One Part of Australia’s Economy Is Booming: Illegal Drugs

(Bloomberg) -- As the Reserve Bank frets about Australia's slowing levels of consumption, it's found one area that appears to be holding up well.

Australians spent A$13.5 billion ($9.7 billion) on illicit drugs in the year through August 2017, the central bank estimates, with methamphetamine and cannabis accounting for over 70 percent of purchases. That's among findings of a research paper released Tuesday exploring usage of the nation's bank notes, of which it reckons almost 2 percent is for illegal drug deals.

“Excluding cannabis, methamphetamine -- also known as meth or ice -- is the most used illicit drug in Australia by weight, followed by cocaine, MDMA -- also known as ecstasy -- and then heroin,” the report said, citing analysis of wastewater that's used to measure the population's drug consumption.

Researchers calculated that the stock of actual notes used in drug purchases -- after taking into account how often the same note tends to change hands -- was a little over A$1 billion.

To estimate the value of cash used to pay for illegal drugs, the RBA paper assumed:

• All drug purchases were made with bank notes, as research shows most users still buy face-to-face;
• To account for drugs typically being cut with other substances, the RBA paper divided volumes by average purity levels; and
• The researchers incorporated estimates of the drugs' street value

As for the denominations of notes used in such activities, law enforcement agencies suggest the A$50 bill tends to be the favored form of payment.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editors responsible for this story: Nasreen Seria at nseria@bloomberg.net, Chris Bourke, Karl Lester M. Yap

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