Marijuana Legalization Gains Steam in Australia: Great News for Pot Stocks

Australian Marijuana Legalization

It’s no secret that the legal marijuana industry currently operating is only scratching the surface of the true potential of pot. While laws are being passed day by day that makes cannabis more permissible, ultimately we still have holdouts in the largest markets on Earth, including the U.S. and much of Europe.

That is changing, however, as marijuana legalization continues to gain traction worldwide. The latest victory comes in the form of Australian marijuana legalization.

Canberra, Australia’s capital city, with a population of about 390,000, will now permit locals to grow, possess, and use marijuana starting on January 31. While marijuana has been decriminalized across Australia for years, Canberra represents the first instance in the country of recreational marijuana actually being legalized.

The Australian Capital Territory Legislative Assembly voted on September 25 to legalize possession by adults of up to 50 grams (1.8 ounces) of dried cannabis and cultivation of two cannabis plants. (Source: “Australian capital legalizes recreational marijuana,” The Associated Press, September 25, 2019.)

To be fair, this is a small step when considered in the global context. Even if the entire country of Australia were to legalize marijuana, that would still be a relatively small step. After all, this is a country that’s smaller than Canada, both in terms of population and gross domestic product (GDP).

Sure, legalization in Australia would still be a huge boon for marijuana companies and help their share prices surge, but the country only offers a small glimpse of the potential that a worldwide legal marijuana industry would yield.

So we’ve established that this isn’t exactly news that’s worthy of lighting fireworks. Or at least, not on the surface. If you dig deeper, however, this is actually fantastic news for a number of reasons.

First, the short-term micro impact. Almost every time we’ve seen pot legalization of some form get passed, the medical marijuana sector has had first-mover advantage. And that paves the way for the eventual legalization of recreational pot.

In this case, Australia now has a first-mover situation in the recreational pot space. The country was already warming up to pot with its decriminalization stance, and the recent news about Canberra is a huge leap in the right direction.

If successful, Canberra can be the first of many Australian cities to legalize pot. And this could be the first step toward marijuana legalization being talked about on a national scale.

So you have some very positive markers of progress in Australia, but as I said earlier, that’s not really the end game of the marijuana business.

Would it be nice if marijuana legalization in Australia was passed sooner rather than later? Absolutely. But even better would be legalization in Europe or the United States. Australia could help in that area as well.

Consider that modern democratic country pretty much across the board are opening up to the idea of marijuana legalization—whether it’s decriminalization, legalization of medical marijuana only, or, in the case of Canada and 11 U.S. states plus D.C., total legalization.

While there are vastly different cultures between European countries, Canada, the U.S., and Australia, in terms of their legal and political systems, these countries are often more similar than they are different.

Which is to say they’re so politically and economically tied that radically different policies regarding goods like weed likely won’t stand for long. More often than not, these countries will work hard to remain aligned. It just makes things easier from an economic and law enforcement standpoint.

Consider all the issues we’ve begun to see at the U.S.-Canada border regarding marijuana-industry workers and their ability to enter the United States. These types of problems are things that countries are keen on avoiding, and governments will often work to ensure that they are swiftly dealt with.

Now, if Australia were to legalize marijuana (we’re really operating in the theoretical here, but it’s not an unrealistic projection) in the near future, or even talk about legalization spreading across the country, other countries would take note. After all, no country wants to seem like the one lagging behind on this issue.

And as the economies grow ever more complicated with certain countries having legalized pot and others continuing with prohibition, well, it begins to create headaches that politicians would rather not have to deal with.

On top of that, you have an issue that’s gaining popularity among voters around the world, amounting to a perfect storm for expanded marijuana legalization, including in the United States.

Yes, yes, there is a lot of “if this happens” in the above scenario, but frankly, legalization in more jurisdictions is not hypothetical—it’s inevitable.

Sure, it may not be Australia that joins Canada as the next major economy to federally legalize marijuana, but another country definitely will.

If it’s the U.S., fantastic, we would see massive boosts across the board for marijuana stocks. If it’s some other country, also good, because legalization anywhere will further incentivize the U.S. and other major economies to catch up.

Whether Australia is now on the path toward full marijuana legalization in the near future, the fact that its capital city has dipped its toe into the legal pot market cements what we already know: the legal cannabis market is growing around the world, and that’s not going to stop anytime soon.

Analyst Take

Analyzing trends is a great way to forecast stock market gains. Here’s an easy enough trend to see: marijuana legalization is spreading globally.

From Canada to the U.S., from Europe to Australia, each passing month brings us closer to a fully realized marijuana market.

It may not happen tomorrow or next year, but eventually, we are going to see the legal cannabis industry begin to reach its potential. And investors who get in early enough will likely be grinning from ear to ear when it does.