Australia's biggest tobacco companies say the Government's decision to introduce plain packaging for cigarettes will only provide a boost for the black market trade.

But anti-smoking groups and health advocates have backed the move, calling it a groundbreaking policy.

In a statement, British American Tobacco Australia says it opposes the plan and is surprised the announcement has been made while a Senate inquiry into the issue is underway.

It says the move could bolster the black market tobacco industry, leading to lost tax revenue and more underage smoking.

Imperial Tobacco Australia spokeswoman Cathie Keogh says her company is now looking at its legal options.

"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," she said.

"It really affects the value of our business as a commercial enterprise and we will fight to support protecting our international property rights."

She warns the move may actually be to the detriment of public health.

"If the tobacco products are available in the same easy-to-copy plain packaging, it makes it much easier for counterfeiters to increase the volume of illicit trade in Australia, which is currently reported at about 12 per cent of the market," she said.

"That illicit product won't have or may not have the health warnings on it. It won't be subject to ingredients reporting."

Australia would be the first country in the world to force cigarette companies to use plain packaging.

From 2012, the companies will only be allowed to print their brand name in a standard style and there will still be graphic health warnings on the packaging.

The Government is also expected to announce a hike in the cigarette tax.

Health Minister Nicola Roxon says the legislation will be carefully drafted to hold up against any legal challenge.

"We have firm advice that this action can be taken," she said.

"Tobacco companies will hate the decision, but it will help people stop smoking."

"We believe this decision should have been taken a decade ago. The last government squibbed that decision but this government won't."

The Federal Opposition's Health spokesman, Peter Dutton, will not yet say if the Coalition will support the Government's plan.

Mr Dutton has attacked the timing of the announcement, calling Mr Rudd a "tricky politician".

"The Government's been sitting on this recommendation for 10 months and they release it today at a time when they need a mass distraction away from the policy disasters of the ETS [emissions trading scheme] and the insulation debacle and the school halls program," he said.

"And also, strangely enough, on a Newspoll weekend as well. This is Rudd Government spin at its best."

Anti-smoking groups thrilled

The chairman of the National Preventative Health Taskforce, Rob Moodie, says he is pleased the Government has accepted the group's recommendation.

He says plain packaging can reduce smoking to low levels with the help of other measures.

"It's part of a comprehensive package," Mr Moodie said.

"It has to be also included with good social marketing, restrictions on exposure to second-hand smoke, to taxation and pricing increases, but certainly the studies that have already been done show that people do respond to them."

He has also welcomed the Government's target of cutting smoking to 10 per cent or less of the population.

"If we can get to below 10 per cent - a million fewer smokers by 2020 - that would be a marvellous result," he said.

"Now that we're seeing such clogging up of our hospital systems with huge demand - a lot of it's resulting from smoking - this would in a sense help our health system all over."

Public health expert Professor Simon Chapman says tobacco companies are worried because they know the move will reduce smoking rates and their own profits.

"It's difficult to exaggerate the importance of this," he said.

"It will remove every opportunity of the tobacco industry to put colours, associations, anything that says to smokers, 'you will look fantastic with this'."

He says the move is an important world first.

"We know that from 30, 40 years' experience that whatever the tobacco industry lobbies hardest enough against is exactly what the Government should do," he said.

"The tobacco industry has lobbied harder against this than anything I've ever seen in my career, so that should be a lesson to all of us."

Professor Chapman does not believe the tobacco industry will follow through on threats to sue.

"Constitutional lawyers and trade lawyers have been crawling all over this proposal for many, many months," he said.

"All are united in the view that the tobacco industry does not have a leg to stand on."

Youth targeted

ABC radio's AM program spoke to a number of smokers about the proposal for no frills packaging.

"I stick to the same packet of cigarettes," one smoker said.

"I don't go into the shop and go, 'hmm, which one is going to look prettiest this week'. I have a particular brand that I smoke and have smoked for quite a long time and will continue to smoke those."

A fellow smoker shared his sentiment: "I don't think it's going to have a big impact. I think for smokers it won't make any difference at all."

The president of the Australian Medical Association, Dr Andrew Pesce, says established smokers are not the target.

"Hopefully it will [help prevent] children and young people from taking it up by decreasing the attractiveness of the packaging," he said.

"Hopefully that will have an effect on preventing people from taking it up in the first place."

The chief executive of the Cancer Council, Professor Ian Olver, also welcomed the government's move, describing it as groundbreaking policy.

"It's a very important move for the Government," he said.

"We applaud them because this actually makes Australia take the lead again in tobacco control.

"The reason tobacco companies are upset is they understand how effective this move will be."

He says the policy will bring huge benefits and cut cancer rates.

"It stops tobacco companies being able to attract young people with brightly coloured packs and it will stop them blunting health warnings. It's really the last form of advertising they have," he said.

Greens leader Bob Brown says his party will back up the Government if tobacco companies take up the fight.

"If they do that, the Greens will move to have the tobacco companies pay the cost to the public health system," he said.

"The tobacco companies, through their promotion of smoking, cost the nation billions of dollars, not least in the area of health, and the level of smoking hasn't decreased as much as health authorities were hoping.

"We'll be right behind the Rudd Government implementing this proposal."