Drink potent fuel for the economy

By SCOTT MacLEOD


Up to 140,000 people will today rise from their beds and travel to jobs that owe their existence to alcohol.

Many will toil in the 14,500 licensed premises, others in breweries, distilleries and hospitality-related firms that rely on alcohol for survival.

Before midnight, more than 1.3 million litres of beer, wine and spirits will have slipped down throats in living rooms, bars, restaurants, clubs, airports and elsewhere.

More than $1.5 million of the cash spent on those drinks will go to the Government as GST and excise taxes - similar to the hefty "sin tax" on tobacco.

New Zealanders' love of alcohol is well known, but few realise the extent to which it has become integral to the economy.

One indication is the amount of cash the liquor giants spend on television advertising: more than $8 for each New Zealander this year.

Then there are supermarkets, where wine has outstripped bread and milk to become the biggest-selling item.

The economic debate over alcohol has shifted from the days of referendums on prohibition, which came within a whisker of killing the entire industry in 1919.

These days there is a recognition that - apart from the tax haul and direct jobs - industries such as tourism would suffer if liquor was pulled from the economy.

Instead, there is intense lobbying over excise tax, which the Government bumps up at the rate of inflation and which the industry says is unfair.

Alcohol taxes give the Government close to $600 million a year to spend on health, education, defence and other obligations. Of that, $420 million is excise tax.

Liquor giants see the excise payments as a threat, arguing that alcohol is a vital part of the economy and they should not have to pay. McDonald's, they argue, does not pay excise on its fatty hamburgers.

The Beer, Wine and Spirits Council says more than 40,000 people are directly employed by the liquor industry and 100,000 more support and service it.

Many of those people live in rural areas, using buildings and equipment worth more than $2 billion.

In the spirits industry alone, distilleries in Tirau, Edgecumbe, Reporoa and other small centres employ at least 400 people.

The spirits industry is most aggrieved at excise taxes because it pays nearly twice as much per litre of alcohol as most beer and wine makers.

Thomas Chin, of the Distilled Spirits Association, said shoppers paid $17 in excise on a large bottle of spirits selling for $26. "That gives $9 to cover production, marketing and overheads," he said. "That's a major issue for us, and we're trying to get more equity."

Liquor body figures show domestic alcohol sales of $3 billion this year - 4 per cent of gross domestic product.

And the Beer, Wine and Spirits Council says alcohol-related industries are worth more than $13 billion to the economy.

How does this compare to the costs?

Alcohol Advisory Council policy adviser Wendy Moore pointed to a study showing alcohol lowered GDP by 4 per cent - equal to the benefits quoted by the liquor industry.

The study, by economist Brian Easton, also found that alcohol cut New Zealanders' quality of life by 2 per cent and the population by 0.8 per cent.

Last December the Treasury finished a big study into excise taxes aimed to see whether they were justified.

The working paper added up costs such as hospital care, then subtracted benefits such as the lower rates of heart disease that come with moderate drinking.

It found that the costs of alcohol were between $385 million and $835 million.

The working paper's author, Felicity Barker, said the tax haul was "near the mid-point" of that estimate.

But, like it or not, the economic outlook for New Zealand's liquor industry is good.

Domestic sales are picking up after a two-decade slump, and there are promising signs for export markets.

Globally, beer sales are growing at 2 per cent a year and twice that rate in the Asia/Pacific region. Within seven years, one in every five beers will be drunk in China.

Beer, Wine and Spirits Council chief executive Nicki Stewart said sales of ready-to-drink beverages and premium beers were taking off. "The biggest growth in supermarkets is beer sales."

Liquor and work

40,000 people work in the liquor industry.

A further 100,000 support and service it.

Many live in rural areas, using buildings and equipment worth more than $2 billion.

In the spirits industry distilleries in Tirau, Edgecumbe, Reporoa and other small centres employ 400 rural New Zealanders.