Comment: How worried should we be about reports of a growing illicit tobacco market in Aotearoa New Zealand? We don’t yet know the extent of this market but it’s estimated to be 5-10 percent of the tobacco market, and we should take it seriously enough to avoid ending up like Australia, where it’s estimated that more than half of the total tobacco market and more than 90 percent of vapes come from illicit sources.
Once illegal supply becomes embedded, it is difficult and costly to reverse. The situation in Australia is so bad that there are suggestions that smoking is increasing again, especially for young people. Recent research showed that almost two thirds of 18-24 year olds who smoke report using illicit tobacco.
Enforcement alone isn’t enough though. It doesn’t address the issue of demand for nicotine among adults with a tobacco addiction.
This has been highlighted by an article on the Public Health Communication Centre, which calls for greater enforcement powers, faster penalties, and cross-agency coordination. The centre also argues that too much focus on enforcement and the preservation of existing tobacco control measures risks missing a crucial part of New Zealand’s changing nicotine market.
New Zealand Health Survey data shows that daily smoking has fallen from 16.4 percent in 2011/12 to 6.8 percent in 2024/25, with about 300,000 New Zealanders still smoking cigarettes. Vaping (smokefree nicotine) has risen to 11.7 percent, with about half a million adults now vaping daily. These trends don’t prove cause and effect, but they show a large shift in how nicotine is used across the population.
This shift hasn’t been evenly distributed though. Smoking is increasingly concentrated among people living in the most socio-economically deprived communities, and among Māori and Pacific populations. These groups now carry a disproportionate share of smoking-related harm and the financial burden of tobacco tax. At the same time, the fastest declines in smoking in adults, particularly among Māori, have occurred over the same period in which alternative nicotine products, largely vaping, have become more available.
This distribution points to how illicit markets develop; illicit tobacco is driven primarily by price. When legal cigarettes become expensive, the black-market grows. The growth of illegal cigarette sales is a rational, although unwelcome, response to rising prices.
Many New Zealand smokers are switching to vaping – a smoke-free nicotine product – which are widely available, well-regulated and relatively affordable. Readers don’t need reminding, but I’ll say it anyway: it’s the smoke from burning tobacco at very high temperatures that kills people, not – as far as we know – the nicotine. These smoke-free alternatives to cigarettes provide a legal substitute for those who would otherwise continue to smoke.
The direct implications for illicit trade are obvious. Where there are affordable and safer alternatives there will be less demand for illicit tobacco.
This matters. A 2026 paper published in the Society for the Study of Addiction suggests that Australia has in effect lost control of its tobacco and nicotine market. The combination of very high tobacco taxes and highly restricted access to vaping has contributed to a large and growing illicit market.
The authors conclude: “Punitive taxes on cigarettes and restricted access to lower-risk nicotine products have diverted Australians who use nicotine into illicit markets and may also have increased cigarette smoking among young people.”
By contrast, they note that New Zealand has seen faster declines in smoking alongside a smaller illicit market under a more permissive and controlled regulatory approach to vaping.
This knowledge should inform and broaden our discussions. Tax on tobacco has been effective in reducing smoking, including in young people, but the burden falls most heavily on those with the least capacity to afford it, the groups in which smoking is now concentrated. Tobacco expenditure can be a significant share of disposable income.
Policy shapes the way forward. If safer, regulated alternatives are accessible, more affordable and supported for adults to quit smoking as they are in New Zealand, they offer a credible and safer route away from both expensive legal and cheap illicit cigarettes. If they aren’t, as they aren’t in Australia, the price gap between legal and illegal tobacco becomes a stronger incentive, particularly for those already carrying the greatest financial burden.
A more comprehensive response to illicit tobacco would therefore combine three elements.
First, effective enforcement to prevent illegal supply from becoming entrenched, with early, visible action.
Second, a balanced and equitable approach to taxation, keeping its role in discouraging smoking while staying alert to distributional impacts.
Third, more support for harm reduction through increasing the availability of subsidised vapes for smokers at greatest risk of disease and death. Facilitating the shift from smoking to lower-risk, regulated nicotine products will reduce demand for cigarettes overall, including illicit tobacco.
This doesn’t mean weakening tobacco control or accepting industry narratives. It reflects how nicotine markets actually work.
Illicit tobacco does need a strong enforcement response. It’s a supply problem that should be cracked down on. But enforcement alone won’t solve it. Illicit markets don’t disappear because we pursue them harder – they disappear when fewer people need them.
