Cigarettes will be sold in plain, standardised packages carrying large, graphic warnings against smoking - and the brand name in small print - from 2012, under proposed new legislation.
The government also sharply raised taxes on cigarettes by 25% from midnight on Thursday, adding about two dollars ($1.85 US) to a packet of 30, with the proceeds ploughed in to healthcare.
"Cigarettes are not cool, cigarettes kill people," said Prime Minister Kevin Rudd.
"This will be the most hardline regime for cigarette packaging anywhere in the world," he added.
Rudd said Australia also planned new curbs on Internet tobacco advertising and would spend 27.8 million dollars on a "hard-hitting" anti-smoking campaign.
"The big tobacco companies will hate what we are doing," he said. "The government however makes no apology what for what we are doing - it is the right decision."
Imperial Tobacco Australia said it planned to challenge the plain packaging on the grounds that it would affect its profits, arguing that branding has commercial value.
"Introducing plain packaging just takes away the ability of a consumer to identify our brand from another brand, and that's of value to us," a spokeswoman told ABC radio.
"It really affects the value of our business as a commercial enterprise and we will fight to support protecting our international property rights."
One intellectual property expert said the move could cost taxpayers more than three billion dollars in compensation.
But Health Minister Nicola Roxon said the legislation would be carefully drafted to withstand legal challenges.
"The World Health Organisation makes it quite clear that this should be considered by countries, this type of action," she told ABC.
"We won't be put off by the fact that tobacco companies won't like this action. Tobacco companies didn't like it when advertising was banned. But this is the last remaining step that needed to be taken."
Tobacco advertising is outlawed in Australia, and smoking is also banned in most enclosed public spaces such as offices and restaurants.
However Rudd said some 15 000 Australians die of smoking-related diseases every year, and that tobacco use cost the country 31.5 billion dollars a year in healthcare and lost productivity.
Meanwhile neighbouring New Zealand also raised the price of cigarettes by 10% on Thursday, with further 10% rises to follow at the start of 2011 and 2012.
"This move will put the price of cigarettes and roll-your-own tobacco up enough to save hundreds of lives," said Associate Health Minister Tariana Turia.
Turia is also co-leader of the Maori Party, which aims to represent indigenous New Zealanders. About 40% of adult Maori smoke, double the rate for all New Zealand adults.
Source: AFP
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