How tobacco excise increases affect smoking behaviours in Australia

Australia has been at the global forefront in using higher cigarette taxes to curb smoking behaviours. This paper aims to utilise Australia’s precipitous increase in cigarette taxes (via its tobacco excise) to examine how it is affecting smoking behaviours across the population. Data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey are used to estimate individuals’ behavioural changes in response to rising cigarette taxes, with the analysis extended to detail household income quintiles and discrete age groups. In general, it is difficult to separate the effect of rising cigarette taxes with growth in anti-smoking sentiment, but it is evident that higher cigarette taxes work to reduce smoking behaviours, and that it affects different groups in different ways. Notably, financially constrained people in the lowest-income households are much more likely to quit smoking or reduce their smoking intensity in response to higher cigarette taxes than those in higher-income household, while younger people are becoming less inclined to start smoking and subsequently become addicted.