Tobacco excise taxes are to rise by 10% a year for the next four years.
Associate Health Minister Tariana Turia says this is in addition to the annual inflation-indexed increases in tobacco excise and follows a 40% increase in tax since April 2010.
Mrs Turia says the Government will increase the price of an average pack of 20 cigarettes to more than $20 by 2016.
The 2012 Budget also provides $20 million over the next four years for a new innovation fund - Pathway to Smoke-Free 2025 - for programmes to discourage young people in particular from taking up smoking and to help people quit.
This is to help create smoke-fee environments by investing in the design, development and promotion of innovative efforts to reduce harm from tobacco.
The first increase in the tobacco excise will take place on 1 January 2013, following annual increases on 1 January for a further three years.
Tariana Turia says the new tax increases will have a major effect in addition to earlier increases.
Mrs Turia says for every 10% rise in price, tobacco consumption falls by about 5%.
She admits the 2025 target is ambitious, but existing policies have New Zealand well on the way and will continue.