By Timothy S. Donahue
Top Takeaways:
- Black market surge: Australia’s statistics agency estimates illicit products accounted for 80% of all nicotine consumption in 2025.
- Revenue collapse: Treasury has downgraded expected tobacco excise revenue by $5.7 billion over the next five years.
- Policy debate: Critics say steep tax increases fueled the illicit market, while government officials argue reducing taxes isn’t the answer.
It’s huge. Australia’s illicit nicotine market may be far larger than previously believed.
A new analysis from the Australian Bureau of Statistics (ABS) estimates that illicit cigarettes, vapes, and other nicotine products accounted for 80% of nicotine consumption in Australia in 2025, a dramatic increase from just 12% in 2017.
The figures represent one of the starkest official assessments to date of the country’s growing black market and are likely to intensify debate over Australia’s tobacco taxation policies, according to several media reports.
According to the ABS, overall nicotine consumption rose by nearly 40% between 2017 and 2025, even as household spending on legal tobacco products fell sharply. The agency attributed the shift largely to increased consumption of illicit cigarettes, e-cigarettes, and other nicotine products.
The estimates were developed using nicotine metabolite concentrations measured in wastewater samples, combined with economic data showing a collapse in spending on legal tobacco products.
“This is a massive policy failure and requires a radical rethink,” said James Martin, a criminologist at Deakin University who studies illicit markets and organized crime. “It’s simply not possible to enforce your way out of a mess of this size.”
Australia has some of the highest cigarette prices in the world, driven by years of aggressive excise increases. The tobacco excise has risen by more than 200% over the past decade, and taxes now account for more than 80% of the retail price of a pack of cigarettes. Legal packs commonly sell for more than AU$50 (US$35.72), while illicit products can be purchased for about half that amount.
The impact is increasingly evident in government finances.
In its most recent federal budget, Australia’s Treasury reduced projected tobacco excise revenue by AU$8 billion (US$5.7 billion) over the next five years, as legal tobacco sales continue to decline. At the same time, enforcement agencies continue to report record seizures.
Australian Border Force seized more than 2.66 billion illicit cigarettes in 2024, up from about 480 million in 2016, according to government figures.
The government’s recently appointed Illicit Tobacco and E-cigarette Commissioner previously estimated that illegal cigarettes and vapes accounted for roughly 60% of the market. The new ABS analysis goes further by including all nicotine products, such as nicotine pouches, resulting in the higher 80% estimate.
The commissioner also estimated annual excise evasion between AU$7.7 billion and AU$11.8 billion. The findings come amid growing political debate over whether Australia’s tobacco tax strategy has reached a tipping point.
Some critics argue that continued excise increases have unintentionally fueled organized crime and accelerated the growth of the illicit market. Australia’s opposition coalition has indicated it is open to considering excise reductions to encourage smokers to return to legal products.
The Albanese government has rejected that approach. Treasurer Jim Chalmers, Australia’s federal treasurer, recently said he was skeptical that lowering tobacco taxes would reverse the growth of the illicit market. Assistant Customs Minister Julian Hill, who oversees customs and border enforcement, dismissed the idea more forcefully.
“The excise argument simply doesn’t stand up to scrutiny,” Hill said. “The option is not to surrender our nation’s health policy to organized crime or condemn the next generation to the scourge of smoking-related disease and early death.”
