Smoking rate

IBISWorld forecasts the smoking rate to fall by 0.03 percentage points in 2025-26 to 0.99%. The tobacco excise tax increases are based on average weekly ordinary time earnings (AWOTE). These changes are made twice a year, in September and March. Most recently, the tobacco excise was increased by 6.8% in September 2025 and by 2.7% in March 2025. This rise in the cost of tobacco products is expected to discourage people from smoking, reducing the smoking rate in 2025-26.

Before December 2013, tobacco excise was adjusted according to the consumer price index. From March 2014, indexation switched to AWOTE to better preserve the tax's real value. Beginning 1 September 2023, the government intensified its tobacco control policy by introducing three consecutive annual increases of 5%. The shift towards indexing the excise tax to AWOTE is to prevent rising real incomes from reducing the effectiveness of the tax on discouraging smoking.

Although Australia has one of the world's lowest smoking rates, tobacco use remains a major contributor to preventable illness and mortality. To curb consumption, successive federal governments have adopted increasingly aggressive pricing and regulatory measures over the past decade. Excise hikes have been the primary tool for raising revenue. Between September 2015 and September 2025, the tobacco excise rose by 2.8-fold, while duties on loose tobacco increased by 3.6-fold. These changes followed earlier interventions, including a one-off 25% excise rise in April 2010 and a series of 12.5% annual increases applied between 2013 and 2020 alongside indexation. The government has also pursued harmonisation efforts to align excise arrangements for roll-your-own tobacco with those for manufactured cigarettes, reducing opportunities for consumers to downgrade to less costly alternatives.

Price signals have had a pronounced effect on consumption. According to the Australian Taxation Office, the total size of the Australian tobacco market (legal and illegal combined) fell to an estimated 7,104 tonnes in 2023-24, representing a 43% decline from 2018-19. This suggests that higher excise burdens have suppressed overall demand more significantly than the concurrent rise in illicit tobacco activity. Nevertheless, the illegal market continues to expand, accounting for roughly 25% of total consumption in 2023-24.

The New Public Health (Tobacco and Other Products) Act 2023 introduces updated restrictions on the advertising, promotion and composition of tobacco products, as well as renewed plain packaging requirements. The legislation commenced on 1 April 2024, with a transition period available to retailers until 30 June 2025. From 1 July 2025, all tobacco products must comply with the new standards, including mandatory health promotion messaging and bans on additives like menthol, clove and flavour capsules.

Broader social and behavioural factors have contributed to declining tobacco use. AIHW data shows that both the share of Australians who smoke daily and the proportion who have ever smoked continues to fall. Rising health consciousness, changing social norms and targeted public health campaigns, like Give Up for Good, have supported cessation efforts and discouraged uptake, especially among younger cohorts. Overall, the smoking rate has declined over the past five years, consistent with long-term structural trends. IBISWorld forecasts the share of total household expenditure allocated to tobacco to fall at an average annual rate of 0.23 percentage points over the five years through 2025-26.