The Economic and Social Benefits and Costs of Legalising Recreational Cannabis in Queensland

This micro report from bluegreen economics in Brisbane, outlines the costs and benefits associated with legalising cannabis use in Queensland.

Executive Summary

Cannabis has been consumed in Queensland in large amounts for many decades. However, consuming cannabis for recreational purposes is currently illegal. Queensland has the highest number of cannabis related arrests of any Australian state or territory, including for the past 15 years, with 23,850 arrests made in 2014 – 15. This puts it at odds with US states like Colorado where consumers have been able to purchase recreational cannabis products from licenced premises operating in a regulated and taxed market environment since January 2014. An increasing number of countries and states are taking a more health-focused and less justice -focused approach to cannabis regulation on the back of the well documented failed ‘war on drugs’ by either decriminalising recreational cannabis use or legalising it by adopting ‘regulate and tax’ schemes.

This approach recognises that cannabis is a commonly used drug with a broad level of acceptance in many communities. The United Nations World Drug Report estimates that in 2013 there were 181.8 million users of cannabis worldwide, with the usage rate in North America for those aged 15 to 64 being 11.6 percent with a similar level of 10.7 percent for the Oceania region (Australia/New Zealand). Queensland has a usage rate of around 11 percent for persons aged 14 and over which despite the increasingly high number of arrests since 2001 has not declined.

We undertook a preliminary examination of the main, likely economic and social benefits and costs of a Queensland recreational cannabis market (QRCM) by using data collected by government agencies as well as drawing on data from the Colorado Department of Revenue. We find that both the state government and cannabis consumers would realise a significant net benefit under a regulated and taxed recreational cannabis scheme.

For government, there is likely to be increased tax and fee revenue of around $90 million in the medium term (three to five years) and significant savings in terms of decreased police, court and prison costs. The economy is likely to benefit from a new cannabis industry, depending on the particular regulation and tax model adopted, with new jobs created. These benefits would offset some additional costs to government in terms of the establishment and ongoing administration and compliance of the scheme, as well as a likely small increase in mental and physical health costs associated with new consumers or existing consumers who increase their usage. These additional health costs could be mitigated by a public education campaign.

For consumers, once purchasing cannabis on the black market and at risk of being fined and imprisoned with the associated police record and social stigma limiting their future job prospects, significant benefits would be realised by purchasing from licenced premises. They would also benefit in terms of product safety and in some cases lower transaction costs by conveniently purchasing from local businesses. Importantly, they are also likely to realise a financial benefit via a consumer surplus as the scheme matured and the price of cannabis decreased to below the black-market price in a competitive environment.

A detailed benefit-cost analysis would be required to place an exact dollar amount on the expected net benefits to the government, consumers and, more generally, society.


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