Prominent Australian economist and public policy expert Richard Holden called for the temporary elimination of Australia’s tobacco excise, arguing that only a dramatic tax reduction can effectively dismantle the country’s rapidly expanding illicit tobacco market. Holden, a professor at the University of New South Wales and columnist for the Australian Financial Review, said reducing excise rates incrementally would be insufficient and that taxes should be cut to zero for as long as necessary to make illegal tobacco sellers uncompetitive. He argued that enforcement efforts alone are unlikely to succeed given the scale of the illicit market and the limited resources available to police agencies, and that undercutting the illicit process was the best way to eliminate it.
Holden’s comments come as new data from the Australian Bureau of Statistics estimated that about 80% of nicotine products consumed in Australia in 2025 were sourced from the illegal market, up from 12% in 2017. He noted that the tobacco excise on a single cigarette has risen from 26 cents ($0.18) to approximately A$1.53 ($1.09), adding more than A$30 ($21.30) in tax to a pack of 20 cigarettes. The proposal goes beyond recent calls by Australian politician Pauline Hanson to halve tobacco excise and freeze indexation, highlighting growing debate over whether Australia’s high-tax tobacco policy is contributing to the expansion of a black market estimated to be worth billions of dollars annually.