Australia’s tobacco and vaping policies have helped create a vast illicit market while governments continue to pour money into enforcement and neglect cheaper, more effective harm reduction.
Between 2013 and 2024, Australian Labor and Coalition governments increased cigarette excise 282 per cent. As there is little community sympathy for the shrinking minority of Australians who smoke, smokers are an easy target for exorbitant taxation. In addition, the impressive evidence that increased cigarette prices generally reduce the number of people who smoke encourages governments to keep increasing cigarette excise.
Black markets for cigarettes and tobacco have existed for many decades, including in Australia. The extent of this difficult-to-estimate market was believed to be relatively modest in Australia and was reluctantly tolerated. However, along with the increasing excise, the size of this illegal market began increasing rapidly in recent years. Illegal sources now supply the majority of cigarettes and tobacco in Australia and provide an estimated 95.7 per cent of vapes in Australia.
The serious unintended consequences of exorbitant cigarette excise increases are now well known but are shrugged off by tobacco control supporters. Cigarette excise revenue, now less than half of what it was in 2019–2020, is expected to continue declining. Rival criminal groups fighting for larger shares of the lucrative black market have become increasingly violent, with widespread extortion of retailers, more than 300 retailers firebombed, high insurance rates for tobacco and other retailers, and at least six alleged homicides.
Legal cigarettes in Australia are among the most expensive in the world, notwithstanding our cost-of-living crisis. Smoking is more common among low-income and disadvantaged people, who also smoke more cigarettes per day. This seems of little interest, even to Labor politicians. Data on recent trends in smoking rates are mixed. The highly respected National Drug Strategy Household Survey reports a substantial fall in daily smoking, while experimental consumption data point to rising overall nicotine consumption and a rapidly growing illicit tobacco market.
Supporters of current cigarette excise also support the quasi-prohibition of vapes, even though most experts now accept that the health risks of vaping are substantially less than smoking and that vaping largely substitutes for smoking.
Two political fracture lines have developed. The National, Liberal and One Nation parties and some teals support a substantial reduction of cigarette excise, and the National and Liberal parties now also support increasing the availability of vapes. Meanwhile, Labor and the Greens support current cigarette excise and the current restrictive vape policy. There is also a jurisdictional split, with ALP NSW Premier Minns and Liberal Tasmanian Premier Rockliff publicly supporting a cut in cigarette excise. Other premiers are described in the media as supportive of a cut in cigarette excise in private discussions with the federal government. NSW Greens MLC Cate Faehrmann was a member of the Legislative Council committee whose report recommended tobacco harm minimisation, a cut in cigarette excise and increased availability of vapes. However, in a recent Senate inquiry, Greens senators Shoebridge and Steele-John provided a dissenting report supportive of current government policy. The commonwealth government receives all revenue from cigarette excise, but the states and territories fund most of the increasing law enforcement costs arising from the ballooning cigarette, tobacco and vape black market. This vertical fiscal imbalance may help explain the jurisdictional divide in policy.
There is also a growing policy divide. Supporters of current tobacco and vape policy have all but abandoned tobacco harm reduction and, at least publicly, are hopeful that law enforcement can control these illegal markets, notwithstanding the consistently extremely negative results from national and international attempts to restrict the supply of illicit drugs.
In a 2026 survey of Australians who regularly inject illicit drugs in capital cities, 95 per cent of participants who commented said heroin was easy or very easy to obtain. Similar results have been found in surveys for cocaine, methamphetamine and cannabis. The latest national drug-budget estimate found Australian governments spent about $3.5 billion on illicit-drug law enforcement in 2021–22.
Although rarely acknowledged, law enforcement for illegal drugs shows a consistently miserable return on investment. Over the course of many decades, there has been an increase globally in: the quantities of illegal drugs cultivated, produced, transported, purchased and consumed; the number of countries reporting serious problems related to illegal drugs; the number of different illegal drugs available; the hazardousness of illegal drugs available; and the number of people dying from illegal drugs. The price of illegal drugs has decreased while their purity has increased in the US, Europe and Australia. Increasing enforcement of illicit drugs often results in increasing violence, including homicides. Nevertheless, community and political support for drug prohibition has continued to hold up.
After more than a decade of trying to obstruct a review of the effectiveness of the international drug control system, the UN Commission on Narcotic Drugs has now allowed a review. The counterfactual to drug prohibition is a difficult question for many, but it is hard to deny that, in general, the more governments regulate drug markets, the better the results, while the less governments regulate drug markets, the worse the outcomes. Australia’s recent experience with cigarettes, tobacco and vapes is consistent with the national and international experience with illicit drugs.
Like other countries, Australian governments perversely allocate funding for illegal drugs in inverse proportion to evidence of effectiveness. Supply reduction receives 64 per cent of government funding expended in response to illicit drugs, notwithstanding a lack of evidence of effectiveness, and ample evidence of both cost-ineffectiveness and major counterproductive effects. Demand reduction accounts for 34 per cent of government expenditure, with results more impressive than efforts to reduce supply. Harm reduction, where the focus is on reducing the harmful consequences of difficult-to-modify risk behaviours, receives 1.6 per cent of Australian government expenditure but is effective, generally unaccompanied by adverse effects and is cost-effective.
Needle syringe programs, an example of harm reduction, required civil disobedience to begin in Australia in 1986 in time to prevent Australia being engulfed by HIV. An independent study found that in 2000–2009, Australia’s needle syringe program averted over 30,000 HIV infections and almost 100,000 hepatitis C infections, and for every $1 spent, $4 was saved in healthcare costs and $27 was saved in expanded economic costs.
Although Australia continues to delay adjusting to the realities of the market for cigarettes and safer nicotine products, the world is moving. The number of people globally using safer nicotine products would have only barely been a million 20 years ago but was estimated in 2026 to be more than 200 million out of a global population of 1.2 billion tobacco users. Electric vehicles accounted in 2025 for 25 per cent of the global market for new cars. The decarbonisation of the global nicotine market, like the decarbonisation of the global car market, is now inevitable. Attempts to prevent the transformation of the car market or nicotine market are destined to fail. The best opponents can hope for is to delay the inevitable.
Dr Alex Wodak, AM, is a physician and has been a Director of the Alcohol and Drug Service at Sydney’s St Vincent’s Hospital, President of the Australia Drug Law Reform Foundation, Board Member of Australia21 & the Australian Tobacco Harm Reduction Association.
Emeritus Consultant, st Vincent’s Hospital, Darlinghurst, NSW, 2010 Tobacco Harm Reduction Adviser to the Harm Reduction Australia Board.