Allegra Spender (Wentworth, Independent) | Hansard source

Australia once led the world on tobacco control. Plain packaging, graphic warnings, non-smoking areas, information campaigns and excise yielded substantial government revenues and, more importantly, created a generation of Australians that never took up smoking. Smoking rates went from one in three to one in 10 in little more than a generation. We were right to be proud of this record. We were wrong to be complacent.

Smoking rates are now higher than they were 10 years ago. Australians are consuming 40 per cent more nicotine than in 2017, far outpacing the 14 per cent population growth. This is despite prices tripling since 2016 due to annual excise price increases. Taxes now make up $30 of the price of a 20-pack, and this has risen rapidly against a backdrop of strained household budgets. But Australians are not smoking less. Instead, they have simply found a cheaper, unregulated, criminal alternative. Illicit tobacco now makes up an estimated 80 per cent of tobacco consumed in Australia, up from 12 per cent in 2017, according to recent data from the ABS. That's four out of every five smokers breaking the law, and almost all vapers are too.

The illicit market is systematically undermining 25 years of progress, creating a triple blow to public health, government revenue and community safety, and there are enormous consequences. The first is public health. Smoking is the leading cause of preventable death and disease in Australia. It costs us 66 lives every single day. The loved ones lost and childhood exposure to second-hand smoke drove early efforts to deter smoking. Smoking kills. Illegal tobacco is worse still. The Royal Australian College of General Practitioners has warned that illegal tobacco often contains higher than expected nicotine concentrations and unregulated ingredients, like heavy metals, pesticides and moulds. These products disproportionately reach lower socioeconomic communities, regional and rural Australians and First Nations people, widening health inequalities.

The second is government revenue. The tobacco excise peaked at $16.3 billion a year in 2019-20. This year, just $4.1 billion is expected, and it's expected to decline over the forwards, not because Australians are smoking less but because of the illegal tobacco industry growing. We're collecting 25 per cent of the excise we did five years ago, and yet we have more people smoking than ever. It is painfully clear that the tobacco tax is not working. The decline in government revenues is a direct fiscal consequence of a market that has been ceded to organised crime.

The third is community safety. Organised crime has not just entered this market; it has taken over. The growth of the illicit market has been accompanied by more than 200 gangland firebombings of tobacco shops since 2013, violence and intimidation against small business owners and skyrocketing insurance premiums for businesses that simply have the misfortune to be located next to a tobacconist. In what other sector are illegal businesses able to operate in plain sight on every main street in very suburb in every city—and in my electorate? What is concerning me even further is that illicit alcohol is starting to follow the same trajectory. The ATO puts the market at over $700 million a year. In a recent investigation, 30 per cent of licensed bottle shops were found to be selling suspected illicit product, bringing with it the risk of methanol poisoning.

So let's turn to this bill. The Combatting Illicit Tobacco Bill 2026 does take a useful step in response to this crisis and enacts recommendations from the ITAC Commissioner's 2024-25 report. It creates new criminal offences for large-scale illicit tobacco activity linked to organised crime. It increases penalties across importing, possessing, buying, selling, producing and manufacturing. It expands unexplained-wealth provisions and proceeds-of-crime tools. And it enables enhanced law enforcement powers, including wiretaps for serious tobacco offences, with imprisonment terms of up to 15 years for the most serious conduct.

I support this bill. Increasing penalties will create a greater deterrence, and the expanded unexplained-wealth powers are particularly important. They go after the money, not just the product. Criminal networks that absorb seizure losses as a cost of doing business are far more vulnerable to asset confiscation. But I have to be honest about what this bill alone cannot do. Illicit tobacco has reached a crisis point. Failure to act on an emerging and growing issue—by both sides of parliament, but particularly by the government, who's been responsible for the last four years—has increased the complexity and cost of addressing it.

