Australia's tobacco lobby has employed an ex-gangland taskforce detective to investigate Melbourne retailers selling black-market cigarettes and commissioned a report that found the illicit trade has reached record levels.

The KPMG report, bankrolled by cigarette manufacturers and obtained exclusively by Fairfax Media, attributes the surge in illegal tobacco to Australia's high tax rates and the introduction of plain packaging in 2012.

Illicit tobacco products were freely available in Melbourne's west. Credit:Michael Clayton-Jones

International crime gangs also avoided an estimated $1.1 billion in taxes last year by smuggling tobacco through Australian ports, according to the research. But anti-smoking campaigners, including the Cancer Council of Victoria, have slammed the report as ''self-serving rubbish''.

''The release of the second tobacco industry-commissioned report into illicit tobacco in less than six months smacks of desperation. Australia has already introduced plain packaging with Ireland, NZ and the UK now saying they may follow suit,'' Cancer Council of Victoria chief executive Todd Harper said.