By business journalist Gareth Hutchens
Numerous analysts are quick to attribute Australia’s economic challenges solely to the Albanese administration, including the rising cost of beer. However, the situation is far more intricate, with many of the underlying issues rooted in decades of policy.
Recently, a graph has gained traction online, illustrating the dramatic increase in beer prices in Australia over the years in comparison to other nations. This data comes from Alex Joiner, the chief economist at IFM Investors.
A significant factor contributing to the high cost of beer is Australia’s alcohol excise tax, which is adjusted for inflation biannually. This systematic increase has been in place for over 40 years, leading to some of the highest beer prices globally by 2026.
The escalating price of alcohol is beginning to erode Australia’s traditional pub culture and live music scene, as it has become prohibitively expensive for individuals to enjoy a night out.
Consider a hypothetical scenario: what if we eliminated the beer excise for five years? Would such a measure revitalize Australia’s nightlife and cultural scene? Would the social and economic advantages of this change outweigh the loss of tax revenue for the government?
The regular biannual increase in the “beer tax” may seem insignificant, yet it contributes to the widespread sentiment of being overwhelmed by continuous price hikes. Currently, the nation is grappling with persistent inflation, sluggish productivity growth, declining real wages, and a downturn in per capita economic growth.
Workers relying on salaries and those renting homes are facing unprecedented challenges due to record-low rental affordability. This reality leads many Australians to reflect on a cartoon from 1894, feeling as though little has changed in over a century.
During a time when citizens are seeking relief from various pressures, the automatic and frequent rise in alcohol prices due to longstanding bipartisan policy only adds to their burdens.
Why does the excise on beer increase biannually? This practice dates back to the 1983-84 federal budget when the Hawke Labor government reformed the excise system. They instituted an indexation program for all excise rates (excluding those on crude oil and LPG) to ensure that government revenue kept pace with inflation.
At the time, then-Treasurer Paul Keating explained that the new biannual indexation of excise rates would preserve the real value of government revenue. He noted that previous discretionary increases in excise rates were insufficient to counteract inflation’s erosive effects, resulting in a decline in real excise rates.
This indexing program has persisted for 43 years, contributing to the current reality of Australia’s beer prices ranking among the highest in the world.
The issue of the “beer tax” is widely recognized, with complaints surfacing from the brewing and alcohol sectors for years. Nationals MP Kevin Hogan pointed out that nearly half the price of a mid-strength beer and 60% of a full-strength beer is attributed to tax.
Occasionally, politicians may overlook the regular indexation, accusing the government of covertly increasing beer taxes, only to be reminded that these adjustments occur automatically twice a year.
Moreover, similar indexation to the Consumer Price Index (CPI) is applied to various other economic factors, including local government rates, tolls, and education costs, which collectively contribute to inflation in an ongoing cycle.
Would it be beneficial to experiment with the abolition of the beer excise for a few years to assess the potential societal advantages? Should we continue with the biannual increases until Australia’s pubs become non-existent? This conversation presents an intriguing opportunity to explore how revitalizing local pub culture and live music might enhance community life.
