Under the new anti-smoking policy announced just recently, Australia will become the first country in the world to force tobacco companies to ban the use of logos and colourful designs on their cigarette packs.

The new anti-smoking policy will be effective July 2012. The promotion of cigarettes through ads, radio and television has already been banned. The new rules would also ban Internet-promotions, as well.

The cigarette tax has been increased by 25 per cent and it is immediately effective.

The Prime Minister, Kevin Rudd says, The new branding for cigarettes will be the most hard-line regime in the world, and cigarette companies will hate it.

Under the new stripped-down cigarette packs proposed by him, graphic government health warnings that include images of tobacco-caked lungs, would take the place of any logo or designs.

The tobacco company's name would be placed at the bottom of the pack, in tiny generic lettering - something the companies aren't too happy about, and they vow to fight the new policy in court.

Cathie Keogh, spokeswoman of Imperial Tobacco Australia says, Introducing plain packaging just takes away the ability of our customer to identify our brand from another brand and that's of value to us.

She also added that the company plans to take the matter to court. According to legal experts, the lawsuits over the new policy could cost the Australian government and the taxpayers, billions of dollars.

Under Australia's constitution, if the government basically takes someone's property rights including intellectual property such as trademarks, or devalues them to a significant extent, they have to provide compensation, said Tim Wilson, director of intellectual property and free trade at Australia's Institute of Public Affairs.

I'd be shocked if they didn't (pursue compensation), because if it happens here, it'll happen all over the world.

Mr Rudd who is running for reelection this year told reporters opposition from tobacco companies should not discourage the Australian government from doing the right thing.

Now the big tobacco companies are going to go out there and whinge, whine, complain, consider every form of legal action known to man, he said.

That's par for course. We, the government, will not be intimidated by any big tobacco company trying to get in the road of doing the right thing.

Nicola Roxon, health minister said the government is confident its new tobacco policy is legal and will hold up in court.

We have firm advice that this action can be taken. Our legislation will be very carefully drafted, she said.

The new policy will hurt retailer's business, and may boost the black market for cigarettes.

Mick Daly, national chairman of Australian supermarket chain IGA said the policy change is a lazy response pushed by some health advocates.

That amounts to a direct attack on approximately 16 per cent of Australians who have made legal and legitimate lifestyle choices.

In Australia, every year smoking is responsible for 15,000 deaths and is the largest preventable cause of disease and death there.