This Is What Prohibition Looks Like: Australia’s Tobacco Black Market is a Public Health Own Goal
- Alan Gor
- 2 days ago
- 4 min read
Alan Gor 19 MAy 2025
This Is What Prohibition Looks Like: Australia’s Tobacco Black Market is a Public Health Own Goal
19 May 2025 — Today’s Sydney Morning Herald article reads like a crime thriller. It tells the story of a city overrun by tobacconists—“60 for every McDonald’s”—and an underground empire of illicit tobacco, cash-stuffed safes, basement factories, and real estate barons who’ve made millions selling cigarettes for a third of the legal price.
But let’s be clear: this is not a mystery. This is the entirely predictable outcome of Australia’s aggressive prohibitionist tobacco and vaping policies. We didn’t stumble into this mess; we legislated our way into it.
And now, public health is paying the price.
The “Success” of Tobacco Control: A 40% Illicit Market
According to KPMG, almost 40% of the tobacco consumed in Australia last year was illicit. That figure is staggering. In no functioning democracy should the black market nearly outcompete the legal one for a widely used consumer product. But that’s what happens when you push smokers into a corner with excise hikes, $50 packs, and no safer alternatives.
The report reveals the scale of the problem:
Legal cigarettes: $50+ per pack
Illicit cigarettes: $15–20, widely available
1.86 billion illicit cigarettes seized in one year
Enforcement actions are up, but the problem keeps growing
This isn’t about minor leakage. This is state-sanctioned market collapse.
Prohibition Breeds Crime—and Failure
The article highlights elaborate operations run by organised crime groups, including fake shopfronts, smuggling rings, and factories hidden in residential suburbs. These aren’t opportunistic grifters; they are well-oiled criminal enterprises, built and fed by policy failure.
You can almost hear the confusion in the voices of the public health establishment. Professor Becky Freeman asks:
“If it’s so easy for a journalist and members of the public to go into these stores and purchase these things, why is it so difficult for the prosecution and police to shut them down?”
The answer is simple: you can’t enforce your way out of a demand problem.
You cannot criminalise demand and expect the supply to disappear. If Australians are spending billions on illicit tobacco, it means the legal framework has failed to meet public demand for nicotine, especially in less harmful forms. The policy Freeman champions has turned otherwise law-abiding citizens into black-market customers, then blames the police for not keeping up with the fallout.
Enforcement is always reactive. But markets are adaptive. And when the demand is this high, especially for nicotine, a substance less harmful than many legal drugs, no amount of raids, fines or seizures will change the underlying incentive: smokers want alternatives, and Australia refuses to provide them.
Freeman’s outrage might be genuine, but it’s also deeply misplaced. This is the natural, inevitable consequence of a policy architecture she helped build. You can’t spend a decade blocking regulated vape retail access, outlawing consumer nicotine products, and vilifying those who use them and then act surprised when consumers and suppliers bypass your system entirely.
In fact, if Becky Freeman truly wants to see these illicit stores vanish, she needs only support what works overseas: regulated retail access to lower-risk nicotine products, strict but reasonable controls, and a pricing model that competes with the black market.
Anything less is just theatre.
Every country that has tried to crush demand for drugs, alcohol, or nicotine through force has ended up in this exact position. Just ask the United States how Prohibition went. Ask Sweden how snus curbed smoking without criminalising users. Australia ignored those lessons, and here we are.
The Cost of Moral Panic
Let’s not forget who helped get us here.
For over a decade, public health figures like Freeman have promoted a scorched-earth approach to nicotine: total abstinence, or nothing. No regulated vapes. No nicotine pouches. No room for innovation. And certainly no space for adult choice.
Instead, the policy playbook has been:
Crank up taxes on cigarettes until they’re unaffordable
Ban safer alternatives like vaping outside of pharmacies
Demonise nicotine users as threats to “the children”
Demand more enforcement when black markets inevitably flourish
It’s not just naïve. It’s dangerous.
Youth smoking in Australia isn’t vanishing, it’s hiding. Adults are switching to illicit sources because their only legal choices are absurdly priced cigarettes or a medical system that doesn’t want them. And through it all, criminal syndicates are celebrating.
Follow the Money: Who Benefits from Failure?
The article names several tobacco magnates who’ve profited handsomely from this distorted system. Some operate at the margins of legality; others thrive in the legal grey zone. But they all rely on the same dynamic: a broken market where legal cigarettes are unaffordable and harm reduction is outlawed.
These are not anomalies; they are the logical winners in a system that:
Keeps nicotine addictive, but unregulated
Makes safer products hard to access
Pushes smokers into the shadows
Pretends moral purity will solve public health problems
Meanwhile, ordinary smokers are squeezed from both sides. Many of them are low-income, marginalised, or long-term users with few options. And the experts who built this system keep blaming everyone but themselves.
What a Genuinely Progressive Policy Would Look Like
It’s not too late to turn things around. But it starts with rejecting the dogma that created this crisis.
Here’s what a smart, evidence-based nicotine policy would include:
Adult access to safer alternatives, including vapes, pouches, and heated tobacco, through licensed retail, not pharmacies
Scaled-back excise on cigarettes to undercut the black market until demand shifts
Education, not punishment, for nicotine use
Clear, risk-proportionate regulation, not bans
The black market thrives when the legal market is made impossible. Harm reduction works when people have real choices.
The War on Nicotine is a War on the Truth
Australia’s war on nicotine has failed not because people want to smoke, but because policymakers refused to offer a safer path. Instead, they built a system that punishes smokers, bans alternatives, and turns a blind eye to the criminal empires flourishing in the vacuum.
The Herald’s story should be a wake-up call. But it won’t be unless we start holding the right people accountable.
The question isn’t why Sydney is awash in illicit tobacconists.
The question is: What did you expect?
