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Budget 2012: Smokers open wallets wide

25 may 2012

The 2012 Budget calls for a NZ$5 increase in the price of 20 cigarettes. Photo / Thinkstock

The Budget’s $5 increase in the price of 20 cigarettes has been welcomed by public health experts, but some wish the Government had added a much bigger “shock” hit to its series of smaller rises.

Associate Health Minister Tariana Turia announced tobacco excise taxes would rise by 10 per cent a year on January 1 for the next four years.

That will lift the average price of a packet of 20 from about NZ$14 now, to $15.40 next year and $20.50 in 2016.

Read all of’s Budget coverage here.

The good news for Government coffers is an estimated revenue rise from $1.2 billion a year to $1.7 billion by 2016.

Professor Richard Edwards, head of public health at Otago University in Wellington, said the tax rises were a good move and would help to reduce smoking.

“Increasing the tax and therefore the price of cigarettes is one of the most effective ways to help people stop smoking and reduce the number of people who start smoking.

“On the down side, we would have liked there to be an even larger increase because there’s evidence that large increases of 20 or 30 per cent have an additional shock value.”

Adding a rise of that magnitude among the series of 10 per cent rises would have a much greater impact on smoking. It would act as a big trigger and many more people were likely to say, “I’ve had it, I’m going to stop”.

“If you have a big hit, it’s difficult for the tobacco industry to cut that. With smaller ones, they can adjust their prices and smooth the effect of an increase. With a big hit, they have less ability to do that.”

The increases announced yesterday are in addition to the annual tax increases linked to inflation and follow the excise rise of 25.4 per cent on loose tobacco and 10 per cent on cigarettes in April 2010 and two later rises each of 10 per cent on both types of tobacco.

Calls to the Quitline increased dramatically in the weeks after the April 2010 rises. Mrs Turia’s advisers said , based on tobacco company data, the volume of tobacco consumed fell 14 per cent from 2009 to 2011.

Mrs Turia said: “We know that for every 10 per cent increase in the price, tobacco consumption falls by about 5 per cent. Many smokers will quit and many more will reduce their tobacco consumption.”

She also announced $20 million would be spent over the next four years on programmes to encourage quitting and to discourage people from taking up smoking.

Imperial Tobacco spokesman Brendan Walker said the tax rises would create “a lucrative black market for tobacco”.

But Action on Smoking and Health communications manager Michael Colhoun dismissed this “industry scaremongering” as a “tired old argument”.

Before the January excise rise, the Government’s next tobacco control measure will be the ban on displays of tobacco products in dairies and other shops, from July 23.

The public will be consulted on any moves to forced plain packaging.

The cost of smoking
Cost of a 20 pack / Tax increase on a 20 pack of cigarettes
$20.50 10% 2016
$18.60 10% 2015
$16.90 10% 2014
$15.40 10% 2013
$14.00 10% 2012 Jan ($16.00 for more expensive brands)
$12.60 10% 2011 Jan
$11.20 10% 2010 April (On cigarettes; 14% on all other tobacco products)
$8.40 14% 2000 May (Plus extra 6% by tobacco companies)
$6.50 10% 1998 May (On all tobacco)
$5.80 37% 1995 Dec (On non-cigarette tobacco products)

Tobacco revenue to rise from $1.2 billion a year to $1.7 billion by 2016

Regular adult smokers
1990 28%
2005 23.5%
2009 21.3%

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