RETAILERS have reported a spending blitz on cigarettes after the Rudd Government’s price hike announcement yesterday.
The 25% rise in excise tax - equivalent to a $2.16 hike on a pack of 30 - applies from today, although some retailers are offloading existing stock at yesterday’s prices.
Coles spokesman Jim Cooper said management responded to yesterday’s rush by putting quantity restrictions on sales.
“We have seen quite a jump in sales of cigarettes,” he said.
“We’ve had to put a three-carton limit on to try to manage the demand.”
Mr Cooper said the price of cigarettes did not rise at midnight, given the previous rate of excise had already been paid on current floor stock.
He said that stock would most likely be cleared during the weekend, after which the additional 25 per cent would be applied.
A number of tobacconists told the Herald Sun they experienced a massive rush on cigarettes yesterday ahead of the price rise.
“We were almost cleaned out today, it’s been crazy,’’ one said. “It’s so busy.
“This has just come out of the blue.”
Smokemart also reported high demand in its stores, but would not comment further.
Yesterday, Prime Minister Kevin Rudd described his government’s decision to hike the price of cigarettes as a “tough” one that “won’t win the government any popularity”.
He said the tax would raise $5 billion over four years but he hoped it would encourage 87,000 people to kick the habit.
“Cigarettes are not cool,” Mr Rudd said.
Mr Rudd said the 25 per cent tax hike would be used to pay for better health and hospitals.
“This is a tough decision for the government,” Mr Rudd said. “It won’t win the government any popularity.
“The big tobacco companies will hate what we’re doing.
“The government, however, makes no apology whatsoever for what it is doing.
“It is the right decision for two reasons: it will help people to stop smoking and, second, it will raise more money to invest directly into the National Health and Hospitals Network.”
Mr Rudd also used Twitter to defend the new tax: “Not popular but will save lives, take pressure off our hospitals. $5 billion straight to national hospitals fund,” he wrote.
Mr Rudd denied the move was a headline grabbing stunt designed to take attention away from recent bad news which has included a series of government backdowns over childcare, home insulation and an emissions trading scheme.
He said the announcement had been made because the media had recently begun reporting a cigarette tax rise on the way.
The Herald Sun revealed a cigarette tax hike was looming on April 14th.
As a result, the Australian Tax Office had advised that smokers were stocking up on cigarettes prior to the rise coming into effect, Mr Rudd said.
“Cigarette price increases have been shown to be effective in cutting smoking, especially among young people who are particularly sensitive to price,” he said.
Mr Rudd also announced that Australia would be the first country to force cigarettes to be sold in plain packaging from July 1, 2012.
It will ban logos, images, colours and promotional words from cigarette boxes. New laws will also ban internet advertising of tobacco products.
The Government will also increase by $27.8 million to $85 million over four years spending on anti-smoking advertising campaigns.
Mr Rudd said smoking killed 15,000 Australians every year and was the largest preventable cause of disease and premature death.
“Cutting smoking will save lives, take pressure off our hospitals and deliver significant economic benefits, “ Mr Rudd said.
“It is one of the best investments in prevention and keeping people healthy and out of hospital that we can make.”
A government statement says the changes will cut tobacco consumption by six per cent and the number of smokers by two or three per cent.
But supermarket chain IGA says retailers will suffer as a result of the new measures.
The move treated smokers and retailers with contempt, chairman of the national IGA board Mick Daly said.
“It’s a lazy policy response being pushed by some health advocates,” he said in a statement.
“That amounts to a direct attack on approximately 16 per cent of Australians who have made legal and legitimate lifestyle choices.”
Mr Daly said it would undermine retailers and small businesses, while propping up the cigarette black market.
There was evidence the trade of illegal tobacco was increasing at a “disturbing rate”, he said.
“Organised crime feeds off the increased margins of profit often derived from taxing legal products beyond the reach of normal people, while legitimate retailers bear the impact and government reaps the cash,” Mr Daly said.
But a health expert says there will be one million fewer smokers by 2020 as a result of the measures.
Prof Rob Moodie, head of the Federal Government’s preventative health taskforce, said promotional packaging was a very important part of the tobacco industry’s appeal to young people.
