13.5 Impact of price increases on tobacco consumption in Australia

Apparent consumption of tobacco products has been shown in many countries to be negatively associated with the price or affordability of tobacco products. Figure 13.5.1 shows a clear pattern of declines in sales of cigarette products in the US when prices increase but also a clear pattern of increases in sales when prices decline in real terms.

A similar pattern is evident in South Africa.2

Australia has had strong tobacco-control measures in place for several decades and there have been no periods over that time when tobacco consumption has increased. Nevertheless, in line with the findings of price elasticity studies in numerous other countries,3–6i substantial real increases in the price of tobacco products in Australia have been followed by larger-than-usual declines in apparent and reported tobacco consumption.

During the period when there were many increases in state franchise fees on tobacco and following the largest increases in excise and customs duty on tobacco products in 1999 and 2010, the prevalence of smoking in Australia also declined substantially–see Introduction, Figure I.3.

The following four sections summarise evidence from Australian studies of the effects of increases in taxes and prices of tobacco on tobacco consumption, reported smoking-related behaviours and smoking prevalence in this country.


Figure 13.5.1.psd

Figure 13.5.1
Tobacco sales compared with price of a pack of cigarettes, US 1970–2007

Source: Chaloupka 20091

Note: Pack price expressed in April 2008 dollars


Figure 13.5.2.psd

Figure 13.5.2
Tobacco sales compared with price of a pack of cigarettes, South Africa, 1961–2008

Source: Blecher 20102

Note: Pack price expressed in April 2008 dollars

13.5.1 Declining excise and customs receipts following price increases in Australia

Figure 13.5.3 plots the real price of tobacco products against tobacco consumption in Australia between 1973 and 2011. The Cigarettes and Tobacco Sub-group of the Alcohol and Tobacco Sub-index of the Australian Consumer Price Index (which has been available since 1973) is used as an indicator of real changes in price. Per capita tobacco consumption is calculated using Australian Bureau of Statistics population figures on the number of persons
15 years of age and over, and data on the weight of tobacco products dutied.9

Figure 13.5.3 shows that the weight of dutied tobacco products fell in line with real increases in the price of tobacco and cigarettes. Looking at the 20 years since 1991 in closer detail, it is evident from Figure 13.5.4 that the biggest declines occurred in periods with the largest real price increases.

The relationship between apparent consumption and affordability is particularly clear over the 12 years from 1998, with major declines in the numbers of cigarettes subject to excise and customs duty following reforms of tobacco taxes in 1999 to 2001 and the increase in excise and customs duty in 2010 (Figure 13.5.5).


Figure 13.5.3.jpg

Figure 13.5.3
Real tobacco prices and tobacco consumption in Australia, 1972–73 to 2010–11

Sources: ABS 2012,10 Scollo 20129

Figure 13.5.4.jpg

Figure 13.5.4
Real tobacco prices and tobacco consumption in Australia, 1990–91 to 2010–11

Sources: ABS 2012,10 Scollo 20129

Note: Based on estimates of weight of tobacco dutied9

Figure 13.5.5.jpg

Figure 13.5.5
Affordability of cigarettes and apparent tobacco consumption in Australia, 1998–99 to 2010–11

Sources: Refer to sources for Figure 13.4.1; and Scollo 20129

Notes: Figure 13.4.1 Time (in minutes) needed on average weekly earnings to earn enough to buy one week's worth of leading brand of cigarettes (20 cigarettes per day), 1984–2011; Scollo estimates of numbers of cigarettes dutied based on reports from the Australian Bureau of Statistics and Australian Taxation Office9

13.5.2 Declining prevalence following price increases in Australia: changes in reported cessation and consumption and other smoking and product-related behaviours among adults

Many smokers and recent ex-smokers report that high prices of tobacco products are a key factor motivating their attempts to quit or cut down smoking. Data from the National Drug Strategy Household Survey shows high levels of agreement that price was an important factor in 2001 shortly after the 1999–2001 reforms in tobacco taxation. Levels fell in the subsequent surveys and then increased again following the large increase in excise and customs duty in April 2010–see Figure 13.5.6.