The central question in this debate is whether enforcement alone can solve a problem of this scale. I do not believe it can, and I believe that the government must act further. Authorities seized triple the quantity of illegal cigarettes last financial year compared with four years ago. It's a record result. In January, 52 tobacco stores were shut down in New South Wales following raids targeting illicit tobacco. Yet the market keeps growing. Across states and territories, law enforcement personnel are stretched, and resourcing is uneven. Victoria has just 14 enforcement officers, compared with more than 200 in Queensland. The Australian Border Force's submission to the Senate inquiry highlighted that the scale, profitability and adaptability of supply chains limited the efficacy of enforcement alone.

It is clear that Australia has passed the revenue-maximising point of the Laffer curve, not because fewer people are smoking but because the price differential between illegal and legal products has become so large that criminal substitution has overwhelmed any deterrence effect. This bill seeks to rebalance the risk-to-reward calculation by addressing risk. Reward is the other side of the equation. Undeniably, the excise settings have created enormous profit margins for illegal operators to exploit. It should be reviewed, but cutting the excise alone is unlikely to reverse this trend. A comprehensive approach is needed. Illegal-cigarette purchasing has been normalised by consumers over years, and tobacconists have strongly established retail networks. They cannot simply be priced out. The think tank e61 concludes that the entrenchment of the illicit market necessitates a combination of stricter enforcement, meaningful financial levers and a coalition of policy actors willing to confront the full picture.

I note that this bill arrives while the inquiry of the Senate's Legal and Constitutional Affairs References Committee is still underway, with its report due on 30 June. I welcome that process, but it does raise the question of why we are debating this bill now, before that inquiry has reported, rather than using its findings to shape a more complete legislative response.

So passing this bill is necessary, but it is far from sufficient. The government must consider all options, starting with demand. The goal is fewer smokers. The second best is that smokers buy legal tobacco. Neither is achievable when an illegal packet costs less than half the legal price. Enforcement alone cannot close a gap that wide, and significant excise reduction calibrated to substitution behaviour needs to be on the table.

Secondly, the bar must be lifted on retail licensing. Australian Council on Smoking and Health, ACOSH, chief executive Laura Hunter put it plainly: 'It is far too easy to become a tobacco retailer in Australia.' She noted that obtaining a tobacco licence involves none of the property checks, police checks or community consultations that are routine in a liquor licence. There are 40,000 tobacco retailers in this country, serving eight per cent of the population—a number that makes compliance monitoring operationally impossible. There are 10 times more tobacconists than the four major supermarkets combined. A genuine national licensing scheme with meaningful barriers to entry, regular compliance checks and real consequences for illegal selling is a prerequisite for enforcement to work. Several states have moved on this, but there is no nationally consistent floor, and it is the job of the government to work across the states for a national approach.

Third is proper resourcing of border enforcement. The ABF's Operation PRINTWALL has delivered record seizure results—over a kilotonne of illicit tobacco deterred since December 2025, with 87 tonnes seized in a single week in April. These are significant achievements, but the ABF has been explicit that it cannot seize its way out of this problem. The government has committed $188.5 million to border enforcement and an additional $156 million for the current financial year. That resourcing must be sufficient and targeted to disrupting the import chains, not just the retail end. Seizures are symptoms. The supply chain is the disease.

Finally, there is resourcing of state enforcement agencies. The current disparity between states is a weakness when criminal networks move supply across jurisdictions and the moment one state tightens its laws. The ITEC Commissioner has documented exactly this dynamic. Organised crime doesn't stand still; it relocates wherever the barriers are lowest. A national approach with consistent standards is the only way to stop that arbitrage

In conclusion, Australia was once a global leader in tobacco control. That record is worth defending, but defending it means being honest when a policy has gone completely wrong. The illicit tobacco crisis is not just a story of inadequate penalties, though penalties matter. It's not simply a story about insufficient border enforcement, though that matters too. It is a story about a market that has been structurally handed to organised crime by a combination of extreme pricing and inadequate supply-side management, which now operates so openly on so many street corners that its normalisation is one of the greatest strengths. This is about organised crime happening in broad daylight. The government must do better in this space.

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