July 2026: Australian Smoking and Vaping Rates Decline to Historic Lows, AIHW Survey Shows
Smoking and vaping rates in Australia have either declined or stabilised, according to the 2025 National Drug Strategy Household Survey released by the Australian Institute of Health and Welfare (AIHW). The data indicates that daily smoking rates among individuals aged 18 and older have fallen to a historic low of 5.8%, down from previous years and well below the federal government’s 2025 target of 10%. This decline represents approximately 500,000 fewer daily smokers compared to three years ago. When factoring in younger cohorts, daily smoking among Australians aged 14 and older stands at 5.6%, down from 8.3% in the 2022-2023 period.
Vaping rates have also shown signs of stabilising. Following a period of steady increases among Australians aged 14 and older, the daily vaping rate held steady at 3.6% in 2025. Additionally, the proportion of current vape users decreased to 6% in 2025, compared to 7% reported in the 2022–2023 survey. Overall, past-year use of any nicotine product declined to 15.2% in 2025, marking the lowest level recorded by the AIHW. Despite these declines, the survey highlighted a shift in consumption habits, with an increasing number of Australians reporting the use of three or more different nicotine products.
These developments occur against the backdrop of a surging illicit market in Australia. Current market conditions indicate that the majority of cigarettes and all new nicotine products, including vapes and nicotine pouches, consumed within the country are sourced through illicit trade channels. In response to these trends and the availability of alternative products, the federal government is implementing tighter restrictions on nicotine pouches. Beginning July 24, 2026, nicotine pouches will no longer be accessible through unapproved therapeutic channels, including the Special Access Scheme, Authorised Prescribers Scheme, and the Personal Importation Scheme. Under the new regulations, individuals will be prohibited from importing nicotine pouches, even with a valid prescription.
The Australian Federal Health Minister indicated that the survey results suggest recent vaping reforms are having an impact, while acknowledging that further measures are required to address broader nicotine harms. He stated that nicotine pouches present a risk of fostering chemical dependency within the community, particularly among youth, and warned that regulatory enforcement against unlawful sellers will remain active. Government representatives also noted that public support services, including the national Quitline and digital cessation tools, remain available to individuals seeking to quit smoking or vaping.
June 2026: 80% of Australia’s Tobacco and Nicotine Market Is Now Illicit
The Australian Bureau of Statistics (ABS) has released experimental estimates suggesting a dramatic expansion of illicit tobacco use in Australia1. Published alongside the Australian National Accounts release for the March 2026 quarter, the analysis evaluates the economic footprint and rapid market expansion of illicit tobacco, vapes, and non-regulated nicotine products across the country. In response to significant market shifts and widespread public discussion, the ABS developed these estimates to measure total consumption, combining quarterly wastewater analysis from the Australian Criminal Intelligence Commission with statistical modeling via Kalman filtering, administrative tax records, and import price indexes.
The analysis reveals a dramatic shift toward the illicit market over the study period. In 2017, illicit sources accounted for just 12% of total tobacco and nicotine products consumed in Australia. By 2025, that figure skyrocketed to 80% of total consumption, marking a major departure from legal retail supply chains. Overall nicotine consumption in Australia grew by nearly 40% between 2017 and 2025, with the vast majority of this increase occurring after 2021, far outpacing the nation’s 14% population growth over the same period. This growth was largely driven by a sharp rise in illicit cigarettes, accompanied by substantial increases in e-cigarettes and novel recreational nicotine products such as oral nicotine pouches. The sharp divergence between rising total nicotine intake and declining household spending on legal tobacco underlines that nicotine consumption has not decreased in line with official retail sales, but has increasingly shifted into unregulated channels.
This structural transition is heavily driven by Australia having some of the highest cigarette prices globally. Over the past decade, mandatory Commonwealth excise increases have pushed tobacco taxes up by more than 200%. The tax component alone now accounts for around A$1.52 per cigarette, or over 80% of the retail price, driving the cost of a standard legal pack of 25 cigarettes well above A$50. In stark contrast, estimated street prices for illicit cigarettes have remained virtually flat, typically selling for around A$25 per pack. Consequently, while nominal household spending on legal cigarettes peaked in December 2020 before dropping back to 2016 levels, physical volume and total nicotine intake increased significantly as Australian consumers substituted expensive taxed products with much cheaper illicit alternatives. Incorporating these illicit figures into national accounting models substantially moderates the steep decline in physical consumption volume that official legal sales data originally reported.
