Budget 2012: Pack of 20 cigarettes to rise above $20

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Substantial tobacco tax increases in today's Budget will help vulnerable younger smokers who are the most sensitive to price increases, the Cancer Society says.

Smokers will pay at least $5 more for a packet of 20 cigarettes by 2016 after Associate Health Minister Tariana Turia announced tobacco excise taxes would increase by 10 per cent a year in each of the next four years.

The move would give smokers a financial incentive to quit and put young people off smoking, she said.

Once inflation increases were included, the price of the average packet of 20 cigarettes would climb dramatically from around $15 today to higher than $20 by 2016.

The price of an average packet of loose tobacco would climb to around $40 over the next four years.

Cancer Society tobacco control adviser Skye Kimura said evidence showed tobacco price increases affected smoking rates.

"We are rapidly moving towards a Smokefree Aotearoa with today's announcement of a substantial increase on the taxation of tobacco products,'' she said.

"We know the rate of smoking is higher amongst more vulnerable populations and they are the ones most sensitive towards price increases.''

Ms Kimura said tobacco companies targeted young people as their regular customers died off at a rate of 5000 a year.

"This vulnerable group is less likely to have disposable income so higher prices will make them less likely to start, and more likely to quit, smoking,'' she said.

The Cancer Society hoped a percentage of the tax revenue would go towards more support for people to quit smoking.

Today's tax hikes followed a 40 per cent increase in tobacco excises since April 2010. The first of the new tax hikes would take place on January 1.

"These tobacco tax increases will have a major impact, particularly as they come on top of three earlier tax increases since April 2010,'' Mrs Turia said.

"We know that for every 10 per cent increase in the price, tobacco consumption falls by about 5 per cent. Many smokers will quit and many more will reduce their tobacco consumption.''

Finance Minister Bill English said "it was now getting pretty expensive to buy a pack of cigarettes'' and he expected stock-piling to take place before each tax increase ticked over.

Government collected around $1.2 billion a year from tobacco taxes. This would climb to around $1.7 billion once the new levies were introduced.

The Government had a goal of making New Zealand smokefree by 2025.

Mrs Turia said this target was ambitious, and taxes alone would not stamp out smoking.

The Budget also allocated $20 million for a new fund, Pathway to Smoke-Free 2025, which would be used to create programmes to discourage smoking uptake.

Around 5000 New Zealanders die a year from smoking-related illnesses or exposure to second-hand smoke.

After the previous tax increases between April 2010 and January this year, record numbers of smokers sought help from smoking quitlines and agencies.