Could legalising cannabis raise $2 billion a year?

Greens Senator Richard Di Natale has referred to independent costings that show billions in potential income from legalising the drug

Greens leader Senator Di Natale has declared that legalising cannabis will raise almost $2 billion a year for treatment, education and the health system.

Senator Di Natale referenced costings, seen by AJP, that have been extrapolated by the Parliamentary Budget Office (PBO) based on the Greens’ proposal to legalise the production and sale of recreational cannabis in Australia.

This proposal includes the establishment of a new agency, the Australian Cannabis Agency, to oversee the regulation of recreational cannabis.

The agency would act as the sole wholesaler and would be responsible for issuing production licences to cultivators and sale licences to private retail outlets.

Parliamentary Budget Officer Jenny Wilkinson conducted the costing, finding that the proposal would be expected to increase the fiscal balance by $3.58 billion over the 2017-18 Budget forward estimates period, based on a variety of assumptions.

This amounts to about $2 billion per year, says Senator Di Natale, adding that this money could go towards treatment resources.

“Our plan to legalise cannabis will bring in billions of dollars, to fully fund drug education and treatment programs and provide a much-needed funding boost for our hospitals and Medicare,” says Senator Di Natale.

Sales of recreational cannabis under the proposal would attract the GST as well as an excise, whereas no tax is currently being paid on the income derived from illegal trading of cannabis.

The proposal would also be expected to result in a decrease in departmental expenses for the Australian Federal Police due to the reduced requirement for cannabis law enforcement, the PBO points out.

However the PBO says there is a “high level of uncertainty” regarding the costing as “there is limited information available to estimate the level of consumption of recreational cannabis or the market price”.

Assumptions for the costing were based on analysis of countries and states where legalisation of recreational cannabis has occurred.

The magnitude of annual sales of cannabis under the proposal was calculated by multiplying the expected number of cannabis users per year, by the estimated average amount consumed per year.

This amount was then forecast and projected to a two-year period with adjustments for behavioural responses.

Consumption of cannabis and associated arrests continue to rise, according to the Greens.

“The reality of this choice is that millions of Australians are forced to buy cannabis of unknown quality or strength from criminal drug dealers, or grow cannabis plants at home illegally,” says the political party in a statement.

“Creating a regulated legal market for cannabis … [would] allow for the current vast expenditure on the criminal response to cannabis to be redirected to drug treatment, education, and other harm reduction programs.”

However Federal Health Minister Greg Hunt has so far ruled out the proposal, saying that it is “dangerous and medically irresponsible”.

“Cannabis has very serious risks in relation to physical health, and in particular, to mental health,” Minister Hunt told reporters.

“That’s why it’s a highly regulated drug.”

Previous Research Roundup
Next New flu vax milestone for Queenslanders

NOTICE: It can sometimes take awhile for comment submissions to go through, please be patient.