The Inquiry That Refused to Ask the Only Question That Matters

Yesterday’s hearing into Australia’s illicit tobacco crisis didn’t just expose a black market problem. It exposed something far more uncomfortable, a system straining under the weight of its own contradictions. The Senate inquiry into the illegal tobacco trade was always meant to answer a straightforward question: how big is the problem, and how do we stop it? Instead, what played out yesterday suggested that the real question is one policymakers are still unwilling to confront. How did we get here in the first place?

Because what emerged wasn’t just evidence of organised crime, smuggling networks, or lost tax revenue. Those elements are now well established. Estimates point to billions in excise losses, a rapidly expanding illicit supply chain, and a market increasingly dominated by sophisticated criminal networks. Law enforcement has been blunt. The illicit tobacco market is scaling industrially, with offshore production now tailored specifically to Australian demand. That single point should have stopped the room cold because demand doesn’t appear out of nowhere. It is created. And in Australia, it has been engineered through one of the most aggressive tobacco tax and regulatory regimes in the world.

What made yesterday’s hearing remarkable wasn’t just the scale of the crisis. It was the growing tension between two competing narratives that could no longer comfortably coexist. On one side, you have the official line: illicit tobacco is a law enforcement problem, driven by organised crime, requiring stronger penalties, more seizures, and expanded police powers. On the other side, though rarely acknowledged directly, is a far more inconvenient reality. Even parts of government are beginning to concede that policy settings themselves are part of the problem. Extremely high excise levels inflate illegal operators' profit margins and create powerful incentives for consumers to exit the legal market altogether. This is the contradiction at the heart of the entire inquiry. You cannot simultaneously drive legal prices to extreme levels and expect the market to remain compliant. Economics does not bend to public health messaging. It responds to incentives. And the incentives in Australia are now so distorted that illicit supply is no longer a fringe issue, it is becoming a parallel market.

But if that tension wasn’t enough, yesterday’s hearing exposed something even more troubling. A disconnect. A widening gap between the reality on the ground and the understanding of some of the very people tasked with responding to it. No one embodied that disconnect more clearly than Dorinda Cox. Throughout the proceedings, there was a persistent tendency to frame the illicit tobacco market as though it existed independently of the policy environment that created it. The focus remained fixed on enforcement, criminality, and the need to double down, as if the explosion of the black market were not, at least in part, a predictable response to the conditions imposed by government itself. That’s not just incomplete. It’s dangerously simplistic.

And then came the moment that crystallised a deeper inconsistency. During the hearing, Dorinda Cox repeatedly pressed witnesses on whether they had engaged with “Big Tobacco.” But when the inquiry itself heard from Philip Morris International, albeit in a closed session, the reaction was immediate and hostile. So which is it? If engagement is inherently problematic, why ask who has spoken to them? And if transparency is the goal, why object when that engagement actually occurs, even if imperfectly? You can’t have it both ways. Either engagement is unacceptable across the board, or it’s something that should happen openly and be scrutinised. Right now, it looks less like a principled position and more like selective outrage depending on who controls the narrative. And that doesn’t help anyone understand what’s actually going on.

Because the evidence presented to the inquiry paints a very different picture. Law enforcement isn’t dealing with a static problem. It’s dealing with a market that is expanding because it is profitable, scalable, and, crucially, driven by demand that has not gone away. And that demand is being squeezed out of the legal market by design. This is the part that keeps getting missed. You cannot push legal prices to extreme levels, restrict access, and remove lower-risk alternatives from the equation, then act surprised when consumers look elsewhere. That’s not a failure of policing. That’s basic economics. Yet that fundamental point seemed to struggle to break through.

