Smoking rate

IBISWorld forecasts the smoking rate to fall by 0.09 percentage points in 2024-25 to 1.74%. The tobacco excise tax increases are based on average weekly ordinary time earnings (AWOTE). These changes are made twice a year, in September and March. Most recently, the tobacco excise was increased by 6.8% in September 2023 and by 2.8% in March 2024. This rise in the cost of tobacco products is expected to discourage people from smoking, reducing the smoking rate in 2024-25.

Until December 2013, the excise tax on tobacco was indexed to the consumer price index, preventing it from falling in real terms because of inflation. Previously, the index was readjusted twice a year, in February and August, to match the increase in the consumer price index over the previous six months. Since March 2014, the tax has been indexed to AWOTE. The shift towards indexing the excise tax to AWOTE is to prevent rising real incomes from reducing the effectiveness of the tax on discouraging smoking.

According to the Australian Institute of Health and Welfare, smoking rates are declining primarily because fewer people are starting to smoke rather than because of an increase in quitting. Strict government regulations, including a yearly 12.5% increase in tobacco excise taxes over the four years through September 2020, have made smoking more expensive and discouraged its uptake. This consistent tax rise has significantly decreased smoking rates in recent years. Public health campaigns, education about the dangers of smoking and regulations, including plain packaging and high tobacco taxes, have effectively deterred many individuals, especially younger generations, from ever taking up the habit. Also, the cultural shift toward healthier lifestyles and the widespread availability of smoking cessation programs have contributed to this trend. However, the reduction in smoking is more because of prevention than increased quitting rates. Recent government initiatives have included You Quit, You Win, Terrie's Tips and Don't Make Smokes Your Story. Overall, the smoking rate has declined over the past five years. IBISWorld forecasts the share of total household expenditure spent on tobacco to fall at an average annual rate of 0.12 percentage points over the five years through 2024-25.