Australia’s illegal tobacco trade has created a $3.3bn (£1.7bn) hole in the federal government’s finances, according to a report by the Australian Criminal Intelligence Commission (ACIC). The agency warned that organised crime’s grip on the market is intensifying, with the Australian Taxation Office estimating one in five cigarettes sold is now illicit.
The ACIC’s analysis, released on Thursday, found the overall economic impact of illegal tobacco – including healthcare costs and lost productivity – reached $4bn over 2023-24. The Australian Institute of Criminology said this figure was “almost certainly an underestimate” as it excludes e-cigarettes and illegal vapes, which have seen a “substantial and rapidly expanding market” since retail sales were banned.
The surge in demand for cheaper alternatives has been fuelled by steep excise increases on legal cigarettes. A packet of 20 now costs nearly $30 in tax alone – an almost eightfold rise since 2006. New South Wales Premier Chris Minns has called for a federal review, arguing the excise is the “leading reason” for the black market boom, with illegal packs selling for around $13 compared to $50 legally.
The illicit trade has been accompanied by escalating violence, including at least three deaths and more than 200 firebombings since 2023, as rival gangs compete for profits. Treasury forecasts in May’s federal budget project tobacco excise revenue will fall by $6.9bn over four years, down from $16.3bn in 2011-12 to just $7.1bn next financial year.
Federal Treasurer Jim Chalmers has resisted calls for a review, saying in June he does not believe “the answer is to make cigarettes cheaper for people”. The ACIC estimates illegal tobacco represents a fraction of the $82.3bn annual cost of serious and organised crime in Australia, with illicit drugs accounting for $19bn.
