Sunday, May 18, 2008

Sunday dollars+sense: Tax alcopops. To extinction.

What is it about prices that the Coalition doesn’t understand?

Push up the price of something and people usually buy less of it than they would have had its price remained low.

Especially when those people are young, and so not yet addicted to it and short on cash.

Alcopops look and taste like soft drinks. They are brightly-coloured, in small bottles – attractive to children. Their sweetness masks the taste of their alcohol.

Young people don’t like the taste of alcohol. (It is acquired later, just as is the taste for chilies.)

But give a teenager a few red or green strawberry or melon flavoured alcopops and he or she will gradually get used to alcohol and want more of it...

Alcopops are starter drinks for kids.

Medical research suggests that the longer the consumption of alcohol can be delayed the better. It acts as a as neurotoxin for children and adults below the age of 25. Their brains are not fully-developed.

Disturbingly, the sales of alcopop starter drinks are soaring. That’s good news for the manufacturers, but bad news for the brains of young people.

The Treasury believes that its proposed tax hike will slow down the growth in sales by 43 million bottles.

The Opposition has pretended not to hear. It has latched on to another part of the Treasury analysis that says the sales of alcopos will continue to climb even after the tax increase.

They will, but by less than they would have. What part of that doesn’t the Opposition understand?

Or perhaps it does understand. In his Budget in Reply speech on Thursday night the Opposition Leader Brendan Nelson put forward the apparently contradictory position that the tax hike would be so effective that it would turn young people away from alcopops toward cheaper forms of alcohol and drugs.

For people used to alcohol there will indeed be substitution to cheaper forms of it. (The drugs suggestion was a bit of a stretch.)

But for young people not yet enticed onto alcohol early by easy-to-drink alcopops the price increase will help. It will make the take-up of alcohol more difficult.

The Opposition also seems confused by the proposition that a tax hike on something could both raise money and turn young people away from it.

Have they not been paying attention to what’s happened to smoking?

The tax hike will raise money from people already addicted, while dissuading potential addicts from trying it out.