New Zealand’s smoking ban is destined to fail

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I hate cigarettes with a passion. My mum smoked for 40 years and one of my worst childhood memories is the smell of cigarettes around the house. Thankfully she quit a decade ago, but has been left with emphysema, which has become a big drain on her quality of life.

With these biases in mind, I should be the first to support the New Zealand Ardern Government’s plan to ban smoking:

New Zealand has announced it will outlaw smoking for the next generation, so that those who are aged 14 and under today will never be legally able to buy tobacco.

New legislation means the legal smoking age will increase every year, to create a smoke-free generation of New Zealanders…

The government announced the rising age alongside other measures to make smoking unaffordable and inaccessible, to try to reach its goal of making the country entirely smoke-free within the next four years. Other measures include reducing the legal amount of nicotine in tobacco products to very low levels, cutting down the shops where cigarettes could legally be sold, and increasing funding to addiction services. The new laws will not restrict vape sales.

“We want to make sure young people never start smoking so we will make it an offence to sell or supply smoked tobacco products to new cohorts of youth. People aged 14 when the law comes into effect will never be able to legally purchase tobacco,” [associate health minister Dr Ayesha Verrall] said…

New Zealand’s daily smoking rates have been dropping over time – down to 11.6% in 2018, from 18% a decade earlier.

Logically, this policy will achieve three broad outcomes:

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  1. A massive black economy in cigarettes will emerge. Illegal tobacco smuggling will become rampant, funding organised crime and posing a potential national security risk.
  2. An army of Daigou-style shoppers will emerge whereby older shoppers not banned from buying cigarettes on-sell to banned younger shoppers at a mark-up.
  3. Vape sales will boom, posing new health risks.

On the first point, we witnessed a massive increase in black market cigarette trading in Australia when taxes pushed the price of a dart to over $2. New Zealand should, therefore, expect even worse.

There was a historical event in the USA called prohibition. Maybe Jacinda should study it and see how it ended?

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.