National Drug Strategy
National Drug Strategy

The avoidable costs of alcohol abuse in Australia and the potential benefits of effective policies to reduce the social costs of alcohol

1. Introduction

prev pageTOC |next page


Alcohol has been an integral part of the Australian way of life since the arrival of the First Fleet. The production and consumption of alcoholic products makes a substantial economic contribution to national output, employment, regional development, balance of payments and public budgets. Consumed in moderation, alcohol is a product which is widely enjoyed by the Australian community and, when consumed appropriately, can even have health benefits.

However, it also has a darker side. Its consumption is causally linked to an impressive range of problems, including health issues and lower life expectancy, reduced workplace productivity, accidents, drink driving, violence and other forms of crime. Collins and Lapsley (2008a) estimate that the social costs of alcohol abuse in Australia in 2004/05 were over $15 billion.

In these circumstances there arises the difficult issue of how to minimise the social costs of alcohol abuse while maintaining, as far as possible, the undoubted benefits of alcohol to Australian society and the Australian economy. The object of the present study is the provision of economic information which will assist in the design of rational and effective public policies towards alcohol.

This research is an extension of the present authors’ research project, funded by the Commonwealth Department of Health and Ageing, which estimated the social costs in 2004/05 of the abuse of alcohol, tobacco and illicit drugs (Collins & Lapsley, 2008a). It arises also from the participation of these authors as the lead authors in the development of International Guidelines for the Estimation of the Avoidable Costs of Substance Abuse (Collins et al., 2006). These guidelines, developed in a project funded by Health Canada, represent the first major attempt to examine in detail the issues involved in estimating the avoidable costs of substance abuse—that is, those costs that would potentially be able to be eliminated or reduced if appropriate public policies were adopted.

The present project, which is funded by the Commonwealth Department of Health and Ageing, represents the first attempt in Australia to apply these guidelines, in this case to estimate the avoidable social costs of alcohol abuse. It represents an extension of the earlier project which estimated the aggregate costs of substance abuse in Australia and it uses those aggregate estimates as the basis for the avoidable cost estimates presented here.

Top of Page

This is a new area of economic research and the Health Canada avoidable cost guidelines were developed in an attempt to stimulate research, rather than being based upon experience gained from prior research in the area. Much of the more detailed methodological background is explained in Appendix A, with only a brief introduction being provided in the main body of the report. The main report concentrates on specific issues involved in estimating the avoidable costs of alcohol abuse in the Australian context.
The structure of the rest of this report is as follows: The present study is essentially economic in nature, although it is informed and greatly strengthened by reference to research in other disciplines. There exists a great deal of published international research on the effectiveness of various interventions designed to counter alcohol abuse. There is, however, little information in the literature concerning the overall potential economic benefits of such interventions.

The results of the study indicate that it should be possible to reduce the social costs of alcohol by approximately half, if the interventions evaluated here are adopted. However, it should be stressed that it is not the intention of the report’s authors to provide specific policy recommendations. The evidence presented here is essentially economic in nature and it is recognised that there will almost certainly be issues other than purely economic ones which will be relevant to the determination of public policies directed at reducing alcohol abuse. However, since there is inevitably competition for public resources among competing uses, the types of estimates presented here represent a very important input into the public policy-making process.

Top of Page

prev pageTOC |next page