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P1050: Additional information on costs and benefits

(24 October 2019)

Proposal P1050 – Pregnancy warning labels on alcoholic beverages

Additional information on costs and benefits.

This information relates to section 3.4.1.1 in the Call for Submissions report.

General Assumptions

  • Annual number of total new FASD cases from the 2018 DRIS: Australia = 15,555; New Zealand = 1,783. Total = 17,338 cases per year.
  • The projected benefits of avoided/mitigated FASD cases start after the end of the transition period, plus another nine months to allow for pregnancy. That means within 1 year after the transition, there are 3 months' worth (0.25 x 1 year) of benefits e.g. 0.25 x 17,338 x 1.3% (Base Scenario) = 56 cases; after 2 years, 1.25 years' benefits (1.25 x an annual number of cases avoided/mitigated, e.g. 1.25 x 17,338 x 1.3% = 282 cases), after 3 years, 2.25 years' benefits.
  • In any one year period after year 1, the same numbers of new (extra) cases need to be avoided/mitigated to break-even with costs over 20 years, i.e. 1.3% of the new FASD cases for the Base Scenario, 0.2% for the Best Case, 3.2% for the Worst Case Scenario. 
  • The total number of extra cases avoided/mitigated is cumulative i.e. in any 2 year period after year 1, twice as many extra cases are avoided/mitigated as in any one year period, three times for a period of 3 years, etc. 
  • Benefits occur for each year of a lifetime of every new FASD case avoided/mitigated over the 20 years, depending on when a person is born within those 20 years.
  • Net Present Value (NPV)= discounted cumulative benefits of all years of all living avoided/mitigated FASD cases, minus one-off costs of the label (not discounted).

Table – Specific assumptions for each scenario

All costs and benefits are in Australian dollars, and rounded to the nearest whole number. Therefore, manual calculations using whole numbers may differ slightly to some figures in the table that use more decimal places.

 

 Base ScenarioBest Case ScenarioWorst Case Scenario
Cost per SKUAverage of base voluntary ($2,272) and involuntary ($7,575) changes, i.e. $4,924 per SKU Average of best voluntary ($757 rounded) and involuntary ($7,575) = $4,166 per SKUAssumes involuntary changes only at $7,575 per SKU
Number of SKUs71,22361,853

80,592

 

Sub-Total $ costs over all SKUs$350,669,009

$257,683,865

 

$610,457,875

 

Drinkwise $ costs estimate

$650,000

 

$650,000

 

$650,000

 

Total $ cost including Drinkwise

$351,319,009

 

$258,333,865

 

$611,107,875

 

Annual benefit for each extra FASD case avoided /mitigated, taken from 2018 DRIS and updated for inflation

$13,847 (in Australia and New Zealand)

 

$76,002  (Australia) and $92,395 (New Zealand)

 

$13,847  (in Australia and New Zealand)

 

Discount rate for benefits4%3%7%

 

 

 

 

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