How Wrong Can a Government Be?

There are moments in public policy when mistakes become obvious quickly. And then there are moments when governments refuse to recognise those mistakes even as the evidence piles up around them. Australia’s nicotine policy increasingly looks like the latter, a case study in how stubbornly a government can persist with a strategy that is clearly failing.

What makes the situation remarkable is not simply that the policy has gone wrong. Governments make mistakes all the time. What makes it extraordinary is the scale of the failure and the determination to deny it.

By the government’s own estimates, more than half of all tobacco sold in Australia is now illegal. Criminal networks are making billions of dollars each year from the trade. Meanwhile, around 95.7% of e-cigarette products sold in the country are also illegal.

Think about what that actually means. The majority of a massive consumer market now exists entirely outside the law.

At some point, a rational government would stop and ask a simple question: how did we get here?

Instead, the current response from Canberra appears to be to crack down harder.

Health Minister Mark Butler has repeatedly defended Australia’s restrictive approach to vaping, describing the reforms as necessary to protect young people and prevent a new generation from becoming addicted to nicotine. The intention may sound reasonable, but intentions do not determine outcomes. Policies do.

And the outcomes are now becoming impossible to ignore.

The attempt to eliminate retail vaping has not removed vaping from Australia. It has simply moved it almost entirely into the black market.

This was entirely predictable. Millions of adults still use nicotine. Many smokers are looking for alternatives that carry lower health risks than cigarettes. When legal access to those alternatives is restricted to a complicated pharmacy system, most consumers will not simply give up and walk away. They will look for another way to obtain the products they want.

That other way has become the illicit market.

At the same time, tobacco taxation has continued to push legal cigarette prices to extraordinary levels. A single pack can cost more than $40, creating enormous incentives for smuggling and illegal distribution.

Even members of the government have begun to acknowledge this reality. Assistant Minister Julian Hill recently admitted that high tobacco excise has been “one of the key drivers” of Australia’s booming black market.

That statement should have triggered a serious policy rethink.

Instead, the response has been to double down.

More enforcement. More raids. Tougher penalties. Expanded surveillance powers. Stronger asset seizure laws.

The underlying policy settings remain untouched.

This is the strange paradox of Australia’s nicotine strategy. On one hand, policymakers acknowledge that their own taxation and regulatory decisions have helped fuel a massive illicit market. On the other hand, they refuse to reconsider those decisions and instead escalate the law enforcement response.

It is a bit like trying to put out a fire while continuing to pour petrol on it.

There is also another powerful force shaping the debate, the tobacco control establishment itself. A relatively small circle of influential academics and advocates has dominated the nicotine policy conversation for decades, often presenting a united front that leaves little room for dissent. Figures such as Becky Freeman and Simon Chapman have been among the most prominent voices defending Australia’s prohibition style approach to vaping and ever increasing tobacco taxes. Rather than engaging openly with the growing international evidence supporting harm reduction, critics argue that many within this academic circle have treated vaping primarily as a threat to their long standing tobacco control ideology. The result is a policy environment where inconvenient evidence is often dismissed, critics are marginalised, and governments receive advice that reinforces the same restrictive strategies, even as the real world consequences become increasingly difficult to ignore.

History suggests that prohibition style approaches rarely eliminate demand. When governments make widely used products excessively expensive or extremely difficult to obtain legally, the market does not disappear. It adapts.

Supply moves underground.

Once that happens, criminal networks inevitably step in. They are faster, more flexible, and often far better incentivised than regulators. Where legal businesses face compliance costs and strict regulations, illicit operators face only risk, and risk can be priced into profit.

Australia is now seeing the consequences of that dynamic play out in real time.

The illegal tobacco trade has become one of the most lucrative black markets in the country. Organised crime groups are competing for control of distribution networks. Police have linked violent incidents, arson attacks, and shootings to disputes within the illicit tobacco industry.

This was not an unavoidable outcome. It was the predictable result of policy choices.

Yet the political narrative continues to frame the situation as though organised crime simply appeared out of nowhere.

The uncomfortable truth is that government policy helped create the conditions that made the illicit market so profitable in the first place.

When cigarettes become some of the most expensive in the world and legal alternatives are effectively banned, the incentives for illegal supply become overwhelming.

And once a black market reaches the scale that Australia’s nicotine market has now reached, enforcement alone struggles to contain it.

This is where the central question becomes unavoidable. How wrong can a government be before it admits the policy itself needs to change?

Other countries have taken a very different approach. Rather than prohibiting lower risk nicotine products, they regulate them. Vaping products are sold through licensed retailers, subject to product standards, age restrictions, and safety requirements.

The aim is simple, reduce smoking while keeping the nicotine market within the legal economy.

Australia chose a different path. It attempted to suppress vaping almost entirely while continuing to escalate tobacco taxes.

The result has been the near total migration of the nicotine market into illegality.

And yet the official solution remains the same, more enforcement.

This is where policy begins to resemble ideology.

Admitting failure would require acknowledging that some of the core assumptions behind Australia’s nicotine strategy may have been wrong. It would mean recognising that harm reduction could play a legitimate role in reducing smoking. It would also mean confronting the possibility that extreme prohibition has produced consequences that are worse than the problem it was meant to solve.

For governments, that kind of admission is politically difficult.

But refusing to make it carries its own risks.

As the illicit market continues to expand, enforcement costs will rise, criminal networks will grow stronger, and ordinary consumers will become increasingly accustomed to operating outside the law simply to obtain nicotine products.

None of this looks like a successful public health strategy.

It looks like a policy that has lost touch with reality and a government that cannot bring itself to admit it.

At some point, the question will no longer be whether Australia’s nicotine policy has failed.

The evidence already suggests it has.

The real question is how long policymakers will continue pretending otherwise.