by David Collins, Helen Lapsley and Robert Mark

March 2007

Illicit drugs are a major problem in Australian society, with their cost impacts being felt by individuals, families, businesses and government. The business sector bears a large proportion of these costs.

Recent 2003 estimates show the total cost to Australia of illicit drugs to be at least $6.7 billion. Of that figure, business costs were $3.3 billion (representing almost two per cent of total Australian corporate profits). Drug use-caused reductions in business productivity are estimated to have cost $800 million, through a reduced workforce, and a further $339 million through absenteeism. The costs of reduced on-the-job productivity were also likely to have been substantial, but were not able to be estimated.

Illicit drug use also imposes other costs on the Australian community. The unpaid output of the household sector in 2003 is estimated to have been reduced by $397 million. Drug-attributable crime costs were $3,248 million, while crime attributable to illicit drugs and alcohol used together cost a further $1,310 million. Nearly a quarter of violent crime attracting jail sentences is attributable to illicit drugs alone, or to illicit drugs and alcohol used together.

Health care costs were $74 million (after taking account of the reduction in costs resulting from the premature deaths of drug users). Drug-attributable road crash costs were $612 million, of which approximately 20 per cent were borne by the business sector. Drug use imposes heavy burdens on individuals and on the government sector but the highest burden is borne by the business sector. Businesses will inevitably attempt to pass these costs on, mainly in the form of higher prices.

The illicit drugs market draws resources away from legitimate businesses supplying legal goods and services and paying their fair share of taxes. If illicit drug use were reduced, the business sector would benefit not only from reduced labour costs and a bigger workforce, but also from reduced drug-related property crime and corruption, and higher consumer demand for legally-supplied products. The potential for increased business efficiency could lead to greater export competitiveness, better worker and management rewards, higher profits and higher returns to shareholders.

Download Cost of Illicit Drugs in Australia (PDF).