What is causing the $6 billion shortfall in the Australian federal budget?

A violent surge in the illicit tobacco black market has wiped $6 billion from the federal budget in just five months. High excise taxes have pushed the price of legal cigarettes to roughly $50, allowing organized crime syndicates to undercut the market with $15 alternatives.

How much is tobacco excise revenue expected to drop by 2030?

Tobacco excise revenue is forecast to plummet to just over $2 billion annually by 2030, a massive decline from the $16 billion collected in 2020.

Why has the illicit tobacco market grown so rapidly in Australia?

The growth is driven by a massive price gap where legal packs cost $50 (including $34 in tax) while illegal products sell for $15. Economists argue that continued excise hikes have reached a breaking point, making the "risk-free revenue" too attractive for organized crime to ignore.

What are the main risks for the Australian macro outlook following this news?

The primary risk is a structural hit to the federal budget bottom line, which limits the government’s fiscal "war chest" for other services.

How does the size of the illicit tobacco market compare to other illegal trades?

Independent MP Monique Ryan states that the illicit tobacco and vape market in Australia now exceeds the combined size of the markets for cannabis, cocaine, heroin, and ecstasy.

Violent tobacco black market wipes billions from budget

Written by Brie CarterPublished May. 13 2026Last Updated May. 13 2026

A violent black market surge in illicit tobacco has triggered a fiscal catastrophe, wiping $6 billion from the federal budget in just five months.

According to the latest figures, tobacco excise revenue is now projected to plummet to roughly $2 billion annually by 2030—a decline from the $16 billion collected in 2020.

The collapse is attributed to excise hikes that pushed the price of legal cigarettes to $50, creating a lucrative vacuum for organised crime syndicates who sell illicit alternatives for as little as $15.

The crisis has sparked a wave of gang-related violence, prompting the government to allocate hundreds of millions of dollars for state-level disruption and compliance.

However, critics argue the policy has backfired spectacularly. Economist Chris Richardson described the situation as one of the worst policy failures of the century, noting that the government has effectively "cratered the tax take" while inviting criminal gangs into the lives of over a million Australians.

Independent MP Monique Ryan, who recently introduced legislation for harsher penalties, warned that the illicit market now exceeds the combined scale of the cannabis, cocaine, heroin, and ecstasy trades.

Despite pressure from NSW Premier Chris Minns to consider lowering the excise, Treasurer Jim Chalmers remains sceptical that such a move would curb the illegal activity.