Australia’s tobacco tax worked. My father shows what the statistics miss.
In Brief:
Australia’s tobacco taxes helped drive smoking down, including among disadvantaged Australians. But the people who continue to smoke are disproportionately disadvantaged, and smoking remains extraordinarily common among people with serious mental illness. A successful public-health policy can still impose a very large cost on the smaller group it fails to change.
My father is 90. He has smoked about a packet a day since he was 14. Every smoker has a story about the uncle who smoked forty a day and lived to 97. My father is that story, still in progress.
He started around 1950, when cigarettes were cheap, widely advertised, and sold without health warnings. Australia’s first health warning on cigarette packets did not appear until 1973. By then, Dad had been smoking for 23 years.
He is now single and lives on the Age Pension: $1,237.70 a fortnight, about $619 a week. His cigarettes cost him around $40 a day. That is $280 a week, roughly 45 per cent of his income, before he has even bought a loaf of bread.
The current excise is $1.55 per cigarette. Add GST and, on a $40 packet of 20, about $34.70 is tax. Over a year, Dad hands roughly $12,600 of his pension straight back to the Commonwealth. The government sends him his pension, then collects a large slice of it back over the counter. As welfare programs go, it is remarkably efficient. The money barely leaves Canberra.
The ward
On a typical day working in psychiatry, I see four or five patients with schizophrenia. Most smoke.
That is not just my impression. Smoking remains extraordinarily common in serious mental illness. The 2022 National Health Survey estimated that 42 per cent of Australians with schizophrenia smoked daily, about four times the national rate. Earlier national surveys found even higher rates among people with psychosis.
Many live on the Disability Support Pension, which, for a single adult on the maximum rate, pays the same as my father receives. So I see the arithmetic again. Cigarettes compete with food, transport, coffee with a friend, a decent phone, and anything that makes life slightly larger than illness and a small flat.
People with severe mental illness can quit, but the gains have been far less complete, and the disparity remains enormous. Treatments improve the odds. But addiction does not disappear simply because an economist sends it a price signal.
The bar
Then I come home and have a drink with friends. On a good night there might be ten or fifteen doctors around the table. Nobody smokes. Everyone is comfortable. The craft beer is very good.
Occasionally tobacco tax comes up, and generally everyone agrees that making cigarettes expensive has been one of Australia’s great public-health interventions.
And they have a point.
But sitting there with my beer in my hand, having spent the day watching people on pensions smoke, I sometimes have an uncharitable thought: It is easy to admire a tax you will never pay.
I should declare a conflict of interest. I’ve always had a soft spot for smoking. I smoked for about 40 years, from 18 until the start of COVID. For most of that time, I paid tobacco tax on a doctor’s salary. It annoyed me, but it did not impoverish me.
My father pays it on a pension.
Unfortunately, the tax works
This would be a much easier essay to write if tobacco tax were simply a stupid policy. It isn’t.
Kevin Rudd’s government increased tobacco excise by 25 per cent in 2010 as part of a broader anti-smoking package. Daily smoking has since fallen from 15.2 per cent to 5.6 per cent, continuing a decline that was already well underway. Among people living in the most disadvantaged areas, daily smoking has also fallen.
Among 14- to 17-year-olds, the estimated daily smoking rate is now around one per cent, although the estimate comes with considerable sampling uncertainty.
That matters. The best argument for an expensive cigarette is the teenager who never buys the first packet. My father was that teenager once, in a country that made smoking easy.
I initially assumed tobacco control had simply left behind the hardest smokers: people so dependent that further price rises no longer changed their behaviour. Researchers have tested this idea, known as the “hardening hypothesis”, and it does not hold up particularly well. Remaining smokers are not, on average, becoming progressively more dependent or less interested in quitting.
So the problem is more complex. High prices can continue to discourage smoking while still imposing an extraordinary cost on some of the people who continue to smoke.
Who still smokes?
Smoking has become extraordinarily socially uneven.
In Australia’s most advantaged areas, 2.6 per cent of people smoked daily in 2025. In the most disadvantaged areas, the rate was 10.8 per cent, more than four times as high. Importantly, smoking also fell in disadvantaged areas, down from 13.3 per cent in 2022–23.
So this is not a simple story in which tobacco policy works for the rich and fails the poor.
Smoking is falling across the population. But among those who continue to smoke, disadvantage is heavily over-represented. And the same price that is irritating on a good salary can be devastating when you have $619 a week.
Research on disadvantaged smokers highlights that tension. Higher prices encourage quitting and cutting down, but some who continue smoking face greater financial stress, including paying bills late or going without other household purchases.
Both things can be true. A policy can produce large benefits and still hurt some of the people it does not change.
Human beings find another door
There is another clue that the price signal is doing something complicated.
In 2025, about one in three Australians who smoked had recently bought or were currently smoking illicit tobacco.
That does not prove high taxes caused the illicit market. Organised crime, enforcement and supply matter too. But psychologically, the response is hardly mysterious. Make something people want extremely expensive, and they have several choices: stop, reduce, pay, or find another way to get it.
Humans are ingenious, particularly when drugs are involved.
From unhealthy to disreputable
When my father started, smoking was normal. Now it is not merely unhealthy. It is inconvenient, expensive and socially disapproved of.
Some of that helped make smoking less attractive. But stigma is blunt. Research suggests smoking stigma can encourage some people to quit while also producing shame, concealment and self-stigma in others.
And once a behaviour becomes socially disreputable, it becomes easier to stop being curious about the people who still do it.
We see the cigarette. We see the bad choice. We see less of the person making it.
Back to Dad
I no longer think the interesting question is whether tobacco taxation worked. It clearly contributed to a much broader tobacco-control effort that changed smoking in Australia.
Nor can I say the people who still smoke are simply incapable of quitting. The evidence does not support that.
What bothers me is the bit population statistics blur.
A policy can deliver substantial benefits to millions of people while imposing a very large cost on a smaller group. As that group shrinks, it can also become easier for the rest of us to overlook them.
My father notices. He has blamed Kevin Rudd for cigarette prices since the 2010 tax rise, although tobacco excise has continued under later governments.
Dad’s analysis is less nuanced. Every time he buys a packet, he thinks the same thing.
“Stuff you, Rudd.”