Key Takeaways
- Australia has the highest gambling losses per capita of any country in the world, yet gambling remains the least regulated of the nation's three major vice sectors.
- While smoking rates and alcohol consumption have declined significantly over recent decades, gambling losses have hit record highs, reaching $31.5 billion in 2022-23.
- Soaring tobacco excise taxes have fuelled a booming illicit market, collapsing federal excise revenue by nearly 50% from its 2019-20 peak despite rising tax rates.
- All three sectors generate billions in government revenue and hundreds of thousands of jobs, yet impose a disproportionate share of Australia's health, justice and welfare costs.
Gambling, alcohol and tobacco occupy a unique and contested position in the Australian economy. They contribute billions in tax revenue, support hundreds of thousands of jobs and are deeply embedded in the nation's cultural fabric. Yet they are also implicated in some of Australia's most pressing public health crises, organised crime challenges and social harm.
The economic contributions are real. Gambling taxes, alcohol excise and the Wine Equalisation Tax collectively fund state and federal budgets. But the costs are just as significant. These sectors account for a disproportionate share of Australia's health, justice and welfare expenditure; from gambling-related financial distress and suicide to alcohol-fuelled domestic violence and tobacco-linked preventable deaths.
What makes Australia's situation particularly striking is the divergence in consumption trends. Smoking rates have declined sharply and alcohol consumption per capita has followed, driven by rising excise taxes, cultural shifts and public health campaigns. Gambling has moved in the opposite direction, with Australians losing a record $31.5 billion in 2022-23, equivalent to the entire Northern Territory's Gross State Product, and per capita losses roughly double those of comparable nations like the United States, United Kingdom and Canada.
This new white paper, written by IBISWorld Senior Industry Analyst Michael Doyle, examines how Australia arrived at this point and what the data reveals about where each sector is headed.
What's in the white paper?
This comprehensive analysis examines consumption trends, regulatory environments, societal impacts and economic contributions across all three sectors, drawing on the latest data from government agencies, parliamentary inquiries and industry bodies.
Gambling: Record losses, fragmented regulation
Australia's gambling market has undergone a fundamental structural shift. Electronic gaming machines — pokies — still account for the majority of losses, with Australia home to nearly 20% of the world's poker machines despite holding less than 0.5% of its population. But wagering has been the fastest-growing segment, with losses nearly doubling from $5.8 billion in 2018-19 to $8.4 billion in 2022-23, driven by the rapid expansion of online platforms and mobile betting apps.
The white paper examines how this online shift has amplified risks, particularly for younger men aged 18 to 34, and how the regulatory response has failed to keep pace. Despite a 2023 parliamentary inquiry recommending a complete ban on online gambling advertising, the Australian Government has yet to implement any formal policies in response. Gambling advertisements aired over one million times on free-to-air television and metro radio in a single 12-month period.
Key issues covered include:
- The fragmented state-by-state regulatory framework versus nationally coordinated approaches for tobacco and alcohol
- Western Australia's near-total ban on pokies as proof that reform is politically feasible
- The Northern Territory's conflicted role as both regulator and primary beneficiary of online wagering licence revenue
- The rise of illegal offshore gambling sites and unregulated prediction markets
- Casino regulatory penalties, including Crown's historic $450 million fine
- The structural dependence of state governments on gambling tax revenue — and why this creates a conflict of interest
Alcohol: Declining consumption, complex taxation
Per capita alcohol consumption in Australia has fallen 24.3% over the past 50 years, with 2023-24 recording the largest single-year decline since data collection began in 1960-61. The white paper traces how beverage preferences have shifted dramatically; from beer to wine and spirits, and increasingly toward ready-to-drink formats and zero-alcohol alternatives.
The analysis covers the complexities of Australia's alcohol taxation regime, which ranks among the most burdensome in the OECD, including the Wine Equalisation Tax's perverse public health outcomes and the government's recent decision to freeze excise indexation on draught beer. It also examines how alcohol advertising self-regulation continues to attract criticism, particularly around sport sponsorship and the exposure of young audiences.
Tobacco: High taxes, a flourishing black market
Australia's tobacco story is one of policy success and unintended consequences. The daily smoking rate has fallen from 24.3% in 1991 to just 8.3% in 2022-23, with Australia tracking toward its national target of sub-5% prevalence by 2030. Plain packaging, mass media campaigns, smoke-free policies and steep excise increases have all contributed to this decline.
But the strategy has reached a breaking point. With legal cigarettes costing around $45 for a 20-pack compared to illicit alternatives available for as low as $14, consumers have increasingly turned to the black market. The Australian Border Force reported a historic high in illicit tobacco seizures in 2024-25, with 2.53 billion cigarette sticks seized (a 320% spike from 2020-21) and an estimated $4.36 billion in duty evaded. Federal excise revenue has collapsed from a $16.3 billion peak in 2019-20 to a projected $7.8 billion in 2024-25.
The white paper examines the Laffer curve dynamics at play in tobacco taxation, the emergence of vaping and its regulatory challenges, and the organised crime dimension — including more than 200 arson attacks linked to tobacco wars across the country.
The broader policy challenge
Across all three sectors, the white paper identifies a common tension: governments that regulate industries they are simultaneously dependent on for revenue. In Victoria, the social costs of gambling were estimated at $14.1 billion in 2022-23, far exceeding the $1.9 billion the state collected in gambling revenue that year. Tobacco excise revenue has halved while the illicit market surges. And alcohol's estimated $67 billion annual social cost dwarfs its contribution to federal revenue.
The white paper argues that current policy settings are failing across the board, and that without meaningful reform, Australia will remain caught between the fiscal benefits and social costs of its most expensive vices.
Final Word
For anyone working in economic research, industry analysis, public policy, consulting, financial services or investment, understanding how these three sectors are evolving is essential. They sit at the intersection of fiscal policy, public health, consumer behaviour, organised crime and regulatory design. The decisions made in the next few years will shape Australian society for decades.
Download the white paper to access the full analysis, including IBISWorld's proprietary data on gambling expenditure by product, tobacco excise revenue trends, alcohol consumption shifts and state-by-state breakdowns of gambling's share of government revenue.
