Tobacco use is the leading preventable cause of death in Australia, responsible for an estimated 24,000 deaths annually. As a result, reducing smoking has long been a major public health priority. Among the most effective strategies to curb tobacco use are increases in tobacco taxes, a measure widely endorsed by health authorities. Australia is internationally recognised for its strong tobacco control efforts, with regular and substantial excise tax increases playing a central role.
In 2010, the federal government implemented a one-time 25% increase in tobacco excise, followed by annual 12.5% increases from 2013 to 2020, in addition to biannual inflation adjustments. A new round of annual 5% increases began in September 2023. On top of these excise increases, a 10% Goods and Services Tax (GST) is applied, further raising the retail price of tobacco products.
But how have these sustained and significant price increases affected smoking prevalence and household tobacco expenditure? In a recent journal article, we investigated this question using data from the Household, Income, and Labour Dynamics in Australia (HILDA) Survey – a nationally representative longitudinal study. Our analysis sample covers the period from 2006 to 2022. We also examined the socioeconomic dimensions of tobacco spending using the Australian Bureau of Statistics’ 2021 Socio-Economic Indexes for Areas (SEIFA) as a predictor variable.
Smoking prevalence
There is a substantial body of evidence demonstrating that tobacco taxation is among the most cost-effective strategies for reducing tobacco use—and Australia’s experience continues to support this conclusion.
Our research identified a notable decline in smoking prevalence—from 19.0% in 2006 to 13.4% in 2022—coinciding with a period of sustained and substantial tobacco tax increases. This trend is consistent with prior research findings from both Australia and other countries.
Importantly, we found that smoking rates declined across all socioeconomic groups. However, the pace of reduction was slower among individuals in the most disadvantaged quintile, leading to a widening gap in smoking prevalence between the highest and lowest socioeconomic groups. Specifically, the difference in smoking rates between the highest and lowest SEIFA quintiles increased from 12.9% in 2006 to 15.4% in 2022.
These findings suggest that while tobacco tax increases have been effective at reducing smoking at the population level, their benefits have not been evenly distributed. Australians in the most disadvantaged socioeconomic group continue to bear a disproportionate burden of tobacco use.
Household expenditure on tobacco
Our findings also illustrate how increases in tobacco taxation have affected household tobacco expenditure. Across all Australian households, we observed a slight decline in average annual tobacco spending—from $981 in 2006 to $973 in 2022—primarily reflecting the decreasing proportion of households that purchase tobacco. However, among households that continued to buy tobacco, average annual expenditure increased over the same period, from $3,840 to $4,932.
Previous research has documented cost-minimising behaviours among people who smoke in response to tobacco tax increases, such as switching to cheaper brands or roll-your-own tobacco products. However, our results suggest that these strategies have not been sufficient to fully offset the impact of rising tobacco prices for people who continue to smoke.
These financial pressures were even more pronounced when socioeconomic status was disaggregated. Since 2010, households in the most disadvantaged SEIFA quintile consistently spent more on tobacco than those in the most advantaged quintile. By 2022, the gap in average annual tobacco expenditure between these groups had widened to $866—up from $289 in 2006.
Moreover, disadvantaged households allocated a greater share of their income to tobacco. Among households with any tobacco expenditure in 2022, those in the most disadvantaged group spent 6.3% of their income on tobacco, compared with 2.7% in the most advantaged group.
Moving forward
Tobacco taxation has been a key driver in reducing smoking prevalence and lowering overall household tobacco expenditure in Australia. However, the effects of these tax increases have not been evenly distributed. For households in the most disadvantaged groups who continue to smoke, rising prices have led to an increased financial burden, exacerbating existing health and economic inequalities.
Our study underscores the need for a more comprehensive and equity-focused approach to tobacco control—one that builds on the proven effectiveness of taxation but also addresses other drivers of tobacco use. Smoking is a complex behaviour shaped by nicotine dependence, limited access to cessation support, environmental and social triggers, and financial stress. To reduce smoking further and more equitably, policies must also focus on expanding access to effective, affordable cessation programs and reducing the retail availability of tobacco products.
There is also a compelling case for reinvesting tobacco tax revenues into targeted public health initiatives, particularly smoking cessation services tailored to low-income and high-prevalence groups. This would not only support individuals trying to quit but also help offset the regressive financial impact of tobacco taxes.
A more comprehensive and inclusive approach will be essential to achieving Australia’s national goal of reducing smoking prevalence to 5% or less by 2030—ensuring that all Australians, regardless of socioeconomic status, are supported in leading healthier lives.
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