Figure 13.5.6.jpg

Figure 13.5.6
Percentages of smokers and recent ex-smokers agreeing that tobacco prices were an important factor motivating their recent attempts to change smoking behaviour

Sources: AIHW 2002,11 2005,12 200813 and 201113 Smoking cessation

A study in New South Wales used data from the Cancer Institute NSW Tracking Survey (which interviews 50 smokers and recent quitters each week by telephone) to examine rates of recent quitting activity (stopping smoking or trying to quit within the previous one month period) in the three months before and the five months after the increase in tobacco excise duty on 30 April 2010. These were compared with quitting activity in the same months in 2009. The proportion of New South Wales smokers and recent quitters who reported quitting activity in May 2010 was 22% compared with 13% in the preceding month and 12% in May 2009. Respondents interviewed in the three months following the tax increase (May–July) were significantly more likely to report quitting activity than those interviewed in the three months prior to the tax increase (OR = 1.84; 95% CI1.26–2.69, p<.01).14 Rates of monthly quitting activity among the New South Wales population returned to previous levels three months after the tax increase. Smoking and product-related behaviour

Another study in New South Wales also using the Cancer Institute NSW Tracking Survey aimed to quantify a broader range of possible responses to price increases.15 Responses to the price increase included smoking-related changes (trying to quit, cut down) and product-related changes (changing to lower priced brands, started using loose tobacco, bought in bulk). Recent quitters were asked how much the increasing price of cigarettes influenced their smoking behaviours. Overall, 47.5% of smokers made smoking-related changes and 11.4% made product-related changes without making smoking-related changes. Multinomial logistic regressions showed that younger smokers (vs. older) were more likely to make product-related changes and smoking-related changes in comparison to no changes. Low or moderate income smokers (vs. high income) were more likely to make smoking-related changes compared to no changes. Highly addicted smokers (vs. low addicted) were more likely to make product-related changes and less likely to make smoking-related changes. The proportion of smokers making only product-related changes decreased with time since the price increase, while smoking-related changes increased. Recent quitters who quit after the tax increase (vs. before) were more likely to report that price influenced them.14

A study in Victoria used data from the Victorian Smoking and Health Survey conducted in November 2010 to assess smokers' reported changes in smoking habits following the 25% increase in duty in April 2010.16 Of all smokers surveyed (recent quitters were not asked such questions), 45% reported that they had changed their smoking behaviour in response to the price increase, either by trying to quit (28%) or by smoking fewer cigarettes (34%). Younger smokers were most likely to report that they tried to quit as a result of the price increase (37% tried to quit, compared with 27% of mid-aged and 23% of older smokers.) Approximately half of smokers from the low socio-economic status (SES) group who were still smoking reported trying to change their behaviour compared with 45% of mid-SES and 37% of high-SES smokers (p=0.04). In 2010, 48% of smokers had changed their purchasing behaviour in at least one way following the price increase. More than 20% had looked for a cheaper source for their regular brand, while 15% switched to a cheaper brand or bought in bulk. Small proportions reported having bought loose tobacco since the price increase–9% had bought roll-your-own tobacco, and 3% reported that they had purchased unbranded tobacco. Only 18% of smokers changed their purchasing behaviour without attempting to change their smoking behaviour (Table 13.5.1).

Table 13.5.1
Smokers' self-reported changes to smoking and purchasing behaviours following the 2010 price increase, Victoria


Changed smoking behaviours

Tried to quit

Smoked fewer cigarettes

Changed purchasing behaviour

Switched to a cheaper brand

Looked for cheaper source of regular brand

Bought smaller number of cigarettes in one go

Bought cigarettes in bulk

Bought R.Y.O.

Bought unbranded tobacco

Changed purchasing behaviour without smoking change

All (n=604)













Males (n=294)












Females (n=349)












Age group

18 to 29 yearsa (n=162)












30 to 49 yearsb (n=279)












50 plus (n=163)













Low SESc (n=223)












Mid SES (n=253)












High SES (n=128)












Source: Hayes 201116

Notes: t = p<0.05 *=p<0.01 **=p<0.001; a b c= reference categories for logistic regression

