We showed a 20% tax on junk food would save more lives than a sugar tax

Every Australian shopper knows the pull of cheap junk foods lining supermarket shelves. Meanwhile, the cost of fresh fruit and vegetables continues to climb.

So it’s little wonder conditions such as obesity and type 2 diabetes are so common, and Australia’s health-care system struggles to cope.

But what if policies could help level the playing field? And what would that mean for our health, and health-care expenditure?

Our new research, published today in The Lancet Public Health, estimates a 20% tax on unhealthy foods could prevent 212,000 premature deaths and save A$14.9 billion in health-care costs over the lifetimes of Australian adults alive today.

We estimated the health impact could be even greater if the tax revenue is used to subsidise fruit and vegetables.

What we did

By “unhealthy foods”, we mean sugary drinks, lollies, salty snacks, biscuits, pastries, processed meat and ice cream. These are the kinds of foods the Australian Dietary Guidelines says we should limit for optimal health. Yet most Australians find them hard to resist.

We modelled how taxing these foods by 20% could shift the type of food Australians buy. This could be a 20% tax on the retail price or a 20% tax applied at the point of manufacture (an excise tax). But our modelling didn’t specify the type, just that the price would increase by 20%.

We also modelled the knock-on effects on weight, blood pressure and chronic disease over the lifetimes of adults aged 20 or greater in Australia.

We then estimated what would happen if we used that revenue to subsidise fruit and vegetables, and any extra health benefits this would have.

We also looked at how these impacts could differ for households across the socio-economic spectrum – from the poorest 20% to the richest 20% – to see how taxes and subsidies might affect people in different financial situations.

What we found

We estimated the 20% tax could cut purchases of unhealthy foods by about 8–26% depending on the category.

This could lead to 660,000 fewer cases of type 2 diabetes and 787,000 fewer cases of heart disease over the remaining lifetimes of Australian adults alive today. In turn, this could prevent about 212,000 premature deaths.

The economic returns could be substantial. We estimated a total reduction of $14.9 billion in health-care costs. That’s a health-care cost saving of $781 per adult over their lifetime.

While the average Australian could pay about $139 more in tax each year, the policy could help make Australia fairer: low-income Australians could experience roughly 76% greater health benefits than high-income Australians. This is because low-income Australians bear the greatest burden of diet-related illness and could see the largest reductions in purchases of unhealthy foods.

So this measure would ease the unequal burden of obesity, diabetes and heart disease on those affected the most.

The revenue raised could also be enough to reduce the average cost of fruits and vegetables by 19–26% across the population. This could ease cost of living pressures, avert 194,000 more cases of heart disease and prevent an additional 45,000 premature deaths.

Implementing the tax and subsidy together would also come at no net cost to the government.

How does this compare to a sugar tax?

You might have heard about proposals for a “sugar tax” that taxes sugary drinks. It’s an approach the World Health Organization endorses.

But we estimated extending these taxes to unhealthy foods more broadly could deliver around seven times the health benefits.

Similarly, the tax-and-subsidy package we modelled could have a greater impact than mandating the Health Star Rating, restricting junk food advertising, reducing harmful ingredients in products (such as salt), or running a national healthy eating campaign.

This doesn’t mean the tax-and-subsidy package alone will fix the enormous personal and health-care costs of unhealthy diets in Australia. But our findings reinforce its potential to be a powerful policy lever the government should consider.

After all, we know price is a strong driver of the foods we buy.

What now?

Australian politicians are debating a tax on sugary drinks. This is a great start, but our findings suggest Australia should consider a broader system of taxes and subsidies for much greater impact.

Public support for such measures is strong. Around 53% of Australians support a tax on unhealthy foods, rising to around 72–74% if the revenue is used to subsidise fruit and vegetables.

The subsidies could be delivered through existing avenues. These include using vouchers, via school programs, retail subsidies in First Nations communities, and healthy food prescription programs.

Advocacy from health and community groups could help drive policy uptake. In Colombia, such sustained advocacy led to the introduction of a 20% tax on unhealthy foods. Evidence suggests this is improving population diets without affecting jobs in the food industry.

Australia has navigated similar debates before. Tobacco taxes, once controversial, have contributed to large reductions in smoking while funding initiatives such as the Victorian Health Promotion Foundation.

Given unhealthy diets and being overweight now drive more chronic disease than smoking, we should be considering equally sensible measures – including food taxes and subsidies – to help Australians act on their best intentions at the supermarket.