The Australian tobacco market, valued at around AUD 18.98 billion in 2024, is projected to experience substantial growth, driven by the increasing preference for e-cigarettes. With the rising demand for cigarettes, the industry is expected to grow at a robust compound annual growth rate (CAGR) of 3.30% from 2025 to 2034. By 2034, the market is anticipated to reach nearly AUD 26.26 billion, reflecting not only a surge in demand among high-income consumers but also a significant increase among middle-income consumers.​

Market Overview

In 2024, the Australian tobacco market faced a slight contraction, with revenues decreasing by 4.7% compared to the previous year, amounting to approximately AUD 1.6 billion. This decline is primarily attributed to the government's stringent tobacco control measures, including high excise taxes and comprehensive advertising bans, aimed at reducing smoking rates.​

Surge in E-Cigarette Popularity

Concurrently, the e-cigarette segment has witnessed remarkable growth. Between 2019 and 2022–2023, current e-cigarette use among Australians aged 14 and over nearly tripled, increasing from 2.5% to 7%. Notably, usage among individuals aged 18–24 surged from 5% in 2019 to 21% in 2022–2023. This trend aligns with global patterns, where disposable e-cigarette sales have become dominant, rising from 24.7% to 51.8% of total sales between January 2020 and December 2022. ​

Impact of Government Policies

Australia's aggressive tobacco taxation policies, intended to deter smoking, have inadvertently fueled the illicit tobacco market. The high taxes have led to a surge in smuggling and illegal sales, with organized crime groups exploiting the demand for cheaper, unregulated products. This illicit trade not only undermines public health initiatives but also results in significant revenue losses for the government.

In response, the government has proposed measures such as permitting pharmacies to sell e-cigarettes over-the-counter without a prescription, aiming to regulate the market and curb illegal imports. However, this initiative faces resistance from major pharmacy chains concerned about safety and efficacy, highlighting the complexities of balancing public health objectives with practical implementation.

Market Outlook

Despite current challenges, the Australian tobacco market is projected to grow at a CAGR of 3.30% from 2025 to 2034, reaching an estimated AUD 26.26 billion by 2034. This growth is expected to be driven by the increasing adoption of e-cigarettes, particularly among younger demographics, and a potential stabilization of cigarette demand as smoking rates plateau. ​

Conclusion

The Australian tobacco market is at a pivotal juncture, influenced by evolving consumer preferences, governmental policies, and the dynamics of the illicit trade. While the rise of e-cigarettes presents new opportunities for market growth, it also necessitates careful regulatory oversight to mitigate public health risks and curb illegal activities. The industry's future will depend on the government's ability to implement policies that balance taxation, regulation, and enforcement, ensuring that both public health objectives and market dynamics are effectively managed.