Another study in Victoria tracked smoking and purchasing behaviour before and after the April 2010 tax increase among a cohort of 491 smokers identified in the 2009 Victorian Smoking and Health Household Survey.17 This study found that 15% of smokers from the baseline survey were no longer smokers at follow-up (nine months after the 2009 survey and three months after the increase in excise duty). Based on annual quit rates from another comparable cohort survey running in Australia since 200218 it was estimated that between one-third and one-half of the people who had quit would have done so as a result of the tax increase. About 40% of those who were not smoking at the time of the follow-up survey claimed that they had tried to quit specifically in response to the tax increase. Another 17.9% of respondents reported having tried to quit in response to the tax increase but were smoking again at follow-up. Also, 35.8% of respondents at follow-up indicated that they had tried to cut down on consumption in direct response to the tax increase. The average reported number of cigarettes smoked per day among those who smoked either factory-made or roll-your-own cigarettes regularly in both years declined from 15.45 per day to 15.02, with the decline most pronounced among the heaviest smokers. While 42% of the cohort responded to the increase in duty by engaging in some form of price-minimising behaviour (such as buying bulk or switching to a cheaper brand), the average price paid per stick still increased by 22.8% , in line with the 20% increases in recommended retail prices following the increase.

13.5.3 Declining consumption following price increases in Australia: reported prevalence and consumption in children

Analysis of prices and reported consumption following the reform of tobacco taxes between 1999 and 2001 also shows evidence of reduced tobacco consumption corresponding with significant declines in the affordability of cigarettes and other tobacco products, both among adults19 and among children.

Figure 13.5.7 plots reported consumption per student against the affordability of cigarettes for young people. Affordability is calculated by dividing the average amount of pocket money reported among students aged 15 years by the cost per stick of the leading brand of cigarettes among the same group.

Figure 13.5.7 shows that the reported number of cigarettes smoked per secondary school student in Australia increased between 1990 and 1996 in line with increases in affordability. It dropped between 1996 and 1999 despite a small increase in affordability. (The hard-hitting National Tobacco Campaign was most prominent between May 1997 and December 1998.) It then dropped even more dramatically between 1999 and 2005 in line with a further big drop in affordability following the reforms to Australia's tax system between 1991 and 2001 (see Section 13.2).


Figure 13.5.7.jpg

Figure 13.5.7
Reported consumption per secondary school student in Australia per year vs. affordability, 1990–2011 (number of cigarettes affordable per week to an average 15-year-old)

Sources: Chikritzhs et al 1997,20 NSW Retail Tobacco Traders' Association 1990s,21 Hill and Alcock 1999,22 Hill, White and Effendi 2002,23 White and Hayman 200424 and 2006,25 White and Smith 2009,26 and White and Bariola 201227

Note: reported consumption for those who smoke weekly is divided by all secondary school students to calculate per capita consumption.

13.5.4 Quantifying the contribution of price increases to declining consumption

Econometric studies that tease out the impact of numerous factors are required to quantify the contribution of price increases to declines in consumption compared with the contribution of other policies implemented over the same period.

A number of economic studies were published in the 1970s to early 1990s attempting to quantify price elasticity of demand in Australia. These were summarised by economist Terry Alchin in 199228–see Figure 13.5.8.


Figure 13.5.8.jpg

Figure 13.5.8
Early price elasticity of demand estimates for Australia

Source: Alchin 199228

All these estimates were very close to the –0.4% international approximate mean for developed country established by the World Bank in 1999.29

In a University of Melbourne study examining factors affecting sales of tobacco products in Australia published in 1999,30 economists Peter Bardsley and Nilss Olekalns concluded that virtually all the reduction in tobacco consumption in Australia between 1962–63 and 1995–96 could be attributed to increases in price resulting mainly from increases in tax levels. In line with international estimates, for the earlier period of the study they found short-run price elasticity of demand for tobacco products of between –0.2 and –0.3% and long-run estimates of between –0.5 and –0.6.ii

In a seminal study using time series analysis to examine the effects of various tobacco control policies on monthly smoking prevalence,33 Wakefield and colleagues found that real price increases and reductions in affordability of tobacco products was the most significant of seven policy interventions examined. Anti-smoking advertising also had a measurable impact, but the effects were nowhere near as strong as the effects of price.33 They concluded, based on their analysis of data over the period 1995–2006, that prevalence of smoking could be reduced by 0.3 of a percentage point by either exposing the population to televised anti-smoking ads for an average of almost four times per month (390 GRPs) or by increasing the costliness of a pack of cigarettes by 0.03% of gross average weekly earnings.

