Opposition Leader Angus Taylor has accused Labor’s tobacco policies of effectively funnelling billions of dollars to organised crime as the Coalition intensifies its push for an 80 per cent cut to cigarette excise.
Taylor says Australia’s legal tobacco market has been priced so far above the illegal market that criminal syndicates have been handed an enormous commercial advantage, allowing them to sell cheap cigarettes through a widespread underground retail network while legitimate businesses struggle to compete.
The Coalition’s answer is one of the most dramatic reversals of Australian tobacco policy proposed in decades.
If elected, it would cut federal tobacco excise by 80 per cent, reducing the excise component of a standard packet of 20 cigarettes from about $30 to roughly $6.
The opposition would also legalise, regulate and tax vapes and nicotine pouches for adults, commit another $200 million to law enforcement targeting illicit tobacco networks and spend $60 million over three years on a national education campaign.
Taylor argues the strategy would attack the black market from both directions: first by destroying the enormous price advantage enjoyed by illegal sellers, and then by using extra enforcement resources to pursue whatever illicit trade remained.
Speaking at the weekend, he said legal cigarettes needed to move much closer to the price Australians could already find on the black market.
“We need to get the price of legal cigarettes down towards parity with illegal,” Taylor said.
He argued that doing so would remove customers from criminal networks and strip them of the profits that make tobacco trafficking so attractive.
Taylor then sharpened his political attack on the Albanese government, saying the existing system amounted to as much as $7 billion flowing to organised crime.
The statement that Labor is “funding organised crime” is a political accusation rather than a literal description of government expenditure.
Labor is not transferring taxpayer money to criminal syndicates.
But the extraordinary size of the illegal market behind Taylor’s argument is supported by official Commonwealth estimates.
Assistant Home Affairs Minister Julian Hill told the National Illicit Tobacco and E-cigarette Symposium in March that organised crime groups were estimated to have earned between $4.1 billion and $6.9 billion in profit from illicit tobacco.
Hill said those profits could then be reinvested into other criminal activity including trafficking, scams and money laundering.
He described illicit tobacco as having evolved from a health and revenue problem into a serious organised-crime crisis.
In another striking admission, Hill acknowledged that high tobacco excise had contributed to the huge gap between legal and illegal cigarette prices.
He said denying that link would be unrealistic.
Where Labor and the Coalition sharply disagree is over what should happen next.
The government says acknowledging that high legal prices have helped create opportunities for criminals does not establish that dramatically cheaper legal cigarettes are the solution.
The Coalition believes the market has now reached a point where enforcement cannot succeed while criminals can sell a heavily demanded product at a fraction of the legal price.
A legal packet of 20 cigarettes commonly retails for about $40 to $50.
The Coalition says cutting the excise by 80 per cent would substantially close that gap.
ABC analysis estimates that, if retailers passed on the entire tax reduction, a packet could fall to roughly $16 to $26, depending on brand and retail pricing.
That is slightly higher than some Coalition rhetoric suggesting legal cigarettes could fall below $15, but it would still represent one of the largest reductions in Australian cigarette prices in modern history.
Illegal packets are commonly reported to sell for about $15 to $20, although prices vary considerably.
Taylor argues that consumers are already exposed to cigarettes at those prices, meaning the public-health deterrent created by a $40 or $50 legal packet has effectively been bypassed by the black market.
“The horse has already bolted on this,” he said when defending the policy.
His position is that reducing the price of legal cigarettes would not suddenly expose Australians to cheap tobacco because cheap tobacco is already widely available illegally.
The evidence about the size of that underground market is alarming, although different official sources measure it differently.
The Illicit Tobacco and E-cigarette Commissioner estimated that between 50 and 60 per cent of tobacco products sold in Australia were illicit during 2024–25.
A more recent Australian Bureau of Statistics analysis produced an even larger number.
Experimental ABS estimates released in June suggested illicit sources represented about 80 per cent of total nicotine consumption in 2025.
That figure has frequently been described politically as 80 per cent of the tobacco market, but the ABS measure is broader.
It includes illicit cigarettes and loose-leaf tobacco as well as e-cigarettes and other nicotine products.
The bureau itself stresses that its estimates are experimental because illicit markets are inherently difficult to measure.
On a scope and time period more closely comparable with the earlier ITEC study, the ABS calculated an illicit share of about 69 per cent.
The methodological differences mean there is no single uncontested number for Australia’s black market.
What all the available evidence points to, however, is an illegal trade that has expanded on an extraordinary scale.
The ABS found legal tobacco quantities had fallen to less than one-third of their 2017 level while total nicotine consumption increased almost 40 per cent between 2017 and 2025.
It said greater accessibility and affordability of illicit products were likely to have enabled higher consumption.
The latest National Drug Strategy Household Survey provides another perspective.
It found 34 per cent of people who smoke had either purchased illicit tobacco during the previous three months or currently smoked illicit tobacco.
At the same time, daily smoking across the population continued its historic decline.
Only 5.6 per cent of Australians aged 14 and over smoked daily in 2025, down from 8.3 per cent in 2022–23 and 19.5 per cent in 2001.
