The government wants to replace the distinctive colours of various brands with a uniform drab, olive green packet for all under legislation to be introduced to Parliament in July.
Brand names would appear in print dwarfed by health warnings and often gruesome colour images of the consequences of smoking, such as mouth cancer and gangrenous toes.
The government expects the so-called plain packaging law to make smoking less attractive to young Australians and further reduce the proportion of smokers within the population from the current 17 per cent. But since no other country has tried it, there is no proof it will work.
The tobacco industry has said it will sue for compensation if the plan proceeds, and has warned there could be unintended consequences - it argues that uniform packaging would be easy to counterfeit and lead to the market being flooded with illegal Asian tobacco, on which tax isn't paid.
British American Tobacco Australia (BATA), the Australian market leader, has warned it might slash prices to compete against the illegal product - a move that could encourage more Australians to smoke.
With high taxes aimed at dissuading smokers, a pack of 25 cigarettes retails in Australia for about AUS$16 (about 10.30).
BATA spokesman Scott McIntyre said yesterday: "If they keep pushing us down this path with this experimental piece of legislation, unfortunately it's going to end up in court, and it's likely to cost millions of dollars."
Marketing experts agree that Australia's tobacco giants - BATA, Philip Morris and Imperial Tobacco Australia - have a lot to lose from the plain packaging law.
The three have effectively been protected from competition for decades - tobacco advertising was banned from Australian television and radio in 1976, leaving outside brands few means of making themselves known in the Australian market.
Australian National University marketing expert Andrew Hughes said the plain packaging law would be more effective in driving tobacco giants offshore than in reducing demand for an addictive product.
He said: "It's removing a very important part of modern marketing, which is the brand itself, and these days, that's worth billions of dollars."
Opposition leader Tony Abbott will not say whether his conservative coalition will support the legislation until he sees the details. The government argues this reluctance is explained by BATA's donating $180,000 to the coalition last year.
Outspoken independent parliamentarian Bob Katter dismissed plain packaging as unwarranted interference in a legal product.He commented: "This is rapidly becoming the most restrictive society on Earth."
However, prime minister Julia Gillard appears to have enough support for the concept for it to become law.
BATA said documents obtained under freedom of information laws showed the government was prepared to spend millions of dollars fighting big tobacco firms in the courts to mandate plain packaging, yet had no credible proof such a move would cut smoking rates.
Other countries, including Britain and Canada, have considered similar restrictions, but none has passed the measures.