The massive price gap drives the rapid surge in black-market supply, which relies on large volumes of contraband imported primarily from Asia and the Middle East. Enforcement figures underscore the massive scale of these illicit flows, with Australian Border Force seizing more than 2.66 billion illegal cigarettes at the border last year – a massive increase from the 480 million seized in 2016.
Under international economic frameworks, such as the United Nations System of National Accounts and OECD guidelines for the non-observed economy, illegal production and consumption conceptually belong inside national accounting boundaries to ensure complete coverage of total production, income, and consumption. However, in practice, Australia excludes illegal trade from official gross domestic product tables because black-market operations are hidden from customs and tax authorities, leaving no direct transactional data for wholesale, retail, or labor income. Therefore, these ABS estimates remain purely analytical and do not alter official gross domestic product figures.
From an economic perspective, the ABS treats legal and illegal tobacco as four distinct product categories rather than direct substitutes because they differ in pricing structures, distribution channels, regulatory oversight, and legal risks. These four categories comprise legal tobacco, illicit cigarettes including unbranded loose-leaf tobacco, e-cigarettes and related vaping products, and other recreational nicotine items like oral pouches.
To estimate this hidden market, the ABS established a multi-step methodology grounded in wastewater biomarker analysis. The Australian Criminal Intelligence Commission collects quarterly wastewater samples from 60 treatment plants covering approximately 60% of the national population to measure excreted nicotine metabolites, establishing an objective baseline for total nicotine intake. The ABS then determines legal baseline consumption using Australian Taxation Office clearance data and supermarket scanner records, applying a Kalman filter model to separate and allocate unobserved nicotine mass across the remaining illicit categories. Specific price deflators and nicotine density ratios are applied to translate metabolite masses into current price monetary values.
While the methodology relies on simplifying assumptions regarding wastewater sampling representativeness and uniform excretion ratios, it provides crucial insights for policymakers. High excise taxes intended to reduce smoking have inadvertently broadened the price gap, driving consumers to illicit channels and diminishing official tax revenues. This experimental framework directly supports the work of the Commonwealth Illicit Tobacco and E-Cigarette Commissioner by establishing a rigorous statistical framework to monitor Australia’s non-observed nicotine economy.
November 2025: Legal cigarette sales in Australia declined by two-thirds in three years
Legal cigarette market decreased by two-thirds, from about 11 billion sticks sold in 2022 to 3.5 billion sticks in 2025. In the same period, illegal cigarette sales volume more than doubled from 3.1 billion to 6.6 billion. Based on the prevailing trends, it is predicted that 8 billion illegal cigarettes will be sold in Australia in 2026, supplying 80% of the total consumption.
In September 2025, the federal excise on tobacco rised a further 5% plus the regular indexing. While the average price of a pack of 20 cigarettes now hovers around the A$50-mark, under-the-counter cigarettes sell for A$25 or less. Tobacco excise collection peaked at A$16.3 billion in Australia in FY20, before dipping to A$14.2 billion in FY21 and A$12.6 billion in FY22. The Government will collect just A$7 billion in FY25 even though about 8% of people aged 14 and over (close to 2 million people) still smoke daily.
October 2025: The Australian Government will establish a new illicit tobacco task force
The Australian Government will pull together another new national taskforce, called Illicit Tobacco National Disruption Group, to try and crack down on illegal tobacco – in addition to the Illicit Tobacco Taskforce led by the Australian Border Force. The latest effort will be equipped with a wider net, including the payments watchdog, tax office, the agency which investigates financial criminality, social and health related services (Services Australia), Department of Agriculture, Illicit Tobacco & E-Cigarette Commission and Department of Home Affairs – Criminal Intelligence Commission, in order to track and catch the mid-level players in the Australia’s illicit tobacco trade. Minister of Home Affairs states that the illicit tobacco players involve in various forms of crime and tackling the problem need co-ordination from the states and territories. The federal government invested more than A$350 million since 2024 to address the illegal tobacco, vapes and other nicotine products2.
Internal tobacco industry data estimates that the illicit tobacco market makes up 64% of all tobacco consumed in Australia while the official figure is around 33%. According to the market-leader, British American Tobacco (BAT), 80% of the tobacco and nicotine market is illicit when vapes and nicotine pouches are included. BAT also states that illicit traders can still profit even if 24 out of 25 shipping containers are seized, as just one successfully reaching Australia is enough to turn a profit.
