Fears NZ's tobacco black market will get as bad as Australia's

New Zealand Customs has warned tobacco smuggling is becoming more organised, large-scale and sophisticated, with the Government pledging to stop the country following Australia into tobacco gangland warfare.

By Ellen O'Dwyer of RNZ

But a public health professor says while criminal involvement is a concern, there is no evidence of a dramatic increase in the size of the tobacco black market.

Chief customs officer for fraud and prohibition Nigel Barnes said seizures have been trending upwards over the past decade, though there have been fluctuations due to large busts.

In 2025, Customs seized 11.1 million illegal cigarettes and cigars, and 5.4 tonnes of loose tobacco, compared to 9.2 million illegal cigarettes and cigars, and 2.7 tonnes of loose tobacco in 2024.

In 2022, 4.8 million cigarettes were seized, and 3.6 tonnes of loose tobacco.

Barnes said illicit cigarette seizures in 2025 represented about $16 million in tax revenue evasion.

"That's just the stuff we've seized."

He said illegal cigarettes were selling here for between $20 and $25 in dairies, liquor stores and pop-up outlets throughout the country. A legal packet costs between $40 and $50.

"Obviously, there's a significant-size market in Auckland, but we've identified illicit tobacco distribution networks in regional centres as well, as far afield as the South Island and Gisborne."

Barnes said the increase in seizures partly reflected a $10.4m funding boost in 2022 and the establishment of a dedicated illegal tobacco investigations team.

But the involvement of transnational and serious organised crime groups concerned him.

"Tobacco smuggling into New Zealand is becoming more organised, large-scale and sophisticated."

Criminals were increasingly adding tobacco to their drug and money laundering operations, he said, and smugglers were masking themselves under shell companies.

Officials had seized drugs, firearms and other weapons, as well as large amounts of cash in investigations.

In 2023, Customs arrested three Malaysian nationals who travelled to New Zealand to smuggle tobacco into the country. When officials did some digging, they found out the trio had the same operation in Australia.

Agents also discovered a large illegal cigarette manufacturing operation in 2024 in Christchurch, where a man had imported loose tobacco under the guise of tea, setting up machinery to make individual cigarettes, boxes of cigarettes and cigarette branded labels.

Barnes said the trajectory of Australia's black market for tobacco was "particularly concerning" for New Zealand.

"We're in contact regularly with our Australian counterparts, and the trajectory of the illicit tobacco market in Australia is particularly concerning, mostly because New Zealand and Australia have the highest excise rates in the Asia-Pacific region. So if it could happen there, it could happen here, is a kind of a theory.

"The standovers and firebombs that are getting reported on in Australia are particularly concerning for us."

Barnes said Customs was doing everything it could to prevent New Zealand following Australia's path.

In Australia, the illegal cigarette black market has developed into a violent and fast-growing criminal market, to the point where rival gangs are fighting over, and threatening retailers to sell illegal products.

Criminal groups have committed more than 200 arson attacks at retailers, and at least three homicides since 2023, the Australian Criminal Intelligence Commission said.

It found that illicit tobacco linked to serious and/organised crime cost the Australian economy about AU$4 billion (NZ$4.8b) in 2023-2024.

Associate professor of criminal justice at Bond University, Dr Terry Goldsworthy, said the black market had infiltrated most parts of the country.

"It was problematic in just a couple of states – but we've now seen responses from almost every Australian state, trying to address it."

It triggered the formation of a federal Tobacco National Disruption group formed by the Albanese government, Goldsworthy said, led by the Australian Border Force and including every state's police force.

Goldsworthy said arson and standover tactics had caused concern in many communities.

"They'll go there and stand over the people and get them to sell their products, if they don't sell their products, then they take the action of either assaulting the people who work there, or they firebomb the place to take it out of business."

Steve Symon, who headed a ministerial advisory group on organised crime last year, said New Zealand risked following Australia's path into a serious criminal black market.

"What's happening there, will happen in New Zealand in 12-18 months, because our conditions are really similar – in terms of our willingness to pay high prices for illicit substances whether it be methamphetamine or cocaine, but the same thing with cigarettes."

He said organised criminal groups in Australia setting up shop here was also alarming.

"What we see in Australia – it's very likely, we'll see here."

He said illegal cigarettes were funding the operations of more serious, organised crime, and New Zealand needed to address the problem urgently.

"It's not just you getting a cheap packet of cigarettes, what you are doing is contributing to people who are incentivised to bring the worst types of crime into our community."

The size of New Zealand's illicit market was not clear, with studies backed by various groups estimating wildly different sizes.

One study from 2025, commissioned by Imperial Tobacco New Zealand and British American Tobacco New Zealand, claimed the size of the illicit market was at 25%, but health expert Chris Bullen said his research from 2023 showed it was likely between 5 and 7% of the market.

"It's an illicit trade, so it's covert activity, it's really hard to get a handle on what's going on."

The professor of public health at the University of Auckland said there was not clear evidence of a dramatic increase in the black market in New Zealand, and smoking rates were dropping among the population.

He said increasing the price of tobacco products had had a dramatic effect on driving down smoking and on people's health.

Customs seizures did not necessarily indicate the problem was getting worse, Bullen said, but that officers were getting better at intercepting product at the border.

New Zealand had a different tobacco environment to Australia, where vapes were illegal, and the country was closer to the Asian market, he said.

What he wanted was more investment in research monitoring the black market so trends over time could be measured.

"It's one of those things like wastewater monitoring for methamphetamine - it's a reasonable thing to do to try and track what's going on in the population, rather than just hoping that it will go away.

"I think it is wise for the government to be aware that across the ditch, it is a big problem."

Customs Minister Casey Costello said Customs' increased seizures signalled the country was facing a growing black market.

"We are very aware of what has occurred in Australia, where we have seen an explosion in the scale of the black market for tobacco and associated challenges with the organised crime groups driving that explosion.

"We cannot let that happen here."

She said the Government would use all the tools it could to disrupt organised crime groups.

"There are also further regulatory options within our tobacco control regime that can support our efforts to tackle illicit tobacco sales.

"I have asked for further advice from the Ministry of Health about how our regulatory regime can be strengthened to effectively manage the sales of illicit tobacco that has made it into New Zealand."