Illegal tobacco markets require that people still smoke. The current laws are in place to reduce the number of people who smoke.
So the illegal markets are fighting a losing battle here. Their market is shrinking. And as they take more market-share from lawful sellers, that only serves to hasten the decline, because those legitimate businesses are required to mask the illegal ones. Every seizure of illegal goods is a loss for that illegal business.
So I don't think we need to a change strategy here. The smoking industry is going to run out of breath, as long as we don't give them a break. I pretty wary of the people who are arguing in favour of easing off. One Nation in particular is basically just a lobbying magnet.