Customs and Other Legislation Amendment (Illicit Tobacco Enforcement Modernisation and Other Measures) Bill 2026

Mr FARLEY (Farrer) (18:17): Last week, the Australian Institute of Health and Welfare released new data. Daily smoking prevalence has fallen to a new record low of 5.6 per cent in 2025, down from 8.3 per cent in 2022-23. Taken at face value, that's the best news in the history of Australian tobacco control.

I want to be the first to say it plainly: the antismoking investment worked and it must be protected. But we owe this chamber the honesty about those numbers and what they do not tell us. These figures come from a self-report survey.

The Australian Institute of Health and Welfare has acknowledged that the respondents tend to underestimate their actual consumption levels and that illicit use is particularly undercounted. So here's the problem: when the previous survey ran in 2022-23, most tobacco was still bought legally. But by 2025, the Australian Bureau of Statistics estimated 80 per cent of all nicotine products were illicit.

So the steepest fall in reported smoking in the survey's history was recorded over exactly the period in which smoking moved underground and became harder to measure. That doesn't mean smoking isn't falling; it means we should be cautious before we declare victory on the back of a number we can no longer fully see. Regardless of the true rate, the bills keep arriving.

The Australian Institute of Health and Welfare tells us that smoking costs our health system circa $7.9 billion every year; smoking attributed to ill health, $29.8 billion; premature mortality, $107 billion; and a total social cost of $160 billion in 2022-23 alone. And 1.4 to 1.5 million Australians still smoke. These are some of the most expensive Australians to look after, and that cost lands on every taxpayer in this nation and in this chamber.

The violence is now a crisis in its own right. Since 2023, nearly 300 arson attacks linked to the trade have been reported nation wide, alongside countless episodes of extortion, intimidation and several murders. Australians now spend up to $8.5 billion a year on illicit nicotine.

That's a big number compared to cannabis, cocaine, ecstasy and heroin. That makes illicit nicotine one of the largest and certainly the fastest growing black markets in our history. The ports are working, but they can't do it alone.

I want to give credit where credit is due. Australian Border Force officers are doing extraordinary work. In 2025-26, this current year, the ABF seized more than 2.2 billion illicit cigarettes, 586.7 tonnes of loose-leaf tobacco and over 13.2 million illegal vapes.

Those seizures represented an estimated $4.7 billion of evaded tobacco duty, largely detected through maritime cargo screening, container X-ray technology, intelligence sharing and offshore targeting. Through international intelligence partnerships, the Australian Border Force prevented a further 514.9 million cigarettes and 3.1 million vapes from ever reaching our shores.

In the drug space, Australian Federal Police and Australian Border Force seized 33.7 tonnes of illicit drugs and the precursors to them in 2023-24—methamphetamine, cocaine, heroin and MDMA. Australian ports are among the most sophisticated border control environments in the world. This is the crux of my argument: the fact that we have a market worth up to $8.5 billion tells you enforcement alone is not solving the problem.

Australia processes millions of containers annually. Only a fraction can be physically inspected. Criminal groups exploit false cargo descriptions, complex supply chains, multiple transhipment ports, corrupt freight operators and small-parcel postal channels.

The Australian Border Force itself frames success as disrupting criminal networks and increasing their costs, not achieving complete elimination. Australian Border Force commander Ken McKern said plainly: Unfortunately we can't seize this problem away. Let me put it this way.

Australian Border Force officers are seizing record quantities of illicit tobacco at our ports, but the size of the black market demonstrates that enforcement alone cannot solve the problem. We must also address the economic incentive that makes tobacco smuggling so profitable for organised crime. We are currently not helping police.

Every gram that gets through places a burden on our law enforcement agencies. Every seizure, every investigation, every firebombing consumes police resources, forensic teams and court time. Officers who should be hunting drug traffickers, child exploitation networks and violent offenders are being diverted into policing a black market that our own tax settings helped create.

Then come the courts. Then come the prisons. Incarcerating a single offender commonly exceeds $150,000 a year.

High excise creates the market, criminals exploit it, police and courts respond, and taxpayers fund the whole cycle. That is not a loss of revenue; that is a cascade of cost flowing through every level of government. There are three things we clearly must do.

Our tobacco control policies were designed when criminal suppliers played only a marginal role. Now they dominate the market. Those policies need an urgent rethink.

First, cut the tobacco tax. Tobacco taxes are meant to reduce consumption by making cigarettes expensive. Right now, the tax only makes legal tobacco expensive, driving consumers to cheap illicit alternatives.

Perversely, excessive taxation has made smoking cheaper than it has been in decades. Canada took this path in 1994, cutting its tobacco excise in response to rampant smuggling while stepping up enforcement. Within six years, contraband seizures fell 94 per cent.

Critics will say a tax cut is what big tobacco wants. But, based on market share, organised crime effectively is big tobacco in Australia right now. A legal industry is preferable to a criminal one selling the same product without health warnings or plain packaging, and allegedly using the proceeds to kill, intimidate and firebomb those who get in their way.

Second, legislate safer alternatives. Smoking remains a leading cause of preventable death, so moving people back to legal cigarettes is only a partial win. We should repel the consumer vapes and legalise lower-risk products, like nicotine pouches.

In May, Sweden became the first country to reach a smoke-free threshold of under five per cent daily smoking through a legal, regulated market for vapes and pouches. New Zealand legalised and regulated vapes in 2020, and adult smoking has since fallen by more than 40 per cent, with the steepest declines among the Maori and the lower-income communities—the very groups whose rates remain stubbornly high here.

Third, keep enforcing against the shrinking market. Enforcement remains absolutely critical, but we must divert a critical mass of nicotine consumers away from criminal suppliers. With fewer customers and lower profits, the same raids and seizures can finally make a difference.

Let me talk about the bottom line. This debate is not about surrendering a public health win. It's about protecting that public health win.

The investments worked, and smoking rates are down, but we cannot protect that again by pretending the black market isn't there or by pretending a self-report survey captures what has moved underground. When a tax policy enriches criminals, overwhelms police, clogs courts, fills prisons and costs taxpayers billions, it's no longer simply a health policy. It becomes a public policy failure.

Australia's tobacco wars are a product of the settings that inadvertently handed organised crime a multi-billion-dollar market. Arrests alone won't end them; fixing the settings will. We can protect the investment and fix what's broken.

We should have the courage to do both. It's from my narrative that I've just articulated that I support and second the member of New England's amendment to the bill. Use all and every strategy and every tactic to fight organised crime and stop this black market.