Data showing four in five vapes and cigarettes consumed in Australia in 2025 were bought on the black market has dredged up fresh debate about cutting the tobacco excise.
The black market share of total nicotine consumption has climbed from 12 per cent to 80 per cent from 2017 to 2025, according to the Australian Bureau of Statistics.
Introducing legislation to give state tobacco regulators powers to shut down dodgy sellers, Victorian Casino, Gaming and Liquor Regulation Minister Enver Erdogan acknowledged the excise had contributed to the problem.
"The statistics speak for themselves," he told reporters at state parliament on Thursday.
"I'll say it is a factor in the growth. I think that's undeniable."
A tripling of the tobacco excise over the past decade to $1.52 a cigarette has pushed the average price of a legal pack of 25 past $50.
Under-the-counter black market equivalents are sold for less than half that price.
Estimates released in May's federal budget revealed the tobacco black market wiped $6 billion from tax revenue in the five months since the previous fiscal update in December.
The excise was forecast to fall to just over $2 billion a year by 2030 after raking in more than $16 billion in 2020.
At the time, NSW Premier Chris Minns renewed his call for the federal government to review the excise as it was "not working".
"This is the only tax in the world that has doubled but the revenue has halved," Mr Minns said.
Mr Erdogan stopped short of joining industry calls for the excise to be lowered, declaring Victoria was focused on greater enforcement.
"We want to protect legitimate businesses but industry tells us they believe the price is the biggest factor," he said.
The federal coalition is yet to reach a formal position on whether the excise should be cut, citing uncertainty around what level would be required to stamp out illegal trade.
Shadow treasurer Tim Wilson said there was an appetite for action among his colleagues and reforming the excise had to be "at least one part of the solution".
"This is a decision for government, we're not in government," he told ABC Radio Melbourne.
"Tax revenue from tobacco is decreasing rapidly ... we're seeing a massive rise in illegal consumption.
"The problem is only getting worse."
Economists argue decisions by successive governments to ratchet up the tobacco excise has created a massive profit incentive for organised criminals to develop a thriving black market.
Assistant minister for customs Julian Hill acknowledged the "risk-reward equation" was higher in Australia compared to other international markets.
But he argued there was no evidence slashing the excise would mitigate the rise in illegal activity.
"There's no magic level of excise reduction that anyone can point to that would make any material difference to the problem," Mr Hill said.
"You could wipe out tobacco excise and the illegal products would still be cheaper.
"This stuff has produced at massive global surplus for $1 or less a packet."
The quantity of total nicotine consumed in Australia increased by 40 per cent from 2017 to 2025 despite the population only growing by 14 per cent in that time.
The figures painted a worrying picture about nicotine addiction but rising prices had been the most effective way for a generation to drive down adult smoking rates, Mr Hill said.
"We don't want to see the smoking wards fill up and condemn the next generation of Australian to the scourge of smoking-related early death and disease," he added.
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