Tuesday 24 August 2010

Alcohol amendments

Simon Power has released Cabinet's proposed legislative response to the Law Commission's review of alcohol legislation. Lots of folks have provided decent commentary; AntiDismal links through to most of them.

It's not as bad as it could have been.

  • Excise tax increases have been ruled out, but minimum price regulation hasn't been. It would be interesting to see to which margin competition moves under that regime. In the first instance there will be rents for folks making low-end product, but rents like that can't last. If a product costs $5 to produce but faces a minimum price of $10, something's gotta give. Some of the worst quality product would be pushed off the market, leaving the stuff that actually costs more to produce. But there'll be some folks who are fairly indifferent on the quality side in that range. Does low-end product then get bundled with other ancillaries?

    On the demand side, I'd expect this to be the kind of rule that would start seriously pushing folks into home distillation. If the price floor is set too far above current equilibrium. It would also be interesting to test the effects of this kind of rule on different qualities of alcohol. Low range, undrinkable, beer costs about $1/bottle (330 mL). Bottom of my drinkable range is about $2/bottle. Good beer starts around $4/bottle. Do folks start pushing farther up the quality spectrum when good beer becomes relatively less expensive, or do income effects dominate?
  • There likely won't be a blanket increase in the purchase age, but 18-19 year olds may be unable to buy alcohol except at bars. Congratulations to HANZ for that one, I suppose. This is, of course, almost useless as it remains legal for 18-19 year olds to possess alcohol. I'd seen somebody call this an excise tax applied to 18-19 year olds who'll have to pay a small premium when off-licence; that seems about right.

    Do note this, though:
    119. Either
    a) Agree that the alcohol purchase age be set at 18 years for on-licence sale and supply and 20 years for off-licence sale and supply;
    OR [supported by the Treasury]
    b) Invite the Minister of Justice to report back to Cabinet with quantified analysis of the costs and benefits of the different options for changes to purchase age;
    I'd love to see Treasury's notes. I'll have to make the request, I suppose.
  • They broaden the objective of alcohol legislation:
    Agree that the objective of sale of alcohol legislation be broadened from a focus on reducing alcohol abuse to a focus on minimising alcohol-related harm, including crime, disorder and public health problems;
    Power notes elsewhere in the document the intention to curb harms while protecting the enjoyment of moderate drinkers. I wish that some note of such benefits were made explicit in the objective statement here. The marginal harm avoided by a tightening of legislation ought be no greater than the marginal harm imposed on moderate drinkers.
  • A default national bar closing time, around which localities can set different rules. A few folks have worried about local wowsers running wild - not an unreasonable concern. I'm not sure this gives them powers they didn't already have though, and I like that locales can also adopt more liberal policies if they want. But again note that there's an option B, supported by Treasury, asking the Minister to report back with costs and benefits of various proposals.
  • Regulatory takings. A bunch of folks running small shoppes that sell alcohol are going to have a hard time getting their liquor licences renewed under the new legislation.
    45. Agree that no compensation will be payable for licensees who are not eligible to have their current off-licence renewed under the proposed criteria;
    There are a lot of immigrant families whose businesses will be destroyed by this legislation.
  • They make provision for the Minister of Justice to ban particular alcoholic products or classes of products deemed particularly unhealthy or harmful. I'm guessing this is pointed at RTDs mixing alcohol and caffeine or other energy drinks. RTDs are subject to other rules mandating maximum alcohol content. I remain confused about the worries about RTDs. The production technology isn't exactly all that difficult. Get a bottle of spirits, get a bottle of mix, pour....
iPredict had most of this right early on. No increase in excise taxes, check. No increase in the on-licence age, check. No increase in the off-licence age before 1 July 2011, check - if third reading is scheduled for June 2010, it's unlikely to be in effect in July. There was a very large temporary spike up in this contract 'till folks figured out the dates. I would have done very well on the set of these contracts as a whole but I didn't work out the dates quickly enough either. Ah, well.


  1. One comment re alcohol issues - with govt planning on "cracking down" on RTD's I'd expect a rise in cask wine sales. They will once again provide the best bang for your buck, just like in my teens. Ahh, nasty cheap cardboard wine - good times :)

  2. I don't understand at all why they want to crack down on RTDs. They really aren't that cheap and most of them don't have much alcohol in them either, I think death from water intoxication would probably come before alcohol poisoning if that is the only thing they are drinking. Also the inconvenience of carrying them would be enough to deter drinking enough to get stupid drunk. A bottle of vodka however, is easy to carry and has a pretty good standard drink per dollar value (those standard drink values on the sides of bottles are so handy when it comes to working out how to maximize drunkenness under a budget constraint!) and it is alot easier to get dangerously drunk on vodka when you are drunk enough to no longer be worried about how it tastes without mixers.

  3. I think it depends where you shop. At a pub with an off-licence attached (which is on my way home from work) I recently spotted a sign advertising one of the cheap bourbon&cola rtd's for <$20 per dozen, and these were 10% alc/vol. That's pretty good value for money if you can stomach it. Personally I'd rather have a beer.

  4. @Lats: That could get covered under minimum pricing regulations; stay tuned.

    @rsw37: I think the cut point for "death by water before death by alcohol" is around 1.7% - a bit lower than 5%.