The win by the US Democratic Party of two federal senate seats representing the state of Georgia creates a situation whereby the Republican Party will lose their majority in the Upper House. Given the Democrats control the House of Representatives, this means their legislative agenda will now be able to be more easily realised. One positive outcome of the win, depending on your viewpoint, is that the cannabis industry in the United States and elsewhere is likely to be a beneficiary of the flip of the senate seats.
Cannabis bills have been passing the US Lower House in recent years but stalling in the Upper House. As reported in the Motley Fool, the win by the Democrats may see important financial services legislation enacted to allow the industry access to much needed banking services which would be a boon for cannabis companies. While most states in the US have legalised medicinal cannabis and almost one-third of states have legalised, or are in the process of legalising, recreational use cannabis, it is still illegal at the federal level. This should now change.
The Queensland Government should be watching this closely. Here, things have moved a lot slower. While medicinal cannabis is now available for doctors to prescribe, including in Queensland, the Therapeutic Goods Administration (TGA) expects that medicines included in the Australian Register of Therapeutic Goods (ARTG) will have been considered or prescribed first before seeking approval to prescribe cannabis. Up to 31 December 2020, the TGA had only approved around 85,000 applications for medicinal cannabis products for conditions including chemotherapy-induced nausea and vomiting, cancer and neuropathic pain, and spasticity from neurological conditions.
However, there has been some movement as reported by FreshLeaf Analytics with the TGA having decided to allow registered low-dose CBD products, up to 150mg per day, to be sold over the counter at Australian pharmacies without a prescription. While the implementation date is February 2021, product availability is expected to be later this year or even in 2022.
But it is the recreational cannabis use space where we are still a long way behind the US. As I wrote in 2018, an Australian Senate committee considered a private member’s bill from (then) Senator David Leyonhjelm to allow any State or Territory Government to legalise and regulate cannabis due to it being considered less harmful than alcohol use and tobacco use, and that otherwise law-abiding recreational cannabis users were cast as criminals, which increases pressure on the criminal justice system and supports organised and violent crime. Leyonhjelm’s lead should be followed by one or more of the major political parties, with support from the states.
Number of cannabis arrests 1997-98 to 2018-19 in NSW, Victoria, Queensland & national total
Source: BGE, compiled from Australian Crime Intelligence Commission annual Illicit Drug Data reports
Queensland has been the leading state for cannabis arrests for the last 20 years, arresting nearly 22,000 people in 2018-19, which places an unnecessary financial burden on the state budget given similar sized states like Colorado are now collecting taxes from cannabis sales. Indeed, I have previously estimated that the tax revenue alone for Queensland could be around $90 million/year with criminal justice system and other cost savings on top of that.
It is likely that the legalisation of cannabis at the federal level in the US will take place in the next year or so. Canada legalised recreational cannabis on a national level in 2018. This is the time for Queensland to commence a comprehensive investigation into the benefits and costs of a regulate-and-tax model, of which I undertook a preliminary examination in 2016 (see report here). For a wide-ranging discussion on the cannabis industry both overseas and in Australia, you can listen to this episode of the Economics Explored podcast.
Dr. Stephen Thornton is the principal of BG Economics. Disclosure: Stephen has a shareholding in a cannabis company listed on the ASX. This article should not be considered as providing financial advice.