Objectives This study aimed to examine the impact of smoking on productivity in Australia, in terms of years of life lost, quality-adjusted life years (QALYs) lost and the novel measure of productivity-adjusted life years (PALYs) lost.

Methods Life table modelling using contemporary Australian data simulated follow-up of current smokers aged 20–69 years until age 70 years. Excess mortality, health-related quality of life decrements and relative reduction in productivity attributable to smoking were sourced from published data. The gross domestic product (GDP) per equivalent full-time (EFT) worker in Australia in 2016 was used to estimate the cost of productivity loss attributable to smoking at a population level.

Results At present, approximately 2.5 million Australians (17.4%) aged between 20 and 69 years are smokers. Assuming follow-up of this population until the age of 70 years, more than 3.1 million years of life would be lost to smoking, as well as 6.0 million QALYs and 2.5 million PALYs. This equates to 4.2% of years of life, 9.4% QALYs and 6.0% PALYs lost among Australian working-age smokers. At an individual level, this is equivalent to 1.2 years of life, 2.4 QALYs and 1.0 PALY lost per smoker. Assuming (conservatively) that each PALY in Australia is equivalent to $A157 000 (GDP per EFT worker in 2016), the economic impact of lost productivity would amount to $A388 billion.

Conclusions This study highlights the potential health and productivity gains that may be achieved from further tobacco control measures in Australia via application of PALYs, which are a novel, and readily estimable, measure of the impact of health and health risk factors on work productivity.