Tuesday 27 April 2010

Alcohol policy

Palmer's report comes out this afternoon; Cabinet will then take a few months to decide what to do. So, what will they do? iPredict launched some contracts this morning. How are things looking?At those prices, I'm shorting excise tax increases of 30% or more. There is absolutely no economic case for increasing excise rates by more than an inflation adjustment; Treasury knows it. I can imagine their mucking about by putting in differential levels for low-strength beer. I can imagine their bumping up the rates on high strength beer, which will be bad for the craft brewers. I can imagine their going after RTDs because it looks like doing something. But I can't see the set of those bumping average excise tax rates up more than 20%.

I can see them dropping the drink driving rate. There's little point in doing it as I've seen zero evidence suggesting that drivers in that range are responsible for any particular increase in accidents; moreover, it'll hurt the hospitality industry where risk averse folks cut their drinking a lot to avoid the small risk that a light meal or a bad day results in blowing over 0.05: aim at 0.03 to avoid hitting 0.05 by accident (where folks currently aim at 0.05 to avoid blowing over 0.08). But I can see them doing it: it would be consistent with their recent reduction in the youth drink driving limit. I'll short it a bit at current prices, but I'd be nervous about building up too big a short position here.

1 comment:

  1. The problem is the government will want to be seen to be doing something.

    They won't be able to get the age raised or the closing times restricted, so the tax is the obvious one.

    They'll get plenty of support from the Maori Party and the Greens to do that too.