That record-low smoking rate sits at the heart of Labor’s case against Taylor’s proposal.
For decades, making cigarettes progressively less affordable has been one of the principal tools used by Australian governments to discourage smoking.
Public-health advocates fear an 80 per cent excise reduction could undo part of that achievement by lowering the financial barrier to smoking, particularly for young people and former smokers.
Labor frontbencher Tanya Plibersek has warned that cheaper cigarettes would increase smoking and vaping and ultimately lead to preventable deaths.
Assistant Minister Matt Thistlethwaite has similarly argued that enforcement, rather than cheaper tobacco, should remain the focus of the government’s response to organised crime.
The Coalition insists the traditional public-health model cannot be assessed as though the illegal market did not exist.
Taylor says a high legal price provides little deterrence if a customer can walk into an illicit retailer and buy substantially cheaper cigarettes instead.
There is an important unresolved question in that argument.
The Coalition has not modelled how its proposed excise cut would affect the number of Australians who smoke.
Shadow Home Affairs Minister Jonno Duniam acknowledged on ABC’s Insiders that specific modelling of smoking prevalence had not been undertaken, although the Coalition had studied overseas experiences and obtained Parliamentary Budget Office modelling on the economics of the excise reduction.
Duniam pointed to Canada, where federal and provincial governments dramatically reduced cigarette taxes in 1994 after a major illegal tobacco crisis.
Smoking initially increased, including among young people, before resuming a longer-term decline.
The Coalition argues Australia’s plan cannot be judged on the tax cut alone because it would be accompanied by enforcement, regulated nicotine alternatives and a public-awareness campaign.
The Parliamentary Budget Office has also become central to Taylor’s economic argument.
He says modelling commissioned from the PBO indicates the Coalition policy would deliver an additional $8 billion in tobacco-tax revenue over four years because consumers would return to the legal market.
However, the detailed assumptions underpinning that calculation have not been publicly released.
One unanswered question is how illicit sellers would respond if legal cigarette prices fell sharply.
Criminal suppliers do not have to maintain today’s prices.
They could theoretically cut their own prices further to retain customers, although doing so would reduce their profit margins and make the trade less attractive.
That is why the Coalition says the excise cut must operate alongside aggressive policing rather than replace it.
Australia’s enforcement agencies are already intercepting illicit products at unprecedented levels.
Australian Border Force figures show that during 2025–26 officers seized more than 2.2 billion cigarette sticks, 586.7 tonnes of loose-leaf tobacco and more than 13.2 million illicit vaping products at the Australian border.
The tobacco represented estimated duty evasion exceeding $4.7 billion, excluding GST.
Those figures reveal both the scale of government enforcement and the scale of supply networks attempting to penetrate Australia.
Labor also rejects any suggestion it has relied solely on tobacco taxes while ignoring organised crime.
The government says it has invested more than $345 million since January 2024 to strengthen the national response.
That includes additional Border Force resources, funding for states and territories, joint enforcement operations, stronger coordination between agencies and plans to increase Commonwealth criminal penalties.
Hill said in March that $84 million over two years was flowing to states and territories to strengthen licensing, compliance and street-level enforcement.
The government is also targeting criminal finances through proceeds-of-crime powers, banking controls and tougher action against businesses and landlords involved in the illegal trade.
The political argument, therefore, is not about whether organised crime has captured a substantial part of Australia’s tobacco market.
Both sides accept that it has.
Nor is there much dispute that the vast difference between legal and illicit prices has helped criminals build an extremely profitable business.
The disagreement is over whether Australia can restore the legal market without sacrificing a public-health policy that has helped push daily smoking to its lowest level on record.
Taylor believes the current settings are trying to enforce a price that no longer exists in the real market.
Labor believes giving smokers cheaper legal cigarettes would surrender one of the most powerful tools governments possess to prevent tobacco use.
The Coalition’s own history adds another political complication.
Tobacco excise rose substantially under previous Coalition governments as both sides of politics supported using higher prices to reduce smoking.
Taylor has acknowledged that approach ultimately went too far, arguing policymakers must respond to the illicit market that exists today rather than defend past decisions.
That represents a major shift in Australia’s tobacco debate.
The country is simultaneously recording historically low daily smoking rates and experiencing an illicit nicotine market capable of delivering billions of dollars in profits to organised crime.
It is possible for both realities to exist at the same time.
That is why neither side has an easy answer.
Maintaining the current price gap risks leaving criminal networks with a lucrative customer base.
Cutting excise dramatically risks making cigarettes cheaper for everyone, including people who currently do not buy from the black market.
Enforcement has produced record seizures, but the continued availability of illicit tobacco suggests seizures alone have not eliminated supply.
The Coalition is betting that changing the economics of the market will succeed where enforcement by itself has struggled.
Labor is betting that stronger coordinated enforcement can crush illegal supply without reversing decades of tobacco-control policy.
With organised-crime profits officially estimated as high as $6.9 billion, the stakes now extend far beyond lost tax revenue.
The outcome will determine whether Australia’s next major tobacco policy shift is built around keeping cigarettes expensive — or making legal cigarettes cheap enough that criminals can no longer compete.
