Health & Science

Productivity loss the first driver of costs related to addictions in Australia, report shows

A report shows that productivity losses in Australia account for almost half of the 80 billion Australian dollars addictions cost to the country’s economy, before law enforcement and healthcare costs.

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© Ralf Kunze

A study estimated that addictions to drugs, alcohol, tobacco and gambling cost the Australian economy 80 billion dollars (US$53 billion) in 2021. Almost half of it is due to productivity losses. Moreover, one in four Australians will struggle with addiction in their lifetime.

The study was published by Rethink Addiction, a coalition of organisations advocating for a change to Australia’s attitude and response to addiction, and carried out by KPMG.

Australia has one of the highest rates of addiction related health burdens in the world,” warns the study in its foreword but little was known about the costs to the Australian community. As such, the report examined 60 existing studies on addiction and calculated the costs.

As a result, tobacco addiction costs the most to Australia with 36 billion dollars (US$24 billion), followed by alcohol addiction with 22 billion dollars. Other drugs account for 16 percent of the costs and gambling 13 percent.

These 80 billion dollars of tangible costs are associated with workplace and household productivity losses, harmful consumption, healthcare, justice and law enforcement, social services and others.

Productivity losses in the workplace are for instance the result of absenteeism and lower participation in the labor market. Household productivity is related to output lost due to premature mortality or sickness, economic costs of excess expenditure, job loss, patient-time costs, support provided by family, etc. Cost of engaging in harmful and excessive consumption are the resources used in the purchase of substances or services that involve or enable consumption.

The authors of this report recognize that not every use creates harm and acknowledges there may be tangible and intangible benefits associated with this consumption but the study exclusively focusses on the costs of the harms and does not account for any benefits of consumption, therefore excluding in the report any economic activity gains or tax revenue from harmful use for instance.

Understanding the cost of addiction to provide an opportunity to act

Addiction costs to Australian economy consist for a large part (48 percent) of workplace and household activity productivity losses. Tobacco-related costs are for instance 70 percent due to these productivity losses.

Then, the harmful consumption of the substances or the services itself contributed to 21 percent of the costs to the population (by buying cigarettes for instance). Costs associated with law enforcement and justice made up 16 percent and healthcare costs contributed 10 percent.

The organization, which considers that addiction is not a choice and advocates for reducing stigma around addictions, points out that not so much money is spent for helping people compared to what is spent for fighting traffic. Alcohol, whose use is legal in Australia, was the most common drug recorded in drug-related hospitalization data across five years to 2019–2020, accounting for more than half (53 percent) of drug-related hospitalizations in 2019–2020.

Rethink addiction claims roughly half a million Australians cannot access the treatment they need due to the impact of stigma, limited resources, and excessive wait times for addiction treatment in the public health system.

As a consequence of stigma around addiction and the misconception it cannot be treated, people then wait too long before seeking help as the median time to first treatment for someone experiencing an addiction to alcohol is 18 years.

The report also highlights that one in four Australians will struggle with alcohol, tobacco, other drugs, or gambling in their lifetime according to a 2009 study. One in ten currently smoke tobacco daily, a figure yet lower than in some countries.

Despite Australian authorities having taken actions against smoking, it remains the leading cause of preventable death and disease in Australia. An estimated 20,500 Australians died because of smoking-related diseases in 2018, accounting for 13 percent of total deaths. Indigenous adult population is more exposed to these diseases as 43 percent of the adults smoke while 15 percent of non-First Nations adults do.

Australians also spent 225 billion dollars on gambling in 2018–2019, the highest in the world on a per capita basis. Logically, it has the largest per capita gambling losses with 1,277 dollars (US$838) per person a year, which can cause financial distress but also relationship difficulties and poor mental health sometimes leading to suicide.

In addition to these tangible costs, the report also estimated intangible ones that cannot be traded, referred to as the value of lost life. They include costs of premature illness, reduced quality of life, pain and suffering of the individual and their friends and family. Each life lost prematurely consists of a loss in productive capacity and its psychological effects.

More difficult to measure in value, the value of lost life was between 48 billion and 174 billion dollars in 2021 (US$32 billion to US$116 billion).

But as big as these numbers are, the organization claims they are all conservative due to gaps in the evidence base and are most probably much higher.

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