Australia’s steep cigarette excise increases and restrictive vaping policies have fuelled a massive illegal tobacco market while undermining the country’s long-standing harm-minimisation approach to public health.

Australia should be very cautious when listening to beguiling arguments recommending keeping cigarette excise sky high after the increase of these rates from about 20 cents to about $1.50 per cigarette in the last 25 years has led to a massive, violent black market.

Defenders of these sky high rates ignore several fundamental aspects.

First, smoking rates are higher in low-income populations who also smoke more cigarettes per day. This shouldn’t be forgotten, especially during a cost of living crisis as Australia is experiencing now. Cigarette excise is inherently regressive.

Second, most Australians prefer to buy legal rather than illegal products et ceteris paribus. However, things aren’t very equal when a legal packet of cigarettes might cost $45 but an illegal packet might only cost $15 (or even less). If that gap shrinks from $30 to $20 or even to $10, it’s likely that many smokers will start switching back to legal sources. Economists refer to this phenomenon as the ‘elasticity of demand’. Thanks to competition and economies of scale, legal goods are usually cheaper than illegal goods unless the legal goods have been slapped with exorbitant taxes.

Third, the unintended consequences of a booming cigarette black market are substantial and increasing. Raising the price of cigarettes........

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