A 'huge' trade-off: One Nation's pitch for cheaper cigarettes

One Nation leader Pauline Hanson has vowed to slash the tax on tobacco by 75 per cent and dramatically reduce the price of legal cigarettes, arguing the move would curb the booming black market.

Illicit tobacco trade in Australia has expanded rapidly since 2020. The value of illicit tobacco attempting to enter the market has soared from $1.74 billion in 2018-19 to more than $6.4 billion in 2023-24, according to Australian Taxation Office estimates.

Meanwhile, government revenue from the tobacco excise — the tax applied to legal tobacco products — has plummeted and is forecast to continue declining.

"Labor has not only lost the revenue, it has lost control of the black market in illegal tobacco," Hanson said in her announcement on Tuesday.

Hanson said her party would also pause indexation on the excise for three years, saying the policy, if passed through in full, would reduce the price of a $46.50 legal packet of cigarettes to around $21 to $22.

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Tobacco is also subject to a high excise to keep prices high and discourage smoking. Currently, excise duty rates increase by 5 per cent each year, in addition to routine indexation.

"This is not about encouraging smoking. It is about restoring the rule of law and breaking the black market," Hanson said.

Labor has previously resisted calls to cut the excise. On Tuesday, Treasurer Jim Chalmers said the government was not considering a cut and its focus was on compliance.

What could a policy like this accomplish? Experts have mixed views on how it would impact crime, public health and government revenue from the excise.

The use of illicit tobacco has surged in recent years, raising alarm bells for public health experts despite an overall decline in smoking rates .

Laura Hunter, CEO of the Australian Council on Smoking and Health, told SBS News making cigarettes cheaper would have "huge ramifications for the health of Australians".

"Australia now has the lowest smoking rates that we've ever recorded, and that's the result of decades of policies that are designed to make cigarettes less affordable, less available in the community, and less normalised," she said.

Hunter rejected the idea that legal tobacco prices were the primary driver of the black market, arguing its growth was being fuelled by international organised crime networks mass producing illicit tobacco.