Over the past month, bothFour Cornersand60 Minuteshave done major investigations into Australias $5 billion tobacco black market and the criminal gangs who now dominate the industry.

Nick McKenzies 60 Minutesreportbegan by squarely laying the blame for the crisis on the Commonwealth Health Departments tobacco policies.

Where theres smoke, theres firebombing, he began, describing the reality for tobacconists in Victoria and increasingly throughout Australia.

McKenzie continued:

Dan OakesFour Corners report,Tobacco Wars, began on an equally critical note:

Drug laws in Australia are preventing tobacco users from switching to safer forms of nicotine use, particularly through unrealistic vaping laws.

Former Australian Federal Police detective superintendentRohan Pike, who created and led the Australian Border ForcesTobacco Taskforcein 2015 but now works as a lobbyist for the Australian Association of Convenience Stores (AACS), followed.

Pike said:

Australias tobacco policy also received a dishonourable mention in the 2025 Federal Budget with the revelation that the fall in the sale of legal cigarettes had led to a precipitous decline in the tobacco excise that was projected to blow a $10 billion hole in the Budgets prediction of revenue collected over the next four years. The tobacco tax peaked at $16.8 billion in 2019, declined to $10 billion in 2023 and was projected to fall to $6.4 billion in 2028.

For comparison, the money required for supplementary funding to increase ourMedicarebilling rates over the next four years was estimated at $8.5 billion.

Commenting on the tobacco tax decline in theAustralian Financial Review, economistChris RichardsonlabelledAustralias tobacco tax a $10 billion policy mistake that has fuelled organised crime and worsened health outcomes.

Richardson condemned the absurd increase in tobacco tax:

Chris Richardson was largely correct, except that putting a heavy tax on smoking was done for two reasons: to raise revenue, as he said, but secondly to discourage people from smoking. When the health authorities saw the excise was down, they misinterpreted the data as proof that their tax policies were working, but wishful thinking is never a good basis for policy. The wastewater testing (below) showed the nicotine was still there, but it was masked by the black market.

By legalising "snus", a smokeless tobacco product believed to be an effective tool for those trying to quit smoking, the Australian Government could better help smokers break the habit.

The chief executive of the AACS,Theo Foukkare, called on the Federal Government to freeze the excise on tobacco products for four years, along with legalising and regulating smoking cessation tools such as vapes, and strengthening the crackdown on illegal tobacco:

The two sides of the nicotine debate

Australias road to tobacco policy hell was paved with the very best of intentions, to reduce the consumption of tobacco, so how did it go so wrong?

Since the Health Department regarded price as the best way to reduce tobacco use, it adopted the crazy policy of increasing the tobacco tax by 12.5% every year, starting in 2013 and ending in 2021. In 2023, in his second budget, TreasurerJim Chalmersannounced a further 15% increase in the tobacco tax, estimating it would bring in anextra $3.3 billionover the next three years.

As the graph indicates, the Treasurers prediction was out by about minus ten billion dollars, which shows how woefully ignorant our Treasurer is about how excise tax works.

(Data source:Treasury,ABS)

ForBay FM, I interviewed DrAlex Wodak, the tobacco harm reduction adviser to theHarm Reduction Australia Board, who explained excise tax in a way even Jim Chalmers might understand:

Harm reduction relies on helping consumers choose safer methods of consumption. Unlike prohibitionists, harm reductionists avoid a judgemental approach to drug taking or drug takers but seek to educate consumers about how to avoid harms.

Lung cancer is a major cause of death for tobacco smokers, but this results from inhaling the tars caused by burning tobacco, not from the nicotine. So the harm reduction approach is to encourage other means of consumption like vaping, which is inhaling nicotine aerosols, nicotine patches and so on.

ProfessorSimon Chapmanis arguably the chief architect of Australias disastrous tobacco policies. Interviewed by Four Corners, he argued against reducing the tobacco tax, asserting that big tobacco exaggerates the size of the black market.

Chapman said:

Dan Oakes then asked Simon Chapman the question many were pleased he did:

Chapman replied, dismissing sincere experts like Rohan Pike and Dr Alex Wodak with this insult:

While it may appear the Government is working in favour of vape users, a closer look at their planned restrictions reveals the opposite.

In our interview, Dr Wodak replied, not with an ad hominin attack, but with a policy-based disagreement:

In their commentary in the AustralianHarm Reduction Journal,JamesMartinandEdwardJegasothyagreed with Dr Wodak, arguing that Australias intensified regulatory approach toward nicotine control revealed a shift that increasingly resembles a de facto war on nicotine.

Martin and Jegasothy wrote:

The combination of sky-high cigarette prices and the Health Departments overwhelming obsession with cutting smoking rates had combined in a perfect storm to fuel an explosion in Australias tobacco black market. Our tobacco policies were creating more harm than they mitigated, mirroring many of the unintended consequences historically associated with drug prohibition.

Dan Oakes also interviewed Health MinisterMark Butlerand asked if the Government would consider pausing tobacco tax increases to freeze legal prices and starve the black market of customers.

Echoing Simon Chapman, he replied that this was something the tobacco industry lobbied for, but that would be raising the white flag and letting criminals and the industry dictate government policy.

However, he could not deny that organised crime was already controlling the market:

Rohan Pike disagreed. The best time was a decade ago when he alerted Border Force and the Government to the problem, but denial reigned then as it does now, and his warnings were ignored. Mark Butlers solution was too little and too late. The black market was so widespread and entrenched that average citizens no longer had any qualms about participating in the black market.

A lack of regulation, heavy advertising and subservience to the tobacco industry has resulted in Indonesia having one of the highest global smoking rates.

Butler said:

Health's response to the rise of vaping

Could Australias disastrous tobacco policy possibly get any worse?

Given the geniuses we have running the Health Department, this proved no problem.

Allow me to illustrate:

(Graph viasciencedirect.com)

This is a graphic from thearticletitled Analysis of wastewater from 2013 to 2021 detected a recent increase in nicotine use in Queensland, Australia. It plots the levels of nicotine measured between 2013 and 2021 in a wastewater treatment plant serving over 100,000 people in southeast Queensland.

Tracing different metabolites, one measuring tobacco-based nicotine use from cigarettes, the other measuring non-tobacco nicotine use from vapes, nicotine patches and other nicotine replacement therapies, it shows the transformation in nicotine consumption between 2013 and 2021 as e-cigarettes or vapes replaced cigarette use. Vapes are recommended as safer than cigarettes because they are free from the tars released by burning tobacco, the major cause of lung cancer in tobacco smokers.

The graph shows how nicotine users concerns about lung cancer changed the pattern of nicotine use in Australia. However, the rise of vapes worried the nicotine prohibitionists in the Health Department, and they set about banning vapes and successfully driving vapes, which are comparable in size to the cigarette market, into the black market as well.

Nicotine vapes were made harder to obtain with an enhanced regulatory approach to vaping, according to the2023 Budget Papers, which required vape users to obtain a prescription from their doctor to legally obtain vapes. Fruity flavours and colourful packaging were also abolished to make vapes less appealing.

Overwhelmingly, this caused vapers to shift to the black market. TheNational Drug Strategy Household Survey 20222023reported that 1.8 million Australians smoked tobacco, while 1.5 million used vapes, a figure that had tripled from 2019. A vast majority (87%) of people who had used ecigarettes with nicotine reported that they had obtained them without a prescription (from the black market).

Said Dr Wodak:

Our interview ended with this bizarrely contrarian observation from Dr Wodak who said:

DrJohn Jiggensis a writer and journalist currently working in the community newsroom atBay-FMin Byron Bay.