Relevant news and research

For recent news items and research on this topic, click here (Last updated June 2024)


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2. Blecher E. Targeting the affordability of cigarettes: a new benchmark for taxation policy in low-income and-middle-income countries. Tobacco Control 2010;19:(4):325-30. Available from: http://tobaccocontrol.bmj.com/content/19/4/325.abstract

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8. Gruber J, Sen A and Stabile M. Estimating price elasticities when there is smuggling; the sensitivity of smoking to price in Canada. Journal of Health Economics 2003;22(5):821–42. Available from: http://www.ncbi.nlm.nih.gov/pubmed/12946461

9. Scollo M. Chapter 2. Trends in tobacco consumption. In: Scollo, M, and Winstanley, M, ed. Tobacco in Australia: facts and issues. Melbourne, Australia: Cancer Council Victoria, 2012 In press. Available from: www.TobaccoInAustralia.org.au

10. Australian Bureau of Statistics. 6401.0 Consumer Price Index, Australia Table 11. CPI: group, sub-group and expenditure class, index numbers by capital city. Canberra: ABS, 2012. Updated 24 April 2012 [viewed 25 April 2012] . Available from: http://www.abs.gov.au/AUSSTATS/abs@.nsf/allprimarymainfeatures/938DA570A34A8EDACA2568A900139350?opendocument

11. Australian Institute of Health and Welfare. 2001 National Drug Strategy Household Survey: detailed findings. Drug statistics series no. 11, AIHW cat. no. PHE 41. Canberra: AIHW, 2002. Available from: http://www.aihw.gov.au/publications/index.cfm/title/8227

12. Australian Institute of Health and Welfare. 2004 National Drug Strategy Household Survey: detailed findings. Drug strategy series no.16, AIHW cat. no. PHE 66. Canberra: AIHW, 2005. Available from: http://www.aihw.gov.au/publications/phe/ndshsdf04/ndshsdf04.pdf

13. Australian Institute of Health and Welfare. 2007 National Drug Strategy Household Survey: detailed findings. Drug statistics series no. 22, AIHW cat. no. PHE 107. Canberra: AIHW, 2008. Available from: http://www.aihw.gov.au/publications/index.cfm/title/10674

14. Dunlop S, Cotter T and Perez D. Impact of the 2010 tobacco tax increase in Australia on short-term smoking cessation: a continuous tracking survey. Medical Journal of Australia 2011;195(8):469–72. Available from: http://www.mja.com.au/public/issues/195_08_171011/dun10074_fm.html

15. Dunlop SM, Perez D and Cotter T. Australian smokers' and recent quitters' responses to the increasing price of cigarettes in the context of a tobacco tax increase. Addiction 2011;106(9):1687-95. Available from: http://dx.doi.org/10.1111/j.1360-0443.2011.03492.x

16. Hayes L. Smokers' responses to the 2010 increase to tobacco excise; findings from the 2009 and 2010 Victorian Smoking and Health Surveys. Melbourne, Australia: Centre for Behavioural Research in Cancer, Cancer Council Victoria, 2011.

17. Scollo M, Zacher M, Warne C, Hayes L, Durkin S and Wakefield M. Impact in Victoria of the April 2010 25% increase in excise on tobacco products in Australia. Short-term effects on prevalence, reported quitting and, reported consumption, real cost, and price-minimising strategies. Melbourne, Australia: Centre for Behavioural Research in Cancer, Cancer Council Victoria, 2012.

18. Fong GT, Cummings KM, Borland R, Hastings G, Hyland A, Giovino GA, et al. The conceptual framework of the International Tobacco Control (ITC) Policy Evaluation Project. Tobacco Control 2006;15(suppl_3):iii3-11. Available from: http://tc.bmjjournals.com/cgi/content/abstract/15/suppl_3/iii3

19. Scollo M, Younie S, Wakefield M, Freeman J and Icasiano F. Impact of tobacco tax reforms on tobacco prices and tobacco use in Australia. Tobacco Control 2003;12(suppl. 2):ii59–66. Available from: http://tc.bmjjournals.com/cgi/content/abstract/12/suppl_2/ii59

20. Chikritzhs B, Stockwell TF, Dyskin E and O'Connor J. The Impact of Tobacco Control Legislation on a cohort of Perth and Sydney Schoolchildren 1992-1994. Perth: National Centre for Research into the Prevention of Drug Abuse, Curtin University, 1997.

