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The impact of government control on the Australian soft drink market and public policies.

Student’s Name:

Institution Affiliation:
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Introduction

In June 2018, the Australian government announced the need to reduce the sugar content

in beverages by ten per cent by 2020 and a further ten percent by 2025 (Brand-Miller, & Barclay,

2017). The claim that soft- drinks do not offer any nutritional value in the human body leads the

Australian government to impose taxes on soft drinks to limit its consumption. Such taxes have

shown to limit the consumption of sugar-sweetened beverages. Taxes have also shown to

encourage the manufactures to reformulate the sugar-sweetened drinks sugar content.

Sugar-sweetened drinks have effects when consumed by people. One such effect is

increased obesity among the Australian people. Australian government saw the need to limit the

intake of sugar products to reduce the obesity rate in the country, which may have resulted due to

extensive consumption of these products. Tax imposition by the government is a great way to

limit sugar-sweetened beverages because these drinks will cost much more, making them

unaffordable for most people. Many people will not be able to buy them, and others who can

purchase them will buy only a few amounts of soft drinks.

Tax imposed beverages are those that contain sugar content beyond 15 grams per 12

ounces. Tax imposition on sugar-sweetened soft drink has many impacts on the country's

economy as they are highly consumed and therefore contribute greatly to the country's economic

development. On the other hand, there would be a reduced rate of contraction of sugar-related

diseases such as obesity, high blood pressure, diabetes and flatty liver disease. This paper will

extensively discuss the impacts of the Australian government tax imposition on sugar-sweetened

soft drinks and the economic impacts these would bring to the country.

Elasticity
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Elasticity refers to the degree to which the consumers and producers or manufacturers

change their demand or the supplied amount of product in the market due to changes in prices or

income (Méndez-Carbajo, & Asarta, 2017). Government tax imposition on certain products leads

to an increase in the market prices in the market. The government usually does this to control

the consumption of certain products by its people hence protecting them from the easy

availability of goods and products that are dangerous to their health.

Tax imposition on the products will automatically lead to an increase in prices hence

discouraging consumers from making purchases. These will affect the rate of consumption of

these drinks. The consumption rate will decrease. Soft drinks are highly consumed in Australia

due to their low costs. Imposing taxes on them will lead to an increase in their prices hence a low

consumption rate. The demand for soft drinks will decrease due to the increased prices.

Another impact on elasticity due to the tax imposition of sugar-sweetened is that it will

lead to a low supply of these soft drinks in the market. The consumer demand for a soft drink

will decrease due to high prices. The manufacture will not be able to supply more soft drinks in

the market because of low consumption. The manufacturer will not produce more soft drinks

because of the low consumption rate, which will result in closing and shutting down some

branches and sucking off some employees to maintain the low source of profits.

Consecutively, this will help in obesity and other sugar-related diseases reduction in the

country. The main of Australia's government is to reduce obesity by imposing taxes on sugar-

sweetened soft drinks. The increase in prices will make the soft drinks not easily available for the

consumer, making them less consumed and improving the Australian people's health. Tax

imposition on sugar-sweetened soft drinks will have a negative impact on the people who are not
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obese. These people will not purchase the beverages because of their high prices, making the

non-obese people suffer the high prices on the soft drinks.

Government Failure

Government failure refers to instances where government intervention goes sideways

lead to misappropriation of scarce resources (Gunawong, & Gao, 2017). In most cases,

government failure rises due to government intervention's unanticipated consequences in a

particular product market.

Australian government intervention in the sugar-sweetened drinks market can result in a

lot of impacts in the market. These impacts include increased soft drinks prices, low demand for

the products, and reduced sugar-sweetened soft drinks in the Australian market. Taxes

imposition on soft drinks is a way of market intervention by Australia's government to protect its

people from sugar-related diseases such as obesity and diabetes.

Tax imposition intervention will lead to an increase of sugar-sweetened soft drinks in the market.

When there are high taxes on certain products in the market, these products increase prices for

the manufacture to make profits.

Secondly, the impact on government failure due to the tax imposition of sugar-sweetened

soft drinks will reduce their supply in the market due to low demand. The manufacturer will

produce less of these beverages because of the low rate flow in the market due to low demand.

Tax imposition on these soft drinks will also encourage the manufacture to produce soft drinks

with low sugar content to avoid heavy taxes imposed on sugar-sweetened drinks.

Another impact on government failure due to tax imposition on sugar-sweetened drinks is

that it will result in low demand for these beverages in the market. Increased prices will result in

low consumption of soft drinks and also low production by the producer. Australian government
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intervention in the soft drinks market will lead to inefficiency in the markets' soft drinks. On the

other hand, people will find it hard to buy these sugar-sweetened soft drinks; thus, sugar-related

diseases will decrease.

Consecutively, there will be an effect on the people who are not obese. The main aim of

tax imposition on soft drinks is to reduce obesity and other sugar-related diseases in Australia.

Tax imposition results in increased products' prices, making it hard for non-obese customers to

purchase soft drinks.

Market Failure

Market failure occurs when there is a state of disequilibrium in the market due to changes

in the market affected by the demand for the product and increased product prices (Ledyard,

1989). A market fails when it is not efficient. When there is too much product in the market,

market failure theory shows or tells the government to impose the corrective taxes corresponding

to the severity of the excess.