Most of the illicit tobacco come from China, Indonesia, the United Arab Emirates, Malaysia, Singapore, and the Philippines. Selling packs of cigarettes for as little as a quarter of the price of a legal pack, the illicit trade creates A$8.6 billion federal revenue loss per annum. Despite consumers clearly opting for far cheaper, illegal options, the federal excise on tobacco rose a further 5% in September 2025 on top of the regular indexing.
August 2025: 50% of cigarettes consumed in Australia are illegal
A study published by FTI Consulting illicit, excise tax evading cigarettes make up 50% of the cigarette consumption in June 2025 in Australia, up from 39.4% in 2024, 28.6% in 2023 and around 25% in 2018. Supplying half of cigarettes to Australia’s 2.7 million smokers, illicit tobacco trade grosses A$10 billion a year in revenue3. As a result, tobacco excise revenue to the government collapsed from a peak of A$16 billion in FY2019-20 to A$7.4 billion in the current financial year.
The surge in illicit tobacco trade is happening despite the fact that the Australian Border Force (ABF) intercepted record volumes of illicit tobacco and vape products during the 2024–25 financial year: an average of 120 detections every day. Between 1 July 2024 and 30 June 2025, the ABF made 23,097 detections of illicit tobacco, seizing 2,091 tonnes of illicit tobacco products: 2.53 billion cigarette sticks and 435.5 tonnes of loose-leaf tobacco. Consequently, the ABF prevented an estimated A$4.36 billion in duty evaded. These figures represent a whopping 320% in cigarette stick seizures and a 67% increase in total tobacco seized compared to the FY20-21. In the same period, more than six million illicit vape products were also detected, seized, and destroyed by the ABF.
With an average in-store tobacco stock worth reaching A$100,000 and violent robberies on the rise, more stores are giving up on tobacco. Liquorland (Coles Group) has already stopped selling cigarettes while both Coles and Woolworths supermarket chains are reported to be considering dropping cigarettes from behind the service counters. Meanwhile, with 1.5 million regular vapers and 2.7 million regular smokers, nicotine consumption in Australia is at an all-time high according to studies of wastewater. With illicit tobacco selling for as low as A$10 a pack compared to legal equivalents priced between A$40 and A$50 and the prohibition on non-pharmacy vape sales, the illegal market is increasingly dominating the nicotine supply in Australia.
July 2025: Legal cigarette market shrank 50% in the second quarter of 2025
As the excise tax driven price increases render cigarettes out of reach for many Australian smokers, the legal cigarette market declined by a whopping 50% in the second quarter of 2025. Only 700 million sticks were sold in the legal market in the whole quarter. In the first half of the year, total legal cigarette sales is down by 33% from 2.7 billion to 1.8 billion sticks. Considering that an estimated 3.6 billion sticks are consumed in the same period, illegal market now represents 50% of the total consumption – up from the market leader, British American Tobacco’s estimate of 30%-40% in 2024.
June 2025: As the excise tax rate goes up, Australian Government collects less tax from tobacco
At an average price of A$40 (US$26) for a pack of 20 cigarettes, Australia has the highest cigarette prices in the world. Taxes account for 70% of the price following a triple-fold excise hike from 46c to A$1.40 per cigarette in 10 years. The excise rate increases twice a year, in March and September, in line with the rise in average weekly ordinary time earnings (“average wage”). In addition, the tobacco excise is surcharged by an extra 5% increase a year for the three years to September 2026. Consequent to the surcharges in the past, as a share of income, cigarettes have become nearly four times more expensive than they were three decades ago and affordability of tobacco in Australia is lower than any other developed country.
Rising cigarette prices continue to fuel illegal cigarette market in Australia: Taxation Office estimates that about a fifth of tobacco sales is now illegal. Australian cigarette market leader, British American Tobacco, stated that 30-40% of all cigarettes sold in Australia is illicit (our own estimate: 37.5%). Under these circumtances, more critical voices are heard on whether the incremental benefit from price-driven reduction in smoking rates outweigh the societal issues created by a soaring cigarette black market and an associated rise in organised crime. Some suggest a freeze or even a cut to the excise rate while Australia cracks down on illicit tobacco. However, federal Health Minister already ruled out lowering the excise and advocates for stronger compliance measures.
