Correcting the costs of alcohol

As this new report explains, the misuse of alcohol in Australia is frequently said to cost the nation $36 billion annually. This figure has been cited in hundreds of news articles and submissions. Yet this estimate comes from a report written in 2010 which was rejected for publication.

Few people are aware that the estimate of $36 billion is not simply the cost of alcohol to taxpayers, the health budget, the economy, or GDP, but the cost of alcohol abuse to drinkers and to others; it is said to include tangible costs of $24.7 billion measuring out-of-pocket expenses, foregone wages and productivity and intangible costs of $11.4 billion consisting of diminished quality of life.

Many of the reported current costs of alcohol result from past consumption. These are tragic statistics but policy makers are unable to undo past damage and policy formulation should only evaluate future costs and benefits.

Estimates of gross costs or benefits of alcohol have little relevance to specific alcohol-related policy proposals (such as wine or 'alcopops' taxation) because they are far removed from the likely impact of specific policy changes. Implicit in the inflation of multibillion dollar costs is the assumption that they require immediate action regardless of the cost or efficacy of the policy. This leads to poor policy.

Alcohol misuse and abuse is a serious issue for Australia but it is complex and multifaceted. The process of formulating public policy would be improved by resisting the urge to appeal to billion-dollar 'cost burden' or 'economic footprint' estimates to justify individual policy changes. Rather, the focus should be on evaluating the incremental future costs and benefits of proposed changes.

The report can be downloaded from the Menzies Research Centre website.

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