21. NSW Retail Tobacco Traders' Association. Price lists--cigarettes. The Australian Retail Tobacconist 1990s;51 to 59(February editions):x-x.

22. Hill D and Alcock J. Background to campaign. In: Hassard, K, ed. Australia's National Tobacco Campaign: evaluation report vol. 1. Canberra: Commonwealth Department of Health and Aged Care, 1999. Available from: http://www.health.gov.au/internet/main/publishing.nsf/Content/health-pubhlth-publicat-document-metadata-tobccamp.htm

23. Hill D, White V and Effendi Y. Changes in the use of tobacco among Australian secondary students: results of the 1999 prevalence study and comparisons with earlier years. Australian and New Zealand Journal of Public Health 2002;26(2):156–63. Available from: http://www.ncbi.nlm.nih.gov/pubmed/12054336

24. White V and Hayman J. Smoking behaviours of Australian secondary school students in 2002. National Drug Strategy monograph series no. 54. Canberra: Australian Government Department of Health and Ageing, 2004. Available from: http://www.nationaldrugstrategy.gov.au/internet/drugstrategy/publishing.nsf/content/mono54

25. White V and Hayman J. Australian secondary school students' use of alcohol in 2005. Report prepared for Drug Strategy Branch, Australian Government Department of Health and Ageing. National Drug Strategy monograph series no. 58. Melbourne: Centre for Behavioural Research in Cancer, Cancer Control Research Institute, The Cancer Council Victoria, 2006. Available from: http://www.nationaldrugstrategy.gov.au/internet/drugstrategy/publishing.nsf/Content/mono58

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29. World Bank. Curbing the epidemic: governments and the economics of tobacco control. Washington: World Bank, 1999. Available from: http://documents.worldbank.org/curated/en/1999/05/437174/curbing-epidemic-governments-economics-tobacco-control

30. Bardsley P and Olekalns N. The impact of anti-smoking policies on tobacco consumption in Australia. Health Promotion Journal of Australia 1999;9(3):202–5. Available from: http://search.informit.com.au/documentSummary;dn=458489558583424;res=IELHEA

31. Chapman S. Commentary: if you can't count it... it doesn't count: the poverty of econometrics in explaining complex social and behavioural change. Health Promotion Journal of Australia 1999;9:206-7. Available from: http://tobacco.health.usyd.edu.au/assets/pdfs/tobacco-related-papers/HPJAEconometrics.pdf

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33. Wakefield M, Durkin S, Spittal M, Siahpush M, Scollo M, Simpson J, et al. Impact of tobacco control policies and mass media campaigns on monthly adult smoking prevalence: time series analysis. American Journal of Public Health 2008;98:1443-50. Available from: http://www.ajph.org/cgi/content/abstract/98/8/1443

i Between 1980 and 1982 the real price of tobacco products in the UK rose 17%. Consumption fell by 16%. In New Zealand between 1987 and 1990, the real price of tobacco products rose by 26% and consumption fell by 16%. In Sweden, a tobacco tax increase from December 1992 raised tobacco product prices by 30%. Consumption per adult fell 19% in 1993, giving Sweden the lowest per capita rate of tobacco consumption among OECD countries. In South Africa, the real (inflation-adjusted) price of cigarettes increased by 115% between 1993 and 2003. Over the same period, aggregate cigarette consumption decreased by about a third and per capita consumption has decreased by about 40%. 7 In Canada, even taking into account the increase in smuggling of cheaper cigarettes destined for the US, consumption of cigarettes fell significantly over the 1980s and early 1990s following substantial increases in excise rates. 8

ii The size of estimates for the later period (–1.2 for the short-run and –3.0 for the long-run) and the authors' conclusion that price was the only significant factor were contested by several commentators, who pointed out that tax levels are merely the most easily quantified of all the tobacco-control policies. 31,32 Using sales rather than consumption or prevalence data, this study would have been detecting the very close relationship between price increases and shifts to cheaper products.