There's only one way to fix Australia's illegal tobacco crisis. The politicians know it - but won't act as our suburbs and children pay the price: PETER VAN ONSELEN

By PETER VAN ONSELEN, POLITICAL EDITOR, AUSTRALIA Published: 13:51, 5 June 2026 | Updated: 13:51, 5 June 2026 There are policy failures, and then there is a policy failure so comprehensive it deserves its own category. Australia's tobacco regime now sits squarely in that space. A policy designed to tax smoking out of existence has instead taxed legal cigarettes out of the market, replaced by cheaper illegal cigarettes sourced from the black market, distributed by organised crime. For years, governments relied on a neat policy loop: keep lifting the excise tax, making smoking prohibitively expensive to help drive down consumption. Then sit back and harvest all the additional revenue from the hopelessly addicted. It was politically convenient. Governments love taxes they can dress up in virtue. Smoking taxes were the perfect modern sin tax, allowing governments to raise vast sums while claiming the moral high ground. Unlike most other taxes, they didn't need to be defended as revenue measures, and instead could be sold as advancing public health objectives. The higher the tax, the more virtuous the government appeared, so they kept going up to Treasury applause. Big Tobacco was already politically friendless, and smokers were an easy mark. But sin taxes depend on a basic principle: they only work when the legal market remains functional, changing behaviour without pushing prices so high that compliance collapses altogether. Once that threshold is crossed, the tax stops operating as a public health measure and becomes an invitation to illegality.  That is precisely where Australia now finds itself. The latest figures show that Australians are no longer consuming less nicotine; they are consuming more of it than ever. New Australian Bureau of Statistics data shows that total nicotine consumption rose by almost 40 per cent between 2017 and 2025, vastly outpacing population growth over that same period.  Driven largely by the explosion of black market vapes, illicit sources now account for an estimated 80 per cent of the market. No ID checks were required when a Daily Mail reporter purchased illegal vape products during a January 2024 investigation Public campaigns are in full swing to discourage Australian teens from using addictive vapes. A young woman was seen clutching a vape when the Daily Mail photographed Schoolies in Byron Bay in November 2021 Driven largely by the explosion of black market vapes, illicit sources now account for an estimated 80 per cent of the market. That accounts for all forms of smoking. It is extraordinary that illegal black market sales, orchestrated by organised crime, account for such a huge proportion of the market.  Vaping isn't illegal, but selling vapes is, other than therapeutic vapes sold by pharmacies. Given how many people you see wandering around sucking down on a vape, it's hard to believe selling them is against the law. It leaves you wondering just how seriously governments are taking the enforcement of laws banning their sale. Successive governments of both major party political stripes helped create this mess, but Labor owns it because it chooses to keep defending the broken status quo. It has (mis)managed an almost impossible irony: making legal tobacco so eye-wateringly expensive that consumers have fled to criminals, while overall nicotine use rises anyway. It's the ultimate public policy fail. At some point, price signals stop discouraging behaviour and start redirecting it elsewhere. This is a classic example of the law of unintended consequences.  When a legal pack of cigarettes pushes past $50 and an under-the-counter pack costs just $15, the black market becomes the rational consumer choice for even the most law-abiding citizens. Especially given that consuming illegal tobacco products goes unpunished. The shattered revenue numbers are just as damning as the dominance of the market by illegal sales. Analysis by the e61 Institute shows that tobacco excise rates increased by nearly 50 per cent between 2020 and 2025, yet revenue fell by $8.5billion over that same period. The illicit trade is no longer a cash economy run out of dodgy milk bars. It's a violent, nationally syndicated industry marked by firebombings, standover tactics and gang warfare. And it's only getting worse the longer the government keeps its head buried in the sand. 'Of course, criminal syndicates should be smashed and illegal shops penalised, if not closed down. But without reducing the massive price gap created by overtaxing legal cigarettes, enforcement is mostly political theatre,' Peter van Onselen writes  A regime designed to reduce harm has birthed an unregulated market supplying cheap, uncontrolled nicotine at serious scale. The black market doesn't check IDs either, nor does it care about health warnings, or pay any tax. It exists because government policy created the commercial conditions for it to thrive. Yet the federal government keeps pretending this is primarily an enforcement problem, passing the blame to the states. Of course, criminal syndicates should be smashed and illegal shops penalised, if not closed down. But without reducing the massive price gap created by overtaxing legal cigarettes, enforcement is mostly political theatre.  And policymakers need to look at what can be done regarding vapes. Clearly making selling them illegal just isn't working. Whether the pivot is towards legal sales or illegal usage, something needs to change. Recognising that a tax is so high it is now destroying compliance isn't discharging healthcare responsibilities, nor does it hand a victory to Big Tobacco. It's a solution-driven response. As things stand, Australia's tobacco excise is acting as a state subsidy for organised crime. A temporary excise freeze is the bare minimum response right now, alongside a targeted reduction back toward the last point of market functionality.  Labor has rhetorically framed any excise reduction as a surrender to criminals, but the criminals have already won. They are selling the product cheaper, expanding their market share, professionalising their illegal operations and turning tax policy into a highly profitable (tax-free) business model. The government claims to be evidence-based and serious about public health. The test of good policy isn't the nobility of intentions. It's whether it works. 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