The Importance of Tobacco in Australia

 

Tobacco is a controlled product under Australian Customs law. It is illegal to grow or manufacture tobacco without an excise licence. Illegal tobacco is also a significant threat to community wellbeing by depriving the government of valuable revenue.

Many Aboriginal and Torres Strait Islander communities have experienced historical and ongoing trauma from colonisation. Trauma impacts health and wellbeing and can lead to higher 1kg tobacco Australia use [1].

Price

The illicit tobacco market poses health risks to Australians and is a significant source of crime revenue for transnational organised criminal groups. Its sub-standard production processes can result in poisonous ingredients, such as formaldehyde and rat faeces, and pose biosecurity risks to the country. To combat the problem, the Australian Government formed the Black Economy Taskforce, a multi-agency team that combines law enforcement and border security agencies.

The price of tobacco in Australia varies by brand, type and location. It is also affected by tax policy. Cigarette excise rates are indexed twice a year. Rates increase on 1 March and 1 September each year based on changes in average weekly ordinary time earnings (AWOTE) for the previous six months.

As a result of these changes, real tobacco prices have increased dramatically. Figure 13.6.4 illustrates this trend by plotting the price per pack of a leading brand in 2024 compared to 1940. Cigarette prices are also impacted by the introduction of new product innovations, such as smokeless tobacco and vaping products.

Health warnings

Smoking is a significant source of cancer, chronic lung disease (emphysema and bronchitis) and heart disease in Australia. It also leads to a range of other diseases and can result in premature death. In addition, smoking causes economic costs to the community through loss of household and workforce labour and net health care savings from reduced life expectancy.

These costs are mainly tangible, including loss of wages from lost productivity; costs to employers due to workplace disruption and loss of skilled workers; and household expenditure on tobacco products. There are also intangible costs resulting from premature mortality, such as loss of potential future earnings and the present value of lifetime health care costs for smokers compared to non-smokers.

It is illegal to import prohibited 1kg tobacco products into Australia, except for cigars, chewing tobacco and snuff intended for oral use up to 1.5kg. Illicit tobacco smuggling is an important revenue source for organised crime and is a threat to Australian security, public health and biosecurity.

Regulations

The Australian Government has a number of regulations relating to tobacco products. For example, travellers to Australia can bring in up to 1.5 kilograms of smokeless tobacco for personal use without a permit provided that they declare the product and pay duties and taxes. In addition, they may store tobacco products for short periods at customs depots if the destination of the product is not entered into home consumption. Anyone who imports tobacco products and does not pay the relevant duties and taxes is committing a criminal offence under section 233BABAD of the Customs Act 1901 (Cth).

The ATO has a dedicated Illicit Tobacco Taskforce to investigate and dismantle serious organised crime syndicates that deal in illicit tobacco. The taskforce works with its partners in law enforcement to identify, disrupt and prosecute the illegal tobacco trade. The taskforce also works to educate communities on the dangers of smoking. Tobacco taxes in Australia are among the highest of comparable nations, and are set to further increase.

Consumption

The number of people smoking daily in Australia has declined steadily since 2010, but it is not clear whether this decline can be exclusively attributed to tobacco excise increases. It has also been observed that the rate of decline is less steep for certain groups, including those with lower socio-economic status, First Nations populations and people with mental illnesses.

Cigarettes and tobacco are the main item of consumption in Australia, and their prices are an important factor in consumer welfare. The Cigarettes and Tobacco subindex of the Consumer Price Index (CPI) is based on in-shop surveys, and includes the prices paid by Australian households for cigarettes and tobacco.

The survey covers retail stores selling tobacco products to the general public, and excludes duty-paid clearances of cigarettes from airports or ships destined for export. The CPI is adjusted for the effect of GST, which accounts for one-eleventh of the price of tobacco in Australia. This measure is the longest-running indicator of actual prices paid by consumers for tobacco.

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