Australia divided over how to tackle illegal tobacco crisis

Australia is divided over how to tackle its illegal tobacco crisis Mon 10 Aug 2026 at 5:00am When the Australian Bureau of Statistics released data on tobacco consumption earlier this year it made headlines. It found that 80 per cent of the tobacco consumed in Australia came from illicit sources. It's a big number and highlights a deep problem for public health authorities and law enforcement alike. Let's take a look at how we got there. First, let's track the amount of legal tobacco consumed. This chart using ABS figures shows the amount of nicotine consumed from legitimate cigarettes and tobacco, going back to 2016. You can see the amounts don't really change much for the first few years, hovering around 4,500kg of nicotine per quarter. This is despite yearly tax hikes, which would eventually make Australian cigarettes the most expensive in the world. Then, halfway through 2019, the amount of legal tobacco starts to shift downwards. ... the tax hikes continue ... … and the shift becomes a tumble. Until we reach the latest numbers — about a third of where we were a decade ago. A triumph for anti-tobacco campaigners and a big win for public health, right? Big tobacco on the run. But this is not the whole chart. When people consume nicotine, the by-product is eventually flushed down the toilet, at which point a different story emerges. This is the total nicotine detected in our wastewater... Look at the gap between the lawful tobacco consumption and the story our wastewater is telling. It is a huge rise in illegal nicotine consumption, and it's big headache for law enforcement. This part shows the thousands of kilos of illicit cigarettes being smoked, according to ABS estimates. Compare this with the amount of tobacco being consumed in illegal vapes. It's a much smaller but growing amount, which we'll go into... This final section shows other nicotine products, like pouches, prescription nicotine and nicotine gum. This all points to the black market trade fast becoming a replacement for Big Tobacco. And that brings problems of its own. You'd be forgiven for thinking those figures mean eight out of every 10 cigarettes sold in Australia are illegal, and that smoking rates must be up. That's what we first thought when we saw it. But it's not as simple as that (although the truth is not that far off). Remember, the chart showed the volume of converted nicotine in wastewater, not the number of cigarettes being consumed, and that's an important difference. Professor of Public Health at the University of Sydney, Becky Freeman, says the 80 per cent figure from the wastewater is most likely down to individuals consuming larger amounts of nicotine in illegal products. Not only are the illegal cigarettes of varying strength, but it's likely that people who buy them are heavier users. "What this suggests is that the people who are smoking illicit tobacco, are probably smoking more because there's no price barrier there." Prof Freeman has worked in tobacco control for more than two decades and explains that all these figures are part of the same story. "I'll just say none of these research findings are surprising to me," she says. "They all marry up and paint a full picture." The good news in all of that, she says, is that it doesn't mean smoking is back, as overall rates are down. In a survey released last month, the Australian Institute of Health and Welfare found daily smoking rates dropped to 5.6 per cent in 2025, down from 8.3 per cent in 2022 - 2023. Although some, including Australia's former deputy chief medical officer Dr Nick Coatsworth, who supports a drop in excise, have questioned this figure, saying it goes against trends in several states, such as Western Australia, showing a lift in rates. Nevertheless, that chart represents another problem — a huge hole in tax revenue. Every dollar that goes to the black market is a dollar that's not going to taxpayers. Australia's Illicit Tobacco and E-cigarette Commissioner office estimates excise and duty evasion cost Australia up to $11.8 billion in the 2024-25 financial year. In the latest federal budget, $8 billion was wiped off tobacco excise estimates over the next five years. Smoking is still the leading cause of preventable death and disability in Australia and that comes with large price tag. It's estimated smoking costs the economy more than $136 billion a year in the treatment of diseases (including heart disease and lung and oesophageal cancers) as well as lost productivity. Low risk, high reward for criminals So, now we can see how we got here, how can we solve the problem? Not everyone agrees to the same approach. Dr James Martin says Australia is seeing a "mass consumer revolt" against the price of cigarettes. The Deakin University criminologist points out that a pack-a-day smoker would be looking at a bill of more than $15,000. "I'm surprised that the government has continued to double down on the policies that have gotten us here rather than looking for alternative approaches," he says. "So you take an addictive commodity, you price it out of a range of affordability, there's very little difference between banning something outright ... or just pricing it out of availability. "The net effect is the same, and that is that it displaces demand