Rising tax was traditionally associated with the twin benefits of falling smoking rates and rising governmental revenue. However, after peaking at A$16.3 billion in the 2019-20 financial year, federal excise receipts have plunged to just A$7.4 billion in the current financial year (the lowest since 2012-13). Budget estimates foresee a further fall to A$6.7 billion by the end of the decade4. These estimates could proven to be overly optimistic if Australia fails in its fight against the illicit tobacco trade. An equivalent of 605.8 million illegal cigarettes were seized at the borders in 2019-20. By 2022-23, border seizures had reached the equivalent of 2.6 billion cigarettes before easing to 2.2 billion in 2023-24. Considering that the illegal cigarette market size is around 3 billion sticks (1.25 billion sticks according to the Taxation Office), Australian Customs manage to seize roughly one in two illegal cigarettes at the border.
June 2025: 95% of the vapers buy their vapes illegally in Australia
Australia has roughly 700,000 people vaping, according to the Institute of Health and Welfare. Vapes can be legally purchased only through a pharmacy and Australian Government notes that 40,000 “patients” have used this service between October 2024 and May 2025. Thereby, around 95% of the Australian vapers continue to purchase their vapes illegally. Although the number of daily smokers in Australia fell from 11% in 2019 to 8.3% in 2023, there are still 1.8 million smokers in the country. An estimated 30%-40% of cigarettes are also bought illegaly in Australia, the world’s most expensive cigarette market.
April 2025: New tobacco regulation comes into effect in Australia
The Australian Government passed a package of tobacco laws in late-2023, which came into effect on April 1, 2025. New tobacco laws require standardised tobacco pack size and cigarette length. Cigarette packs should carry one of ten new health warnings and quitting advice inserts. Moreover, one of eight health warnings should be printed directly on the filter paper of cigarette sticks. Flavor-enhacing ingredients, including menthol, are banned. In addition to menthol, the long list of prohibited ingredients includes clove, sugar, probiotics, vitamins, any ingredients that mimic the cooling properties of menthol and many other additives. Retailers will have a three-month grace period to sell the existing stocks by July 1, 2025.
March 2025: Tobacco excise revenue collapses amid a booming illegal market
In the 2025/26 fiscal year, the Australian Government expects to earn A$7.4 billion revenue from the tobacco excise tax – down 41% from A$12.6 billion in 2022–23 and down 55% the peak of A$16.3 billion in 2019–20. The Government expects this downward trend to continue as Australia’s heavy tobacco taxation continues to drive smokers towards illegal cigarettes. However, the actual decline in tobacco excise revenue has been much more significant than previously forecast.
As of March 1, 2025, a pack of 20 cigrettes bare A$28.1 excise duty. Moreover, 10% Goods and Services Tax (GST) is added at the time of sale. A standard 20-pack costs more than A$50 (US$31.5) in Australia – making it the most expensive country in the world in terms of cigarette prices. Moreover, the cigarette affordability is also low in Australia: on average, a worker earns 1.1 cigarette packs worth of salary with each hour worked (- as opposed to more than 3 packs in many developed countries).
Tobacco excise is indexed every March and September in Australia. In addition to the indexation, the excise rate is increased by an additional 5% per year for 3 years starting September 2023. Australia’s excise tax policy is based on the principle that higher costs deter smoking. About 8% of Australians aged 14 and over still smoke daily, down from almost 20% in 2001. Howevern the fall in smoking is partially offset by the rise of vaping; about 7% of Australians use e-cigarettes – about half of whom vape daily.
Illegal cigarettes are widely available and significantly cheaper in Australia. The estimated value of illicit tobacco entering the Australian market has soared, from A$980 million in 2016–17 to more than A$6 billion in 2022–23. Almost half of the illicit tobacco enters the market undetected despite the rising investment in enforcement. The 2025–26 federal budget allocates an additional A$156 million over the next two years to combat illicit tobacco — on top of the A$188 million committed in the previous budget.
Australia has long been a global leader in tobacco control. The first health warnings on cigarette packets appeared in 1973. Graphic health warnings were introduced in 2006 and Australia pioneered plain packaging law in 2011. From April 1, 2025, Australia mandates health warnings on individual cigarette sticks – with a 3-month transition period to deplete the existing stock. However, as the excise tax burden and regulatory restrictions intensify on legitimate cigarettes, illegal cigarette trade flourishes in Australia. Australian Government estimates that 18% of all tobacco for sale is illicit5; however, the actual figure could be higher.
