Jane Hume (Victoria, Liberal Party) Share this | Hansard source

I rise to speak on the Excise Tariff Amendment (Tobacco) Bill 2016 and the Customs Tariff Amendment (Tobacco) Bill 2016. The coalition is particularly proud of these bills, which will increase tobacco excise charged on domestic production and equivalent customs duties charged on imports by way of four annual increases of 12.5 per cent a year from 2017 to 2020. These increases will replicate the annual increases that were put in place by the former government and continued by this government from 2013 to 2016. In addition, adult average weekly ordinary time earnings based indexation of tobacco excise rates will continue. The next biannual indexation of tobacco excise will occur on 1 March 2017.

From 1 September this year, the excise and excise-equivalent duty rates on tobacco are just over 61c per stick and $763.20 per kilogram of tobacco content. This equates to $15.26 in excise on a packet of 25 cigarettes, which currently retails for approximately $25. Ignoring biannual indexation, the 12.5 per cent increases will increase excise per packet of 25 cigarettes by around $2 each year. This means that, after the final increase in 2020, the excise component of a packet of 25 cigarettes will be around $21.50. The increase in excise and duty will move Australia towards the World Health Organization's recommendation that excise should comprise around 70 per cent of the price of a cigarette. The precise impact on price is uncertain, because tobacco companies may alter their prices beyond that excise change, and that is something which is out of our control.

A number of speakers have already mentioned that each year smoking kills an estimated 15,000 Australians and costs Australia $31.5 billion in social costs, including health costs. This bill particularly aims to reduce the prevalence of smoking in Australia and therefore to minimise the harm of cigarette smoking to the community. The Turnbull government is greatly concerned about the serious health risks of smoking and has continued the efforts of previous governments to support and build on Australia's great success in tobacco control. The excise increases announced in the 2015-16 budget are firmly based on the evidence that they will further help reduce smoking rates in Australia.

To give a brief history of tobacco control in Australia, in 1997 the government implemented a national tobacco campaign. In 2006, graphic health warnings were introduced on most tobacco packaging—and they still scare the bejesus out of most people on a daily basis. Some of those pictures are just terrifying. In 2010, there was a 25 per cent increase in tobacco excise. In 2011, tobacco plain packaging became law. There was some controversy surrounding that, but we believe that it has certainly had an impact. In 2012, all tobacco products sold in Australia were required to be in plain packaging, with updated and expanded health warnings. In 2013, we started seeing stepped tobacco excise increases, with 12½ per cent increases in 2013, 2014 and 2015. In 2016, a post-implementation review published on the Office of Best Practice Regulation website on 26 February found that tobacco plain packaging had begun to achieve its objectives. The last 12½ per cent increase in excise kicked in very recently in 2016.

Increasing the price of tobacco products through taxes is widely recognised as an effective and cost-effective tobacco control intervention for reducing tobacco use, particularly among youth and people from lower socioeconomic groups—those disadvantaged communities where smoking is most prevalent. Increased prices may cause some financial stress; that is understood. However, we do believe that that is offset in Australia by the provision of accessible and affordable cessation treatment—something that Senator Xenophon recently spoke about—both in services and in therapies. In Australia, the 2010 post-implementation review, PIR, conducted by the Treasury, estimated that, of the 25 per cent tobacco excise increase, there was an 11 per cent decrease in tobacco consumption. That was based on import data. That was just over two years, which is a fairly significant impact.

The guidelines that the World Health Organization issue recommend that excise account for at least 70 per cent of the retail price, and it has been very challenging for Australia to reach those World Health Organization targets. Tobacco manufacturers have taken the opportunity to increase the price of their product at the same time that excise increases, which is sort of muddying the waters. As reported in 2015 in the World Health Organization report on the global tobacco epidemic, as of mid-2014—and since then there have been already two more 12.5 per cent excise increases as well as biannual increases in excise in line with wage inflation—Australia's total taxes applied to cigarettes were the sixth highest among 106 countries who reported to the World Health Organization.

It also accounted for, at this stage, 47.67 per cent of the total retail price of the most popular brand of cigarettes, which was Winfield 20 packs. Goodness me, when did Winfields become the most popular brand? I speak as an ex-smoker. I was actually one of those smokers who gave up when they became pregnant. But I was a passionate smoker. In fact, I think I might have smoked for Australia at one stage; I was very good at it.