ABS estimates 80% of tobacco consumed in Australia last year illegal amid ‘rapid growth’ in black market

By national affairs correspondent Jane Norman

• An estimated 80 percent of the cigarettes and vapes consumed in Australia last year were illegal, according to the ABS.
• Treasury downgraded tobacco excise revenue by $8 billion over the next five years in the latest federal budget.
• Criminologists say the findings highlight a “massive policy failure and require a radical rethink” of tobacco laws.

An estimated 80 percent of the cigarettes and other nicotine products consumed in Australia last year were illegal, according to the Bureau of Statistics, which has analysed the “rapid growth” of the black market for the first time.

Data released by the ABS on Thursday found nicotine consumption increased by almost 40 percent between 2017 and 2025, while household spending on legal tobacco products fell dramatically over the same period.

“The increase was underpinned by a large rise in illicit cigarettes as well as increases in e-cigarettes and other nicotine products,” the ABS analysis found.

“Consumption from illicit sources, as a share of total tobacco consumed, rose from 12 percent in 2017 to 80 percent in 2025.”

The experimental estimates are based on “nicotine metabolite concentrations” detected in wastewater samples, combined with data showing a collapse in household spending on legal cigarettes and vapes.

In its analysis, the ABS points out prices for legal tobacco have almost tripled since 2016, driven by steep increases in the excise, which experts blame for creating a black market that has spiralled out of control.

“These numbers put it in the most stark terms possible,” said James Martin, a Deakin University criminologist who described the findings as “absolutely staggering”.

“This is a massive policy failure and requires a radical rethink.

“It’s simply not possible to enforce your way out of a mess of this size.”

Australia has among the highest cigarette prices in the world, with the tax alone increasing by more than 200 percent in the past decade.

The excise is now worth $1.52 per stick (more than 80 percent of the total cost), pushing the price of a packet of 25 cigarettes well over the $50 mark.

Under-the-counter cigarettes sell for around $25 a pack and are being imported in huge quantities, mainly from Asia and the Middle East.

Tax has been the cornerstone of efforts to drive down smoking rates in Australia from about 25 percent of adults in the early 2000s, to around 10 percent today, which is why public health experts are in favour of a high excise.

Excise downgraded by $8 billion

Historically, the tax was increased twice yearly in line with inflation, but in 2010 - along with its plain-packaging reforms - the federal government started taking a more aggressive approach.

In that year, the tax was increased by 25 percent, followed by annual hikes of 12.5 percent between 2013 and 2020.

These hikes were in addition to the twice-yearly increases, which are now pegged to average earnings rather than inflation.

Critics say the steep increases have pushed Australians to a black market that is robbing the federal budget of billions of dollars and forcing legitimate retailers to shut down.

In the latest federal budget, Treasury downgraded tobacco excise revenue by $8 billion over the next five years.

While the Coalition is open to reducing the tobacco excise to encourage smokers to shift to the legal product, the Albanese government has resisted calls to change tack.

Instead, it has focused on bolstering enforcement at the border, appointing an Illicit Tobacco and E-cigarette Commissioner, whose latest report estimated illegal cigarettes and vapes made up 60 percent of the total market.

That report was limited to cigarettes and vapes while today’s ABS data included all nicotine products including pouches.

“Estimated excise evaded ranges from $7.7 billion to $11.8 billion,” the report stated, quantifying the amount of revenue being lost to the black market.

Border Force last year seized more than 2.66 billion illegal cigarettes at the border, up from 480 million in 2016.

Asked recently about calls to cut the excise, Treasurer Jim Chalmers said he was “sceptical” that it would achieve what critics were hoping.

Assistant Customs Minister Julian Hill dismissed the idea altogether.

“The excise argument simply doesn’t stand up to scrutiny,” he told the ABC.

“What magic level of excise reduction would make any material difference to transnational and serious organise crime profitability?

“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.”

- ABC