When Reality Becomes Inconvenient: Croakey's Refusal to Learn from Australia's Tobacco Disaster

The latest Croakey article urging governments to intensify their crackdown on illicit tobacco is remarkable not because it presents any genuinely new ideas, but because it demonstrates how difficult it has become for some parts of the public health establishment to acknowledge policy failure when that failure conflicts with deeply held beliefs. Australia is currently experiencing one of the most dramatic expansions of illicit tobacco trade seen anywhere in the developed world, yet rather than prompting reflection about the policies that contributed to this outcome, the response from many public health advocates appears to be a demand for even more enforcement, even tougher restrictions, and even greater faith in the very approach that has produced the current situation.

The article rests on a familiar argument. Australia does not have a taxation problem, a regulation problem, or a policy design problem. Instead, according to this perspective, the problem is simply that governments have not been sufficiently aggressive in their enforcement efforts. If only authorities could seize more illicit tobacco, prosecute more offenders, impose harsher penalties, and devote additional resources to enforcement, the problem would eventually disappear. It is an attractive narrative because it allows policymakers and public health advocates to avoid confronting a much more uncomfortable possibility: that the illicit market is not merely a failure of enforcement but a predictable consequence of the policy settings themselves.

This distinction is crucial because the scale of the problem can no longer be dismissed as a minor inconvenience or an unfortunate side effect of otherwise successful policies. According to the latest estimates from the Australian Bureau of Statistics, approximately 80 percent of tobacco consumed in Australia now comes from illicit sources. At the same time, overall nicotine consumption is estimated to have increased by around 40 percent. These figures should have triggered a serious national conversation about what has gone wrong and why. Instead, many public health advocates seem determined to interpret them as evidence that governments simply need to intensify their efforts.

What makes this response so difficult to understand is that the current situation was not unforeseen. Critics of Australia’s tobacco taxation strategy have been warning for years that continually increasing cigarette prices would eventually create powerful incentives for consumers to seek alternatives outside the legal market. They warned that enormous price differentials between legal and illicit products would attract organised crime. They warned that consumers facing some of the highest cigarette prices in the world would increasingly turn to cheaper suppliers. They warned that enforcement agencies would struggle to suppress a market fuelled by such extraordinary profit margins. These warnings were routinely dismissed, often portrayed as industry talking points or attempts to undermine public health measures. Yet virtually every one of those predictions has materialised.

The uncomfortable reality is that markets respond to incentives regardless of whether policymakers approve of those incentives. Consumers do not suddenly abandon economic considerations because a product has been heavily taxed. When legal cigarettes become dramatically more expensive while illegal alternatives remain widely available at a fraction of the price, many consumers will inevitably migrate toward those alternatives. This is not an endorsement of smoking, nor is it a defence of illicit trade. It is simply an acknowledgment of how human behaviour works. Public policy cannot repeal economic reality.

One of the most frustrating aspects of the Croakey article is its attempt to sidestep this issue by arguing that illicit tobacco markets also exist in countries with lower tobacco taxes. This observation is true but largely irrelevant to the central question. Critics are not claiming that reducing taxes would eliminate illicit trade entirely. Very few serious observers believe any black market can ever be reduced to zero. The real question is whether Australia’s exceptionally high tobacco taxes have contributed to the creation of an exceptionally large illicit market. On that question, the evidence is becoming increasingly difficult to ignore.

Australia’s tobacco taxes have risen repeatedly over the past decade, pushing legal cigarette prices to levels that would have been almost unimaginable a generation ago. At the same time, illicit suppliers have been able to offer products at a fraction of the legal price. The larger the gap becomes, the greater the incentive for consumers to leave the regulated market. This is not a controversial economic theory. It is one of the most basic principles of supply and demand. Yet discussions within parts of the public health sector often proceed as though these forces simply do not exist or can be overcome through sufficient determination and enforcement.

The faith placed in enforcement is particularly striking because the evidence increasingly suggests that enforcement alone cannot solve the problem. Governments across Australia have already introduced tougher penalties, expanded police powers, increased inspections, strengthened licensing requirements, and invested substantial resources into combating illicit tobacco. Despite these efforts, the black market has continued to grow. Tobacco-related organised crime has become a major law enforcement issue. Illegal tobacco stores continue to operate in numerous communities. Criminal networks continue to find ways to supply products that consumers clearly want to buy. The reason is straightforward. Enforcement can increase the risks associated with illegal activity, but it cannot eliminate the economic incentives that make that activity profitable in the first place.

