Measuring the Illegal Drug Economy of Australia in a National Accounts Framework: Some Experimental Estimates Drug Policy Modelling Program Symposium

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Measuring the Illegal Drug Economy of Australia in a National Accounts Framework: Some Experimental Estimates Drug Policy Modelling Program Symposium Friday March 16, 2012 Derick Cullen and Adam Gajewski ABS Macro Economic Research Section 1

Introduction Why the Australian Bureau of Statistics interest in the illegal drug economy? International Statistical Standards System of National Accounts 2008 and Balance of Payments and Investment Position sixth edition Manuals require measurement of illegal actions Illegal drugs are part of a wider ABS project to improve measures in what it is known as the Non Observed Economy We have used methods recommended by the OECD for measuring the Non Observed economy. This is an experimental staff study, not official statistics. We seek review and comments 2

Scope of the Study This investigation is limited to the most commonly used drugs in Australia Cannabis Amphetamines (including methamphetamines and other similar forms of amphetamines) MDMA (ecstasy) Heroin Cocaine. Annual time series have been derived over 7 years from 2004 to 2010 for imports, production, production costs, and consumption 3

Household Final Consumption Expenditure About 1% of total Household Final Consumption Some components of these estimates are included in current data e.g. groceries, electricity Nominal and purity adjusted prices 4

Gross Value Added About 0.5% of Gross Domestic Product 5

Methods Cannabis estimates required detailed production cost and usage estimates Heroin and Cocaine are 100% imported MDMA imports and some local production Amphetamines example Users and consumption Domestic production cost Prices Imports Household Final Consumption Expenditure Sensitivity 6

Amphetamine Users and Consumption Usage data is provided by the Australian Institute of Health and Welfare (AIHW) for 2004, 2007 and 2010. The other years between 2004 2010 have been modelled based on the IDRS and EDRS, as well as the available AIHW data. Presentation of data: % of total population whom are recent users (considered as users within the last 12 months) Of recent users, % who use every day at least once a week about once a month a quarter use about once a year An average quantity used per person 'on any one day' was multiplied by 'users on any one day' to estimate the total amount consumed on any one day in Australia\ Amounts consumed on any one day were gathered from the EDRS, IDRS and AIHW reports Total amount consumed over the course of the year (kg) 2004 2005 2006 2007 2008 2009 2010 6,391 6,236 5,101 3,573 3,251 2,944 2,687 7

Amphetamine Domestic Production Cost Amphetamines are assumed to be 90% domestically produced and 10% imported (precursors). Method: Total cost of domestic production = (Cost of domestic production per kilogram) * (Total kilogram amount consumed over the year + State Police Seizures) * % domestically produced (0.9) Where Cost of domestic production per kilogram = $7054.00 Cost of domestic production per kilogram is taken directly from a source, Cost of Meth paper (also confirmed by World Drug Report 2005 UN) 8

Street Prices Wholesale Prices Amphetamine Prices (Per Gram) Prices for Amphetamines 2003 2004 2005 2006 2007 2008 2009 2010 Nominal 295 302 323 277 281 280 270 Adjusted 192 419 358 183 374 204 442 Street Purity (%) 13 20 14 13 20 15 20 12 Nominal 115 137 137 137 160 155 160 Adjusted 125 118 147 131 158 157 153 Border Purity (%) 73 68 78 73 76 77 76 80 All price and purity data is sourced from the Australian Crimes Commission The purity data are only those seizures analysed at a forensic laboratory The purity and price percentages were chosen based on the largest samples available (or an average) The street purity is very volatile, but the border purity is quite stable with a slight increase over the seven years Calculation of Adjusted Prices: Adjusted Price = Nominal Price [t] * (Purity [t 1] / Purity [t]) 9

Amphetamine Imports Import Calculation: (Dealer purchase price per kilogram) * (Total kilogram amount consumed over the year + Amphetamine AFP seizures) Amphetamines Imports (Nominal Prices) ($M) 2004 2005 2006 2007 2008 2009 2010 210 107 82 53 94 110 54 10

Household Final Consumption Expenditure The Household Final Consumption Expenditure is the dollars spent by consumers on drugs. That is the total consumed amount multiplied by the nominal street prices Amphetamines HFCE ($M) 2004 2005 2006 2007 2008 2009 2010 Nominal Series 1,885 1,883 1,648 990 914 824 725 Adjusted Series 1,225 2,616 1,825 653 1,216 601 1,187 11

Overall Results: A Supply/Use table is shown below for the year 2010: Table 14: Supply Use table (Adjusted Prices) for the year 2010 (a) Supply (in $m) Agriculture Manufacturing Retail (b) Domestic Supply Imports Total Supply Cannabis 2000 2888 4888 4889 Cocaine 244 244 455 699 Heroin 179 179 301 480 MDMA (Ecstasy) 4 232 236 82 319 Amphetamines 370 766 1136 51 1188 Total 2,000 375 4,309 6,684 890 7,574 Use (in $m) Intermediate Use Final Use (HFCE) Total Use Cannabis 4889 4889 Cocaine 699 699 Heroin 480 480 MDMA (Ecstasy) 319 319 Amphetamines 1188 1188 Total 7,574 7,574 (a) Numbers have been rounded (b) Distribution margins 12

Household Final Consumption Expenditure (Nominal Prices) 13

Sensitivity: AIHW speculative consumption data 2010 * Nominal Prices 14

Sensitivity: AIHW speculative consumption data 2010 * Nominal Prices 15

Sensitivity: per capita 2010 HFCE $ per Capita, per annum for population aged 14+: Population 14+ = 18,396,129 Study HFCE / Population 14+ = $385 Speculative HFCE / Population 14+ = $680 HFCE $ per Capita, per annum for Recent User Population: Recent Users of drugs for 2010 = 3,256,115 * Study HFCE / Recent User Population= $2,174 Speculative HFCE / Recent User Population = $3,842 * Multiple drug users counted for each drug 16

Conclusion The greatest challenges in forming these estimates is data quality in prices, purity, production and consumption amounts The overall results are small (in national accounting terms) Good enough for inclusion in the accounts? What are possibilities of better data? How useful are these estimates outside a national accounting context? 17

Questions, Comments d.cullen@abs.gov.au Adam.gajewski@abs.gov.au 18