New Zealand’s world leading cannabis reform

New Zealand has a long history of firsts, and its potential government take over of a black market for the purpose of public health is no different. New Zealand was the first country to grant women the right to vote and (arguably) the first to introduce the 8 hour working day for adults and state funded pension from general taxation. If passed by referendum and then parliament, New Zealand’s proposed Cannabis Legalisation and Control Bill will be a world leading approach.

At the (now delayed) 2020 New Zealand Election, voters will not only elect their government, they will also participate in two referendums: Cannabis Legalisation and Control and End of Life Choice. Both have arisen from the formation of New Zealand’s current coalition government[1]. The first of these comes from the confidence and supply agreement between New Zealand Labour and the Green Party which includes a goal to hold “a referendum on legalising the personal use of cannabis at, or by, the 2020 general election”, following the Greens election commitment to legalise personal production and use if it formed government. The implication of this referendum, including the government’s ability to establish and control such a complex market if passed, has a range of implications in Australia, least of which include reigniting debate on legalisation here as well.

The Cannabis Legalisation and Control referendum asks voters whether they support the proposed Cannabis Legalisation and Control Bill. The intention underpinning the Bill is to minimise harm and reduce use. This would be achieved by establishing a tightly controlled legal market which will displace the black market and reduce harm (and possibly use) by limiting age access, potency, supply licences, price and total market quantity, overseen by a new agency.

Providing the Bill is a different approach than taken by other jurisdictions around the world, such as by states in the US which asked more generally whether cannabis should be legalised. While it gives insight about implementation and asks a more precise question, it assumes the voting public can interpret the specifics in a meaningful way (either directly, through summaries or via the media). The Bill stops short of the level of detail that will come through regulation which could make or break the reform success. It also creates regulatory challenges, such as prescribing that a person may buy up to 14 grams of dried cannabis per day from a licensed outlet – without specifying how this would be enforced in practice including whether this is per outlet or whether this is expected through some type of national tracking.

There is high profile support on both sides of the referendum, including the New Zealand Drug Foundation, which advocates for “healthy approaches to alcohol and other drugs”, supporting the campaign to put restrictions around an existing market, and the New Zealand Medical Association which does not support recreational use and supports civil penalties and diverting users to treatment.

Primarily, the arguments in support of the referendum centre on the need to control access, the costs of law enforcement, the potential tax revenue and resolving some perceived existing challenges in access to medical cannabis. Medical cannabis is not illegal, and the legal status would not be affected by the proposed bill. New Zealand’s medical cannabis scheme took effect earlier this year, allowing for doctors to prescribe cannabis products and local production. Extension of that legal status to recreational cannabis is seen to better support patients under the scheme by alleviating any current negative perceptions about prescriptions and also in some cases making them unnecessary. It is also worth nothing, driving under the influence of cannabis is and would remain illegal under the existing Land Transport Act.

The tax potential is particularly interesting in the context of the current COVID recovery all nations are facing. Although this Bill has been on the books for some time, the estimated $490 million in annual tax revenue it would generate if progressed would provide a welcome new stream to support recovery. Arguments about new business generation are less strong, particularly given the tight control on market size and advertising proposed in the Bill, as well as the overall intention (although unlikely reality) to eventually reduce market size once the legal market gains total market control.

Globally, the legalisation of recreational cannabis may be growing. Uruguay was the first to legalise in 2012 and, following election commitments by Trudeau, Canada legalised recreational use in 2015. While not technically legal in the Netherlands, use was decriminalised in 1972 and personal use is generally tolerated. Several US states have legalised recreational use, but it remains technically illegal at the Federal level, in much the same way as the ACT has legalised personal use in Australia despite the Federal illegality. There also a common misconception that recreational use is legal in South Australia, possibly because it was a world leader in decriminalisation[2] and allows for expiation (or making amends) for minor possession.

Two separate Bills have been introduced to the Australian Federal Parliament in support of legalisation of recreational use. The Criminal Code and Other Legislation Amendment (Removing Commonwealth Restrictions of Cannabis) Bill 2018 was tabled on 9 May 2018 as a private Senator’s Bill by Liberal Democrat Senator Leyonhjelm. His argument was primarily that consumption was an ‘adult choice’ but also referenced law enforcement savings and potential tax revenue. The Bill was referred to a Senate committee which ultimately rejected it. On 27 November the same year, Greens leader Senator Richard Di Natale introduced the Australian Cannabis Agency Bill 2018 to ‘take it out of criminal hands’. In a report prepared by the Parliamentary Budget Office on the Greens proposal in April 2018, it estimated (with a high level of uncertainty) a potential $4.611 billion increase in revenue from the proposal with just over $1 billion in increased expenses for a total gain amounting to almost $3.6 billion. The Bill was not voted on before the conclusion of parliament and has now expired.

Although relatively quiet at this moment, there is ongoing activity, for example in Victoria the Legal and Social Issues Committee is currently progressing an Inquiry into the use of Cannabis in Victoria with submissions closing last month, and a report due by June 2021. Research from the National Drug Research Institute at Curtin University based on 2015/16 found that about 10% of Australian adults (over 14 years) had used cannabis in the last 12 months and while they identified extensive social costs (such as workplace injury and contribution to other crime) almost half of that attributed to the costs of imprisonment.

If passed, the implications of the New Zealand referendum for Australia will be interesting and could play out in a number of ways. Least of which could be a new form of cannabis tourism, but, and more likely, it could reinitiate debate here – just in time for Australia’s next federal election. As with any significant reform, tackling the task depends on the intersection of a range of different values which are not represented in the simplicity of either of the previous members’ bills. Cannabis reform sits at the intersection of Justice, Health and Business and where the new New Zealand agency would sit will have huge implications for how reform, if passed, plays out.

Catriona McNaughton is Manager - Communications at FPL Advisory.

FPL Advisory is a team of specialists resolving risks and creating opportunities with respect to government. We work with public sector and corporate clients to execute strategies for owning and managing change.