And the disconnect didn’t stop there. It extended well beyond the political theatre and into the NGO sector, the very groups that have long positioned themselves as the intellectual backbone of Australia’s tobacco control strategy. That’s where the problem becomes harder to ignore. Because these organisations are not bystanders. They shape the narrative, inform the messaging, and influence the direction of policy itself. When they fail to grasp what’s unfolding, it’s not just an analytical gap, it becomes a systemic one. What stood out was how consistently some NGO representatives defaulted to a framework that simply doesn’t match the current reality. The illicit tobacco market was treated as a deviation, an external threat, something that exists outside the system, rather than something emerging from within it.

That framing might have worked a decade ago. It doesn’t work now. Because the scale of what Australia is dealing with today is not incidental. It is structural. And yet, instead of engaging with that, much of the NGO commentary circled back to familiar territory, stronger enforcement, tighter controls, more pressure on legal supply, with the assumption that if you just push harder, the system will eventually correct itself. But there was very little acknowledgment of the obvious tension sitting underneath all of this. That the very policies being defended are the ones creating the conditions for the illicit market to thrive. High excise doesn’t just reduce consumption, it increases margins for illegal operators. Restricted access doesn’t just limit use, it displaces it. Product bans don’t eliminate demand, they redirect it. None of this is controversial. It’s basic market behaviour. Yet it was treated as if it barely existed.

There was, however, a small but important contrast in the room. A few contributors did manage to hold a more balanced line. James Martin, Ed Jegasothy, and Liz and Paul from the DPMP (Drug Policy Modelling Program) stood out not because they were aligned with any particular ideological position, but because they appeared willing to sit in the complexity rather than flatten it. Their testimony acknowledged both enforcement realities and market dynamics without defaulting into either denial or certainty. They did not treat the illicit market as a moral aberration alone, nor as something that could be solved purely through escalation. Instead, there was at least an attempt to recognise the interaction between policy design, pricing, and behavioural substitution. In a hearing marked by polarisation, that degree of balance was notable precisely because it was rare.

There is a kind of institutional reflex at play here, a reluctance to step outside the established narrative, even as the evidence continues to challenge it. And that’s where the criticism becomes unavoidable. Because this isn’t just about missing a detail. It’s about missing the mechanism. If you don’t understand why the illicit market is expanding, you can’t meaningfully respond to it. And if your entire framework is built on the assumption that tightening the same levers will eventually produce a different outcome, then you’re not solving the problem, you’re reinforcing it.

There is also a deeper issue. Many of these NGOs have spent years advocating for increasingly restrictive measures, confident that the outcomes would be unambiguously positive. That confidence is now colliding with a far more complex reality, one where unintended consequences are no longer marginal, but central. Acknowledging that would require a level of introspection that was largely absent yesterday. Because once you accept that the illicit market is not just a failure of enforcement, but a byproduct of the policy architecture itself, it forces a much harder conversation about trade-offs, about balance, about whether the current approach is still fit for purpose.

And hanging over all of it is the issue that remains largely unspoken. Substitution. People don’t simply stop using nicotine because policy demands it. They switch. To cheaper products. To illegal products. To whatever remains accessible. This is the missing piece in the entire conversation. Because without acknowledging substitution, every policy intervention becomes a game of whack-a-mole. Raise taxes and illicit trade grows. Ban products and black markets expand. Tighten enforcement and criminal networks adapt. And the cycle continues.

What yesterday’s inquiry revealed, more than anything, is that Australia is no longer dealing with isolated policy failures. It is confronting the cumulative effect of years of decisions that have pushed the system beyond its limits. The black market is not an anomaly. It is a signal. A signal that demand has not disappeared. A signal that the supply has simply moved. A signal that the current approach is no longer containing the problem, it is reshaping it. By the time this inquiry reports, it will likely recommend stronger enforcement, tougher penalties, and greater coordination. All of which may be necessary. But none of which will address the underlying tension that was impossible to ignore yesterday.

You cannot regulate demand out of existence. And until that reality is confronted directly, not just by policymakers, but by advocates and NGOs who continue to defend the status quo, Australia will remain locked in a paradox of its own making. A country is trying to eliminate a market that its own policies have helped to create.