The unintended consequences of our current tobacco control regime are now outweighing its health and economic benefits, as illicit trade explodes, enforcement costs soar and criminal networks flourish. It’s time for policymakers to confront a hard truth: well-intentioned health policy has become a catalyst for criminal enterprise, and a reset is urgently needed.

The Illicit Tobacco in Australia 2024 report by FTI Consulting paints a troubling picture. It estimates that almost 40 percent of all tobacco consumed in Australia is now illicit, up more than ten percentage points in a single year. That represents around 3,400 tonnes of illegal product in 2024, with roughly 70 percent of that being unbranded loose-leaf tobacco, or ‘chop-chop’. The fiscal impact is immense: an estimated $6.7 billion in lost excise revenue, equivalent to the annual budget of several federal agencies combined. While these findings are striking, it’s important to acknowledge questions about the legitimacy and accuracy of the report itself. Commissioned by players in the tobacco industry, its methodology and data sources should be treated cautiously. Yet, even if the figures are debated, the underlying trend—a flourishing illicit market—is clear, and it demands serious policy attention.

For decades, Australia has led the world in tobacco control. Plain packaging, steep excise increases, and bans on advertising were designed to reduce smoking rates and improve health outcomes. But those same measures have produced unintended side effects. The price of legal cigarettes has risen to more than $55 a pack, while illicit loose tobacco can be bought for less than a quarter of that price. In an era of rising inflation and economic stress, that disparity has created fertile ground for organised crime. Consumers priced out of the legal market are turning to unregulated suppliers, many of whom are part of larger transnational criminal enterprises.

Organised crime has adapted faster than policy. Networks that once trafficked drugs or counterfeit goods have diversified into illicit tobacco, drawn by high profit margins and relatively low risk. Unlike methamphetamine or cocaine, tobacco isn’t inherently illicit, which complicates detection, prosecution and deterrence. These criminal groups are using the same logistics chains that move other contraband, such as concealed shipments through ports, hidden storage in industrial estates, and cash-based retail networks that launder money back into the legal economy.

The Australian Border Force, the Australian Taxation Office and the Illicit Tobacco Taskforce have worked tirelessly, but the scale of the problem is outpacing their reach. Seizures of illicit tobacco in 2024–25 were almost unchanged from two years earlier, even as the estimated consumption of illegal products rose. That suggests a widening enforcement gap, not a shrinking one. Each new raid or seizure delivers diminishing returns, while the cost of enforcement continues to climb. Policymakers need to ask whether the resources dedicated to this fight reflect the real hierarchy of harm. Is illicit tobacco truly as great a national threat as methamphetamine, human trafficking or child exploitation?

This is the uncomfortable policy dilemma at the heart of the issue. Every dollar and hour spent pursuing tobacco smugglers is one not spent targeting those higher-harm threats. Australia’s law enforcement system prides itself on prioritising risk and harm reduction, but our current approach to illicit tobacco appears driven more by fiscal concern than social impact. Tobacco tax losses matter, but so too does the efficient use of finite policing resources.

To move forward, the government needs a pragmatic recalibration of its tobacco control and enforcement strategy. Three actions would make a difference.

The first is to commission an independent and transparent review of Australia’s illicit tobacco landscape. This should examine not just industry-commissioned data, but also government intelligence, academic studies and international comparisons. It must assess the real scale of the problem, the cost of enforcement, and the net social harms relative to other criminal markets. A credible evidence base is the essential starting point for any meaningful policy shift.

Second, enforcement should be reprioritised based on harm, not volume. Agencies should adopt a harm-weighted approach, focusing their efforts on dismantling organised criminal networks rather than simply seizing product. The goal should be disruption and deterrence, not just statistics. That may mean fewer large-scale seizures but more effective targeting of the financial and logistical nodes that sustain these networks.

Third, the government should revisit the structure of excise and regulation to close the incentive gap. No one is arguing for lower tobacco taxes as a matter of public health, but there may be scope to smooth future increases, introduce differential excise mechanisms or pilot controlled retail reforms to reduce the attractiveness of illicit markets. Any change should balance health outcomes, fiscal integrity and enforcement capacity.

This isn’t about weakening Australia’s stance on smoking. It’s about acknowledging that the system designed to protect public health is now inadvertently sustaining organised crime. The illicit tobacco economy erodes trust in institutions, drains public revenue and undermines the legitimacy of policy. It is both a law enforcement challenge and a warning about the limits of regulatory overreach.

Australia’s tobacco control policies were built on the principle of deterrence through cost and restriction. That approach worked for decades. But today, deterrence without pragmatism is breeding defiance, and defiance is being industrialised by criminal enterprise. Policymakers face a choice: persist with an unsustainable model or recalibrate towards one that balances health goals with economic and security realities. If we fail to act, the next tobacco crisis won’t be about public health, it will be about the criminal networks profiting from our good intentions.

 

This article has been corrected to say that seizures of illicit tobacco in 2024–25 were almost unchanged from two years earlier.