to illicit operators." Perceived as a low-risk and high-reward business model, selling illicit tobacco has become one of the fastest growing criminal markets. It's now second only to illicit drugs in lining the pockets of organised crime groups. So what are the solutions? Shouldn't we cut tobacco tax? Given the chart shows a clear increase in illicit tobacco consumption as the price of legal products steadily rises, it seems like the first place to start. But this is where ideas on how to tackle the issue differ most. The federal government is cold on any change to the tobacco tax. Assistant Minister for Customs Julian Hill told the ABC in June that reducing the excise "doesn't stand up to scrutiny". "What magic level of excise reduction would make any material difference to transnational and serious organise crime profitability?" he said. "The option is not to surrender our nation's health policy to organised crime or condemn the next generation to the scourge of smoking-related disease and early death." On the other side of politics, Liberal MP Mary Aldred says the excise is "too high" and a reduction should be considered as part of a "Swiss army knife of solutions". "The price point legal cigarettes are now at means the government is driving honest, decent Australians into the arms of organised crime," she said at a National Press Club address last month. In Ms Aldred's hometown of Warragul, a suspected illegal tobacco shop was firebombed 80 metres from her electorate office, terrifying nearby businesses and the small community. "There's thousands of small business owners right across Australia who have nothing to do with this and are losing trading hours, they're losing staff, because they are scared about coming to work and no-one's standing up for them," she told the Press Club. "I believe this will come to be seen as the greatest public policy failing in a generation." NSW Premier Chris Minns has also called on the federal government to consider lowering the tobacco excise, questioning whether it is the best use of NSW Police time to be fighting on the illegal tobacco front. Professor Richard Holden from the UNSW Business School believes it is a "huge mistake" for the government not to consider changing the excise. The economist is calling for the excise to be cut entirely for a period of time, while authorities get on top of the black market. "It's a disaster ... because if you make the excise high enough, you create an incentive for illicit tobacco to come into the country," he says. But Illicit Tobacco and E-cigarette Commissioner Amber Shuhyta is not advocating for excise cut. "It is not my current understanding that reducing the excise rate would effectively shift the market dynamic," she says. She says she doesn't want to have "blinkers on" looking at one policy lever. The commissioner says the market is currently being driven by not only the price differences, but also the sophistication of organised crime networks, the technologies that became available to them in recent years, the rise in the number of shops selling the illegal products, and the demand for what is a highly addictive commodity. Professor Freeman wants to see more control on the market, not less. "I don't think people realise that illicit tobacco can get even cheaper. It's not being sold at the most basement bargain price already. It's really cheap to manufacture cigarettes," Professor Freeman says. "So all we would be doing (in cutting the tax) is trying to 'compete' with criminal gangs." The Australian Medical Association also says reducing tobacco excise would increase prevalence and "undo decades of effective public health strategy". Ok, well how about tougher policing? Last year Australian Border Force seized more than 2.66 billion illegal cigarettes, up from 480 million in 2016. The products mostly come in two forms. Counterfeit cigarettes that look and taste like legitimate brands, but are not made by the company advertised on the branding. The other is cigarettes made legally in another country, but smuggled and sold in Australia without duties or taxes. With vapes only legally sold at pharmacies, almost every vape bought in Australia is unlawful — 97 per cent of e-cigarettes sold are from illegal sources, which amounts to a market value of $1.6 billion. The federal government has committed $84 million over the last two budgets for enforcement, storage and disposal. It's part of a $345 million strategy to try and disrupt the illegal market, which includes the National Disruption Group, an ABF-led team that works with state and territory police. The Australian Criminal Intelligence Commission says organised crime groups involved in the illegal trade show "the agility and sophistication of multinational businesses". "Without sustained and coordinated intervention, the market will continue to expand and further entrench criminal influence in Australia," it said in its submission to a Liberal-led senate inquiry into illegal tobacco due to report on August 13. But Dr James Martin says arresting big players can also have the opposite effect, and entrench black markets further. "Policing doesn't work against illicit markets that big," he says. "And that's because the distribution networks are dense and there's so many players in the market that if you take one out ... not