Australia now sources 50 to 60 per cent of its tobacco from illicit suppliers. New Zealand has kept the same figure between 5 and 10 per cent under a different regulatory path.
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Australia now sources 50 to 60 per cent of its tobacco from illicit suppliers. New Zealand has kept the same figure between 5 and 10 per cent under a different regulatory path.
Australia has lost control of its tobacco and nicotine markets. A combination of the world's highest tobacco excise taxes and a strict prescription-only rule for nicotine vapes has opened the door to organised crime.
The Illicit Tobacco and E-cigarette Commissioner Report 2024-25 puts the illicit tobacco share at 50–60 per cent. The same report values the black market at between A$4.1 billion and A$6.9 billion. Lost excise revenue runs to A$7.7 billion or more each year.
New Zealand avoided the same outcome. The Ministry of Health New Zealand Health Survey 2024/25 records adult daily smoking at 6.8 per cent. That rate has halved since 2011/12. Daily vaping stands at 11.7 per cent.
The policy difference is clear. Australia requires a medical prescription for nicotine vapes. New Zealand treats vapes as consumer goods under the Smokefree Environments and Regulated Products Act. Nicotine caps, age limits and retailer rules apply, but no prescription gate exists.
A 2026 paper in the journal Addiction draws the direct comparison. Authors Ron Borland and colleagues conclude that Australia's tax-plus-prohibition approach diverted smokers into illicit channels. They note New Zealand achieved faster smoking declines despite similar high tobacco taxes.
The Public Health Communication Centre briefing of May 2026 reinforces the point. Over-reliance on enforcement alone misses the role of affordable, regulated alternatives in cutting demand for both legal and illegal cigarettes.
Over-reliance on enforcement alone misses the role of affordable, regulated alternatives in cutting demand for both legal and illegal cigarettes. — Public Health Communication Centre, May 2026
Smoking remains concentrated in disadvantaged groups. The New Zealand Health Survey shows daily smoking at 15.0 per cent among Māori adults and 12.9 per cent in the most deprived neighbourhoods. These communities face both higher health harm and the heaviest burden from excise taxes.
Australia has poured money into enforcement. The 2025-26 Budget added A$156.7 million on top of earlier commitments. New offences, expanded police powers and an Illicit Tobacco and E-cigarette Commissioner were created. Seizures rose, yet official estimates of the illicit market continued to climb.
New Zealand recorded an estimated $225 million shortfall in tobacco excise revenue in 2025/26. Lower legal sales, whether from quitting or substitution to vapes, drive the gap. Retail NZ has called for stronger penalties and better coordination to tackle the remaining 5–10 per cent illicit share.
Recent New Zealand changes include a ban on disposable vapes from June 2025 and tighter display rules. These adjustments stay within the existing consumer-product framework rather than shifting to a medical model.
The Addiction paper warns that further tax hikes or mandated nicotine reductions on legal cigarettes would widen the price gap and feed the black market. New Zealand's experience suggests the opposite path delivers better results.
Regulators face a clear choice. Heavy enforcement spending and prohibition-style rules risk repeating Australia's outcome of rising crime and lost revenue. Pairing targeted enforcement with regulated lower-risk products has produced faster smoking falls and a smaller illicit market. Maintaining that balance offers the lower-risk route for New Zealand.