Sugar-sweetened soft drinks tend to flood the market and have a very high flow rate since

they are cheap. Australian government tax imposition on sugar-sweetened soft drinks would lead

to market failure because it would shift the equilibrium of these soft drinks in the market, making

the demand decrease due to high price resulting from government taxation.

Australian government tax imposition on sugar-sweetened soft drinks would lead to

inefficient allocation of resources in the market. Tax imposition on sugar-sweetened soft drinks

would increase these soft drinks prices; hence the consumers will not be able to purchase them

easily. These will favour other soft drinks in the Australian market. Consumers will shift to

purchasing them hence the inefficient allocation of resources for these sugar-sweetened soft

drinks.
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In addition to impacts on market failure due to tax imposition on sugar-sweetened soft

drinks, the Australian government will lead to low production of these sugar-sweetened soft

drinks by the manufacturer. The low soft- drink consumption will affect how the manufacture

produces these soft drinks. The manufacturer or the producer will reduce the amount of soft

drink manufactured due to low demand.

Public Policies Implications

Australian government tax imposition on sugar-sweetened soft drinks is due to reduce

sugar consumption in the general public. Conditions associated with the western lifestyle, such

as diabetes and obesity, are very high in Australia. In the last two decades, the adult obesity rate

in Australia has increased by approximately nineteen percent in 1995 and have increased

drastically to twenty-eight percent in 2015. The increase in the rate of obese people in Australia

is very worrying as in 2014 and 2015, twenty percent of children in Australia aged two years and

nine years old were overweight. During the same time, children, 8.8 percent aged two to five

years, were obese(Allen, Allen, 2020). These Australian figures in the rate of obesity are very

high compared to that of other nations.

In addition overweight children and adults in Australia have been a strain on the economy

because of the money used in treated the condition. Obese individuals may cost the government

fifteen hundred dollars more compared to people without obese. This shows that the Australian

government should address the sugar intake issue among its people to reduce the increase in

overweight among its people.

From the above analysis, it is evident that the Australian government should impose taxes

on sugar-sweetened soft drinks to control and combat obese development in the people.

Although tax imposition will have a lot of negative impacts on this country's economy as they
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have shown to contribute greatly to Australia's development, it is vital to reduce their

consumption in the people to reduce obesity and diabetes and promote healthy lives among the

Australian people.

The public policy implications from the analysis above are that these policies also target

artificial sweeteners, which are very dangerous if consumed in large quantities. Manufacturers of

these sugar-sweetened drinks tend to use artificial sweeteners because they are cheap, cutting the

production cost, increasing profits. Artificial sweeteners are made using chemicals that

contribute greatly to the development of sugar-related diseases in people. The tax imposition of

sugar-sweetened soft drinks directly cuts off these artificially sweetened beverages from the

market or reduces the consumption and demand in the people. Artificial sweeteners may result in

caloric disease.

Money obtained from these tax imposition of sugar-sweetened may be used to treat obese

people and diabetic people. The Australian government spends a lot of money 'on treating these

people suffering from obesity and diabetes, and other sugar-related diseases. The Australian

government will obtain a huge amount of revenue from these sugar-sweetened soft drinks. These

revenues will take care of people suffering obese and diabetes resulting from consuming these

beverages.

Tax imposition by the Australian government will have a huge economic impact on the

country. For instance, some companies that produce these sugar-sweetened drinks will be forced

to stop some of their operations in the country, and others will completely shut down. These

companies pay a lot of taxes to the government and employ so many citizens of Australia. These

employees will be forced to stop their jobs and put in mind they have families that depend

entirely on them for food, shelter, and education. The government will lose these taxes when
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these companies completely shut down, and many people are left unemployed. On the other

hand, it is important to stop the huge increase in obese people in the country hence tax

imposition on sugar-sweetened soft drinks.

Conclusion

Conclusively, government taxes are still aimed at reducing the consumption of products

that are rich in sugar content in Australia. It is hard to say that sugar generally has sugar

reduction in products that have reduced obesity among people (Allen, Allen, 2020). Tax

imposition on these sugar-sweetened soft drinks will have a lot of impacts on the economy of

Australia. Tax imposition on these sugar-sweetened beverages will impact elasticity in the

market, market failure and government failure in the market.

References
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Allen, W. M., & Allen, K. J. (2020). Should Australia tax sugar ‐sweetened beverages?.  Journal

of paediatrics and child health, 56(1), 8-15.

Brand-Miller, J. C., & Barclay, A. W. (2017). Declining consumption of added sugars and sugar-

sweetened beverages in Australia: a challenge for obesity prevention. The American

journal of clinical nutrition, 105(4), 854-863.

Gunawong, P., & Gao, P. (2017). Understanding e-government failure in the developing country

context: a process-oriented study. Information Technology for Development, 23(1), 153-

178.

Ledyard, J. O. (1989). Market failure. In Allocation, Information and Markets (pp. 185-190).

Palgrave Macmillan, London.

Méndez-Carbajo, D., & Asarta, C. J. (2017). Using FRED data to teach price elasticity of

demand. The Journal of Economic Education, 48(3), 176-185.