just one retailer, but a whole syndicate, there are so many other competitors in the space." If policing won't work, how about new penalties? Commissioner Shuhyta is firm that Australia needs to harden the environment for anyone trying to sell illegal tobacco. "It is about strengthening consequences," she says. "It's about centralising all of our data and intelligence and information, so we can tackle this in a national way rather than separate agencies going alone." Tobacco licensing is state or territory based, so a range of laws are in place across the country. The Police Association has called for a nationally consistent licensing scheme for the sale of tobacco. Two years ago, Victoria promised some of the toughest penalties in the country after dozens of arson attacks linked to the so-called tobacco wars. New penalties mean anyone caught with illegal tobacco faces fines of up to $370,000 or 15 years' jail and businesses face penalties of more than $1.8 million. One Victoria Police detective told the ABC's 7.30 that after 500 arrests he wasn't sure law enforcement was making a dent. "They [organised crime groups] have got bigger budgets than law enforcement agencies, which is just frightening." There's also been crackdowns in WA, with 50 shops in Perth shut down by authorities last month. Queensland Health has issued 275 shop closure orders since November last year and NSW tightened its licensing scheme and increased fines. Can we cut smoking rates further? There is wide agreement that it's best to have as few smokers as possible. Smoke-free products such as vapes, gums and pouches have been touted by the tobacco industry as a lesser evil than inhaling the toxic fumes of cigarettes. But the products remain highly controversial, with health groups concerned they simply shift the nicotine addiction to another product. Last month the government cracked down on nicotine pouches, closing a loophole for personal importation, in a bid to reduce their availability. "Anyone unlawfully selling nicotine pouches in Australia has been put on notice," Minister for Health Mark Butler said. Dr Coatsworth says there needs to be a shift to talking about harm reduction but admits it is a "wicked public policy problem". "We must either temporarily align with some of the objectives of the worst corporate citizens on the planet, or surrender our youth or disadvantaged smokers to an illegal market," he told the Press Club. He says alternatives such as vapes and tobacco pouches should be considered to get long-term smokers to kick the habit. Professor Freeman is more cautious. "The only way I would be comfortable with these products being available for Australians to use is if they had that stamp of approval that they were safe and effective for smoking cessation. And no company has." Dr Martin says Sweden has been able to drive down its smoking rates to under 5 per cent of the population with the availability of non-combustible nicotine options, such as tobacco pouches and a product developed in the country called snus, which is absorbed into a person's lip. But others fear that opening the door to alternatives is inviting Big Tobacco in the back door. There were deep concerns that the senate inquiry allowed tobacco giant Philip Morris a closed-door hearing, with a coalition of health organisations calling it out in an open letter. "The only way I would be comfortable with these products being available for Australians to use is if they had that stamp of approval that they were safe and effective for smoking cessation. And no company has," Professor Freeman says. "We need to do more in tobacco control, not less. "What we're doing is working. We need to hold the course." She wants to see cigarettes harder to come by in Australia. "They should only be sold in a few places that can handle the intense responsibility of selling such a dangerous, addictive and highly taxed product." Commissioner Shuhyta says a coordinated response is needed. "I don't just listen to the loudest voices," she says. "I think diversity in thinking is a good thing. I think we need to contest ideas. I think we need to have all of the different perspectives at the table because just looking at it through one lens will not get us the solution we need." About the reporting - The ABS chart of household consumption of illicit tobacco and nicotine products uses experimental estimates of illicit tobacco consumption, using quarterly wastewater data sourced from the Australian Criminal Intelligence Commission. - Samples were collected from 60 wastewater treatment plants cross Australia, representing about 60 per cent of Australia’s total population. - While wastewater data provides reliable estimates of total nicotine consumption, it does not identify which products the nicotine came from. Information from existing survey and administrative data sources, such as supermarket scanner data and ATO tax data, is used to establish nicotine consumption from legal tobacco products. The Kalman filter approach is used to allocate the remaining unobserved nicotine consumption across all product types and quantities. Credits - Reporting and production: Andie Noonan - Design: Georgina Piper - Development: Josh Byrd - Editing: Cristen Tilley - Share options - Copy link - X (formerly Twitter) [Image text:] Smoking causes cancer