The Albanese government is facing renewed pressure to change its approach to combatting the illicit tobacco market as new data shows a shocking drop in excise revenue and a huge uptake in illegal products.
'Alarm bells': Pressure builds on 'deluded' Labor as shocking data shows billions of tobacco excise lost to black market The Albanese government is facing renewed pressure to adjust its approach to tackle the illicit tobacco market as new data shows a shocking drop in excise revenue and a huge uptake in illegal products.
The Albanese government is facing renewed pressure to change its approach to combatting the illicit tobacco market as new data shows a shocking drop in excise revenue and a huge uptake in illegal products. Fresh Australian Bureau of Statistics data released this week found that nicotine consumption increased by almost 40 per cent between 2017 and 2025, despite population growth of only 14 per cent over the same period.
The increase, according to the ABS, was driven largely by the rapid growth in illicit cigarettes, e-cigarettes and other nicotine products. In 2017, illicit products accounted for just 12 per cent of total tobacco consumption, but by 2025 that figure had risen dramatically to 80 per cent.
The Albanese government is facing renewed pressure to adjust its approach to tackle the illicit tobacco market as new data shows a shocking drop in excise revenue and a huge uptake in illegal products. Picture: NCA NewsWire /Philip Gostelow Labor’s own budget has forecast tobacco excise revenue collapsing from $7.767 billion in 2024-25 to just $4.13 billion this financial year, well below the estimated $6.8 billion annual healthcare cost of smoking.
Victorian Liberal MP Mary Aldred said the current policy on tobacco has reached a “breaking point” due to excise revenue falling below estimated annual healthcare costs of smoking for the first time.
“This is the financial year Australia crossed the line where tobacco excise no longer even covers the healthcare costs of smoking,” Ms Aldred said in a statement. “That should be setting off alarm bells right across government because it shows the current model is breaking down. ” A British American Tobacco Australia spokesperson said Health Minister Mark Butler had claimed to be simultaneously “fighting organised crime and Big Tobacco”, but Australians were now dealing with “serious” consequences”.
“The uncomfortable reality for the Minister is that organised crime is the new Big Tobacco,” BATA said. In 2017, illicit products accounted for just 12 per cent of total tobacco consumption, but by 2025 that figure has risen dramatically to 80 per cent. Picture: Serhii Moiseiev/Getty Images The spokesperson said the legal tobacco industry operated under some of the “strictest regulations” in the earth, while organised crime “dominates” Australia’s nicotine market while avoiding paying taxes, reporting profits and employing Australians.
“And unlike legal businesses, they appear entirely unconcerned about firebombing shopping strips, intimidating retailers or recruiting young people into organised crime,” BATA said. “It is an exercise in deluded irony for the Minister to keep attacking “Big Tobacco” while presiding over the largest expansion of black market tobacco in Australian history. “If the government genuinely believes organised crime is the enemy, it may eventually need to confront the uncomfortable fact current policy settings have made organised crime extraordinarily rich.
” Assistant Minister for Customs Julian Hill downplayed the scourge of illicit tobacco and said the ABS report was simply a reflection of last year’s inaugural report by the ITEC Commissioner. The Albanese government’s own illicit tobacco and e-cigarette commissioner has acknowledged the tobacco black market cost the country $11.8 billion in lost excise in 2024-25.
“Available evidence suggests enforcement measures pre-, at- and post- border are having an effect on the illicit trade,” Mr Hill told SkyNews.com.au. “While the government has always acknowledged that the illicit trade might grow before it declines, there is very early evidence suggesting that … nicotine users return to the legal market when the sleazy illegal shops have been forced shut.
“The Government will not surrender our nation’s health policy to organised criminals or Big Tobacco who just want to see a new generation of Australians hooked on nicotine. ” Mr Hill said the Liberals were “hypocrites” on the issue having raised the excise by 121 per cent during their tenure but were now calling for cuts.
“It is not the Labor Party that takes donations from Big Tobacco, but the same cannot be said about the Coalition,” he said. Ms Aldred said the Albanese government’s tobacco policy had become a “gift” for organised crime, but “wrapped in plain packaging”.
“When illegal tobacco explodes, nearly 300 firebombings follow and smoking rates go up, the government can no longer hide behind ideology,” she said. “There is nothing moral about protecting policy settings that are helping organised crime dominate the market while vulnerable communities carry the consequences. ” In March, the excise rate increased, as it does each year in March and September, to $1.53 per cigarette.
Oxford Economics Australia found in its commissioned report earlier this year that Commonwealth revenue forecasts have “consistently underestimated the rapid rise of the illicit market”.
"The illicit market was estimated at 19 per cent of total consumption in 2020-21, 50-60 per cent in 2024-25, and is forecast to reach almost 90 per cent by 2028-29," the report found. “The gap between expected excise receipts back in 2018-19 and forecasted receipts by 2028-29 $67 billion. Forecasted excise revenue by 2028-29 is $1.5 billion.
“The illicit market is a highly lucrative revenue stream for organised crime, estimated at $4b to $7b per year. Violent turf wars vying for market control are harming the community and legal retailers.
" Oxford recommended Treasurer Jim Chalmers slash the excise to 2019 levels until the market stabilises, cutting the price of legal packs by about a third of the current price.
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