Volume of illegal tobacco shrinks after years of rapid growth

The government says its crackdown on organised crime and at the borders has seen Australia's illicit tobacco market shrink for the first time in years.

New figures from the Illicit Tobacco and E-cigarette Commissioner (ITAC) show that after five years of rapid growth, an average 22.6 per cent increase each year, there's been a fall from last year's peak of 5,972 tonnes.

ITAC estimates the total volume of black market tobacco has dropped to 5,893 tonnes and could be as low as 4,453 tonnes.

An exact figure is hard to determine given the market's illicit nature but ITAC argues the inclusion of several datasets this year, including the Australian Health Insitute of Welfare data released every two years, has lead to a narrower and more accurate range.

The government attributes the shrinkage to stronger enforcement, larger seizures and better coordination between federal, state and territory agencies.

Assistant Minister for Customs Julian Hill has argued that the crackdown, as well as public health measures to curb demand, was "reversing years of growth".

"Every illicit cigarette seized, every store closed and every network disrupted sends the same message to criminals: we know who you are, we know how you operate, and we're coming after you and your profits," he said.

However, record seizures by Australian Border Force officers, including 730 tonnes in the first three months of this financial year, call into question the scale of the market.

Up to four in five nicotine products now smoked in Australia are illegal, according to the Australian Bureau of Statistics.

Coordination model praised internationally

The National Disruption Group, comprised of 31 federal, state and territory agencies, has coordinated more than 600 operations nationwide since it was established last October.

It has led to the seizure of 24 million illicit cigarettes and 3.6 tonnes of loose-leaf tobacco.

It represents more than $45 million in evaded tobacco duty, while on-the-ground operations have led to the closure of 1,300 stores.

International cooperation has also played an integral role in creating sustained pressure to disrupt criminal networks, with 340 referrals from foreign partners resulting in tobacco and vape seizures.

The New Zealand Customs assistant comptroller of intelligence and investigations, Terry Brown, said the multi-agency model was helping shape New Zealand's enforcement response to illicit tobacco.

"The challenges posed by illicit tobacco are increasingly transnational, and effective responses require equally connected enforcement partnerships," he said.

"By sharing intelligence, insights and operational experience, our agencies are enhancing our collective ability to identify, disrupt and deter the criminal networks that profit from illicit trade across our region."

The approach has garnered praise from Australia's neighbours but domestically, both the Coalition and One Nation have instead proposed slashing the tobacco excise by 80 per cent and 75 per cent respectively.

The opposition has also suggested legalising and taxing vape and nicotine pouch alternatives, helping to regulate their content.

The ABS found illicit nicotine product consumption, including e-cigarettes, vapes and loose-leaf tobacco, jumped from 12 per cent in 2017 to 80 per cent in 2025.

However, Labor has warned that the Coalition's pitch risks undermining the progress made, with daily smoking rates having fallen to a record low of 5.8 per cent and vaping rates on the decline.