Background Information:
Factory-made cigarettes and roll-your-own tobacco comprise 72.6% and 23.3% of the Australian tobacco market, respectively. The remaining 4.1% consisted of other tobacco products (OTP) including cigars, cigarillos and pipe tobacco. The tobacco market in Australia is dominated by three major companies: British American Tobacco (BAT), Philip Morris International (PMI) and Imperial Brands. These three major tobacco companies collectively account for 92% of the market. BAT is the distant market leader with 44.3% share. Imperial Brands and Philip Morris owns 26.6% and 21.1% of the market, respectively. Apart from the three major companies, a small number of companies – including Scandinavian Tobacco Group, Stuart Alexander & Co and Richland Express – operate within Australia as distributors of imported cigarettes and other tobacco products – predominantly cigars, cigarillos and pipe tobacco – and smokers’ requisites such as cigarette papers and filters for roll-your-own tobacco users. These smaller companies collectively accounted for 8.0% of the total Australian market in 2024.
| BAT | PMI | Imperial Brands | |
| Cigarettes | Benson & Hedges, Dunhill, Holiday, Kent, Pall Mall, Rothmans, ShuangXi, Vogue, Winfield | Alpine, Bond Street, Choice, Longbeach, Marlboro, Peter Jackson | Camel, Davidoff, Escort, Horizon, JPS, Parker & Simpson, Peter Stuyvesant |
| Roll-your-own | Capstan, Holiday, Port Royal, Rothmans, Winfield | Choice, Craftsman Longbeach, Marlboro, Peter Jackson | Bank, Champion, Dr Pat, Drum, Escort, Golden Virginia, Horizon, JPS, Peter Stuyvesant, Riverstone, Stockman’s, White Ox |
| Cigars | Captain Black | Willem II | — |
8.9 billion and 7.2 billion factory-made cigarettes were sold in Australia in 2022 and 2023, respectively – thereby, the cigarette market collapsed by 21% in 2023. In 2024, the legal market is estimated to decline by another 32% to rougly 5 billion cigarettes. From 2016 to 2024, Australian legal cigarette market lost more than two thirds of its volume while the cigarette consumption per capita (people aged 15 and over) declined from 800 to 225 cigarettes. However, Australia is also home to a large illicit cigarette market; an estimated 30-40% of all cigarettes sold in Australia are illicit. Therefore, the real market size is closer to 8 billion cigarettes in 2024.
As even the total market volume is below the economic quantity for a cigarette factory of size, no tobacco products have been manufactured in Australia since 2016. Philip Morris International (PMI) closed its last manufacturing facility in Australia in 2014, relocating these operations to South Korea. Most brands sold by Imperial Tobacco, which entered the market following the merger of WD & HO Wills and Rothmans in 1999, are manufactured in New Zealand.
The first factory in Australia was first opened by W.D & H.O. Wills in 1913. A second factory was established in East Bentleigh, Melbourne in 1945. The Sydney and Melbourne manufacturing operations were consolidated into a single factory in Pagewood, Sydney, named Virgina Park in 1985. BAT acquired W.D & H.O. Wills in 1989 and operated the Virginia Park for 26 years until its closure in 2015. BAT now sources its Australian cigarettes from the four tobacco manufacturing facilities located in Oceania: Papau New Guinea, Fiji, Solomon Islands, and Western Samoa6.
References:
- https://www.abs.gov.au/articles/household-consumption-illicit-tobacco-and-nicotine-products ↩︎
- https://www.news.com.au/national/crime/government-assembles-second-wider-illicit-tobacco-task-force/news-story/cb8a82686f38bcab9964b4bc198ceb95 ↩︎
- https://www.abc.net.au/news/2025-08-04/illegal-tobacco-is-a-deadly-10-billion-industry/105607186 ↩︎
- https://www.theguardian.com/society/2025/jun/11/tobacco-excise-isnt-making-australians-smoke-less-and-should-be-frozen-to-curb-black-market-economists-say ↩︎
- https://www.ato.gov.au/about-ato/research-and-statistics/in-detail/tax-gap/q-z-tax-gaps/tobacco-tax-gap/latest-estimates-and-findings ↩︎
- https://www.tobaccoinaustralia.org.au/chapter-10-tobacco-industry/10-3-tobacco-companies-operating-in-australia ↩︎
