor costs, health illness, and abusive consumption, loss of joyful life, psychological coats and cost of fires which is associated with smoking.
Negative externality and market failure of the economy
According to Ashley, Nardinelli & Lavaty (2015), negative externalities would influence the market failures of the economy as it causes health care diseases, lungs cancer and pollution in the economy, which is not desirable. Moreover, in this perspective, the amount of private benefit is higher than the amount of social benefit for which the deadweight loss of economy occurs. The consumption level of the economy is much higher than the socially efficient level of the economy along with the lower level of price (Sun & Daniels, 2014).
Figure 3: Negative externality of the economy
Source: (Pearson Australia, 2016)
According to the figure, the demand curve of social benefit refers to the consumption of cigarettes which is lower than the demand curve of private benefit. As the people of this country over consumed the cigarettes, the market equilibrium of the economy is higher than the socially efficient level of equilibrium (Sassi, Merkur & McDaid, 2015). As a result, deadweight loss occurs in the nation, which is a serious threat to the economy.
Policy of plain packaging system
In this context, the Australian government would take an initiative of plain packaging for reducing the increased level of smoking rate. The policy would concentrate on the facts of expanding and updating of the health warnings and regulate the restriction on the advertisement of tobacco consumption which is beneficial to diminish the habit of tobacco consumption (Department of Health | Introduction of Tobacco Plain Packaging in Australia, 2016). Furthermore, the Australian government imposed a tax on smoking and increased the excise duty approximately 25% in the year of 2010. In addition, the people who are engaged to smuggling offenses are punished by the government of the country.
To regulate the act successfully, the Australian government would impose an act of Tobacco Plain Packaging in the year 2011 and Tobacco Plain Packaging Regulations in the year 2011 for diminishing the consumption of tobacco. To effective the policy regarding the plain packaging system, the Australian government would levy an excise duty according to the weight of the production of tobacco and cigarette and rose the real excise duty of the tobacco products through the index of Consumer Price from the year of 1993 to the year 1995 (The costs of smoking - Tobacco In Australia, 2016). By increasing the prices of tobacco through the procedure of taxation, the governments of this country would be able to reduce the health issues, death, and diseases which are mainly caused by the bad impact of smoking. In the words of Sassi, Merkur & McDaid (2015), due to increasing in the price of tobacco products would influence to fall the consumption rate of this product which is a very effective procedure for the plain packaging system. On the contrary, as commented by Soon, Jean & Tan (2015), this policy would be ineffective to reduce the consumption of tobacco and cigarettes as the human nature always addicted to smoking.
Figure 4: Phase of plain packaging system of different age groups
Source: (Department of Health | Evaluation of Tobacco Plain Packaging in Australia, 2016)
The above figure depicts the fact that the plain packaging system is effective for reducing the consumption of smoking in different age groups. The young generations would positively respond compare to the other age groups of the people in this context.
Though the policy has faced some barrier through the factors of elasticity, rent seeking, industry opposition, unexpected consequences and asymmetric information by which the effectiveness of this policy cannot be achieved fully (Ashley, Nardinelli & Lavaty, 2015). In the words of Soon, Jean & Tan (2015), the rise in the price of the cigarettes would not have any direct impact on the amount of consumption as the nature of the product is inelastic. Moreover, most of the smokers are not aware of the government policies which are beneficial to their health and do not bother about the imposition of tax and excise duty on the price of cigarettes.
By referring to the above analysis, it can be inferred that the Australian government would concentrate on reducing the tendency of smoking in different age groups of the people by the plain packaging system. But, the policy has faced some problems relating to the asymmetric information and elasticity of products.
The costs of smoking - Tobacco In Australia. (2016). Tobaccoinaustralia.org.au. Retrieved 30 August 2016, from
Gender Indicators, Australia, Jan 2013. (2016). Abs.gov.au. Retrieved 30 August 2016, from
Ashley, E. M., Nardinelli, C., & Lavaty, R. A. (2015). Estimating the benefits of public health policies that reduce harmful consumption. Health economics,24(5), 617-624.
Department of Health | Evaluation of Tobacco Plain Packaging in Australia. (2016). Health.gov.au. Retrieved 30 August 2016, from
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Sun, L. G., & Daniels, B. (2014). Mirrored Externalities. notre dame law review, 90(1), 135.