History provides countless examples of this phenomenon. Whether the product in question is alcohol during Prohibition, illicit drugs, gambling, or any number of restricted goods, black markets emerge when strong consumer demand collides with restrictive policies and lucrative profit opportunities. The specific details vary from one market to another, but the underlying dynamics remain remarkably consistent. Demand persists, supply adapts, and enforcement struggles to keep pace. Public health advocates often acknowledge these realities when discussing other substances, yet many seem unwilling to apply the same lessons when discussing tobacco and nicotine.

What is perhaps most concerning is the way the debate is increasingly framed as a choice between supporting public health or supporting the tobacco industry. This framing oversimplifies a complex issue and discourages serious discussion about unintended consequences. Questioning whether current policies are achieving their intended outcomes does not mean supporting smoking. Asking whether excessive taxation may have contributed to the growth of organised crime does not mean wanting cigarettes to be cheaper. Raising concerns about the size of the illicit market does not mean abandoning public health objectives. These are legitimate policy questions that deserve careful consideration rather than reflexive dismissal.

The reality is that a black market accounting for the majority of tobacco consumption represents a profound challenge to the credibility of Australia’s tobacco control strategy. When most tobacco sales occur outside the regulated system, governments lose many of the tools they rely upon to influence behaviour. Product standards become harder to enforce. Tax collection collapses. Consumer protections weaken. Organised crime flourishes. Public health messaging becomes less effective. The very mechanisms intended to control the market become increasingly irrelevant as consumers and suppliers move beyond their reach.

Yet perhaps the greatest damage caused by this refusal to acknowledge failure is the erosion of public trust. People are capable of observing what is happening around them. They can see the proliferation of illicit tobacco stores. They can read reports about organised crime involvement in tobacco distribution. They can observe governments struggling to contain a market that appears to be expanding despite repeated enforcement efforts. They can see evidence that nicotine consumption is rising rather than falling. When experts insist that these developments simply prove the need for more of the same policies, many members of the public understandably become sceptical.

Trust is not maintained by insisting that policies are successful regardless of outcomes. Trust is earned when institutions demonstrate a willingness to evaluate evidence honestly, acknowledge mistakes when they occur, and adapt their approach when circumstances change. Public health has historically achieved some of its greatest successes because it was willing to follow evidence wherever it led. It was strongest when it remained open to questioning assumptions and revising strategies in response to new information.

The danger illustrated by the Croakey article is that parts of the public health establishment appear increasingly unwilling to do so. Instead of viewing the growth of Australia’s illicit tobacco market as evidence that current policies may need reassessment, they view it as justification for even greater escalation. Instead of asking whether incentives have been misaligned, they ask only how enforcement can be intensified. Instead of considering whether unintended consequences have become too large to ignore, they treat those consequences as proof that existing policies must be pursued with greater determination.

This approach risks transforming public health from an evidence-based discipline into an ideological project. Evidence-based policymaking requires a willingness to confront uncomfortable facts and reconsider assumptions when outcomes differ from expectations. Ideological policymaking begins with conclusions and then interprets every development as confirmation of those conclusions. The distinction matters because reality ultimately has the final say. No amount of rhetoric can change the fact that Australia’s illicit tobacco market has exploded. No amount of moral certainty can alter the incentives driving consumers toward cheaper products. No amount of enforcement can fully overcome the economic forces that have created one of the most lucrative black markets in the country.

Australia’s tobacco crisis should have been an opportunity for reflection, humility and learning. Instead, articles such as this suggest that many influential voices remain determined to avoid those conversations altogether. If every policy failure is treated as evidence that the policy should simply be implemented more aggressively, then meaningful learning becomes impossible. At that point, public health ceases to be guided by evidence and begins to resemble a belief system that cannot be challenged by facts.

The tragedy is that reality has already delivered its verdict. The only remaining question is whether those responsible for shaping tobacco policy are willing to listen.