By increasing taxes on cigarettes and rolling out measures such as plain packets there was a good chance there’d be one million fewer smokers nationwide by 2020.
“The evidence around this is good, in terms of peoples’ intention to smoke, their attraction to smoke,” Professor Moodie told ABC Radio.
“If you have labels like smooth or gold or silver, they are always perceived to be significantly less harmful.”
Health Minister Nicola Roxon said the move towards plain packets gives cigarette makers no room to gloss over the fact their product was a killer.
She defended the timing of the announcement, which comes before the results of a Senate inquiry into tobacco packaging, saying the plan was part of a range of budget measures on health.
“It has been decided for some time as part of a range of responses to the preventative health taskforce and it is, I think, a really exciting step for us to try and remove the last opportunity for tobacco companies to promote their product, particularly to young people” she told 3AW.
“It’s just part of the puzzle and just another step that will hopefully dissuade people from taking up this habit.”
The government is confident it can take the step towards plain packets legally, despite one tobacco company already preparing to challenge.
“We have firm advice this action can be taken,” Ms Roxon told ABC Radio yesterday.
“Our legislation will be very carefully drafted … we won’t be put off by the fact tobacco companies won’t like this action.”
Queried about the announcement’s timing, Ms Roxon said it was not unusual to make such announcements leading up to the budget.
A spokeswoman for Imperial Tobacco Australia said the company was preparing a legal challenge against the plain packaging move.
“Introducing plain packaging just takes away the ability of a consumer to identify our brand from another brand - and that’s of value to us,” she told ABC Radio.
“It really affects the value of our business as a commercial enterprise and we will fight to support protecting our international property rights.”
She also warned that easy-to-copy plain packaging could be counterfeited, and would circulate without health warnings and ingredients reporting.
Intellectual property and free trade expert Tim Wilson, from the Institute of Public Affairs, said the move could cost taxpayers $3.4 billion a year in compensation to tobacco companies.
“Stripping intellectual property from products is akin to stripping someone of their physical property and requires compensation,” he said.
Opposition health spokesman Peter Dutton said the government had been sitting on a report that recommended the step for 10 months, and had only moved now to win favour in the community.
“If they were convinced I presume that they would’ve introduced the measure before now,” he told ABC Radio.
“It doesn’t surprise me that these sort of distractions are released in the run up to a Newspoll weekend, at a time when the government needs to distract people’s attentions away from their failings.”
Under the changes proposed in a world-first by the Federal Government, cigarette packets will be stripped of familiar logos and colourful imagery in a new bid to stop young people taking up smoking.
Australian Medical Association president Andrew Pesce said the plan wasn’t meant to get smokers to quit, but rather stop young people from starting.
Health groups have praised the proposals, saying the changes could make a significant difference to the number of Australians who smoke.
Cancer Council Australia chief executive Ian Olver said the move would stop some people smoking and cut cancer rates. It would make Australia a world leader in reducing tobacco deaths, he said.
“Tobacco companies cleverly tailor product packaging to attract people to the pack and send a message to smokers about the personality of the consumer,” Prof Olver said.
He said health warnings would be more prominent without other patterns on the packaging.
Quit praised the “gutsy” plan and said it would hamper the recruitment of new smokers.
With advertisment of cigarettes already banned, packaging was serving as the main way to lure people into the habit, executive director Fiona Sharkie said.
“By adopting plain packaging we can stop the tobacco industry from using the pack to recruit new smokers and promote their deadly and addictive products,” she said.
Drab standardised lettering will identify individual cigarette brands. Apart from that, the only “artwork” on packets will be government health warnings.
The ban on colourful images and promotional wording such as “smooth” is being billed as an assault on one of the last bastions of tobacco advertising.
Tobacco manufacturers have long regarded legally-enforced plain packaging as a violation of fair trading and competition principles.
Research has shown that attractive and colourful brand imaging reduces the effectiveness of health warnings.
The Government will now develop and test a generic package design to make the deadly habit less appealing, especially to young people.
By Phillip Hudson, Michael Harvey
AAP, April 30, 2010