Up to four out of five cigarettes smoked in Australia are illegal, as new evidence pulled from the country’s sewers shows that decades of campaigning to reduce smoking rates have failed.
The Australian Bureau of Statistics has for the first time estimated how much the illegal tobacco trade now dominates the nation’s cigarette market using experimental tests of nicotine concentrations in wastewater.
According to data released on Wednesday, illicit nicotine products – including cigarettes, e-cigarettes, vapes and loose leaf tobacco – will account for 80 per cent of consumption in Australia in 2025, up from 12 per cent in 2017.
Nicotine consumption grew by 40 percent during the same period, with most of the increase in nicotine use occurring in the last four years. The population increased by 14 percent during that time, while tobacco taxes increased by a third.
The federal government, along with states and territories, is spending more than $300 million to combat the illegal tobacco trade, which has grown since the beginning of the decade. Tax revenues have fallen over time violence related to illegal trade has increased.
In last month’s budget, Treasurer Jim Chalmers was again forced to write down expected tobacco tax collections. Between 2025-26 and 2029-30, the government now expects to collect $15.4 billion in taxes, compared to the $27.3 billion it predicted for the same period in last year’s budget. Since the start of this decade, tobacco taxes have raised more than $65 billion.
Wednesday’s data showed household spending on tobacco fell to 2016 levels after peaking in late 2020 even as tobacco consumption increased, reflecting a shift to cheaper illegal sources.
Annual increases in tobacco taxes have increased the legal price of tobacco, which has tripled since December 2016, the report said. Prices of illegal goods have remained stable.
The ABS figures show a bigger problem than was revealed in a study by the state’s tobacco and e-cigarette commissioner in December, which an estimated half of tobacco was illegal.
The bureau’s report covers all nicotine products, including nicotine patches, while the tobacco king’s report excluded cigarettes and vapes.
Assistant Minister of Customs Julian Hill said that while the methods differed and the data was taken at different intervals, the office’s results reflected the commissioner’s inaugural report.
He said that since the end of 2025, the intense search of the Border Force has seized more than 1000 tons of illegal tobacco, while illegal shops have been closed all over the country by government authorities.
“While the government has always acknowledged that the illegal trade can grow before it declines, there is very early evidence to suggest that in states like Queensland with strong closure powers and landlord penalties, nicotine users are returning to the legal market when illegal shops are forced to close,” he said.
“The Government will not surrender our nation’s health policy to organized criminals or Big Tobacco who just want to see a new generation of Australians using nicotine.”
Liberal MP Mary Aldred, who co-chairs the Coalition’s illegal tobacco task force, said the bureau’s figures proved that current tobacco policy was no longer working as an effective public health measure.
“The ABS report completely destroys the idea of Australians simply giving up smoking,” he said.
“This stopped being a moral purity debate when businesses started being attacked and workers started being threatened.”
Lachlan Vass, research manager at independent think tank e61, said ABS data on tobacco tax write-offs in last month’s budget confirmed the government had to cut tobacco tax and step up enforcement against the illicit trade.
“The concern and reluctance about cutting tobacco tax should be based on the fact that 80 percent of consumption now pays zero tax, and faces very low prices,” he said.
“This works strongly against public health goals. And while tax cuts may benefit ‘big tobacco’, the current approach benefits ‘big crime’.”
Deakin University senior criminology lecturer James Martin said law enforcement could not crack down on such a large market alone.
“This should prompt a deep rethinking of the neo-prohibitionist policies that have gotten us into this mess,” he said.
Brittany Busch is a federal politics reporter for The Age and the Sydney Morning Herald.Connect through email address.
Shane Wright is the senior economics writer for The Sydney Morning Herald and The Age.Connect through X or email address.
