Australia grapples with soaring illegal tobacco market as taxes rise

Recent Australian Bureau of Statistics figures, supplemented by wastewater testing, indicate that roughly eight out of ten nicotine units consumed are illicit, a rise driven by successive tax hikes that have made legal cigarettes among the world's most expensive. Researchers say heavier smokers turn to unregulated products because they face no price barrier, even as overall smoking rates fall to 5.6% in 2025. The illicit trade is estimated to cost the Treasury up to $11.8 billion in lost duties for 2024-25, prompting calls for either excise cuts, tougher penalties, or a coordinated national enforcement strategy.

While some politicians, such as Liberal MP Mary Aldred and NSW Premier Chris Minns, advocate lowering taxes, the Illicit Tobacco and E-cigarette Commissioner and the Australian Medical Association warn that reductions could revive smoking prevalence. Law-enforcement agencies have seized billions of illegal cigarettes, yet experts argue that targeting individual dealers may not disrupt the dense distribution networks of organized crime.