Australia’s tobacco control policy has reached a breaking point. For decades, bans on advertising and steady excise increases reduced the incidence of smoking and raised reliable revenue. Since 2019–20, however, revenue has persistently fallen short of Budget forecasts and a violent illicit market has expanded. This paper explains how split responsibilities and misaligned incentives have produced this outcome. 

The paper shows that excise has moved beyond the point where it is either efficient or corrective. It argues that the Commonwealth is rewarded for over-taxing while states and local communities bear the health, policing and insurance costs of the disorder that results. The paper concludes that Australia needs policy clarity and institutional reform. 

Tobacco control cannot be both a public health programme and a revenue measure. To stabilise the market, starve organised crime and bring control back to the legitimate sector, the paper calls for bold policy change.

Key recommendations

• Stabilisation of excise: The Commonwealth immediately stabilise tobacco excise within an economically defensible range.
• Institutional reform: The Commonwealth be made fully responsible for the costs of disorder created by the excise it sets.
• Strengthened enforcement: resources for inland enforcement must be substantially increased to target the sophisticated distribution and sales networks currently operating within Australian communities.