Australia on Thursday said it would become the world's first country to ban logos and branding on cigarette packets, sparking a furious response from the tobacco industry.

Cigarettes will be sold in plain, standardised packages carrying large, graphic warnings against smoking -- and the brand name in small print -- from 2012, under proposed new legislation.

The government also sharply raised taxes on by 25 percent from midnight on Thursday, adding about two dollars (1.85 US) to a packet of 30, with the proceeds ploughed in to healthcare.

"Cigarettes are not cool, cigarettes kill people," said Prime Minister Kevin Rudd. "This will be the most hardline regime for cigarette packaging anywhere in the world," he added.

Rudd said Australia also planned new curbs on Internet advertising and would spend 27.8 million dollars on a "hard-hitting" anti-smoking campaign.

"The big tobacco companies will hate what we are doing," he said. "The government however makes no apology what for what we are doing -- it is the right decision."

Imperial Tobacco Australia said it planned to challenge the plain packaging on the grounds that it would affect its profits, arguing that branding has commercial value.

"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," a spokeswoman told ABC radio.

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

One intellectual property expert said the move could cost taxpayers more than three billion dollars in compensation. But Health Minister Nicola Roxon said the legislation would be carefully drafted to withstand legal challenges.

"There will be very graphic warnings, there will be no colourful branding or logos," she said.

"This is the last vestige of advertising that remains in Australia for and we make no apologies about trying to close it down."

is outlawed in Australia, and smoking is also banned in most enclosed public spaces such as offices and restaurants.

However Rudd said some 15,000 Australians die of smoking-related diseases every year, and that tobacco use cost the country 31.5 billion dollars a year in healthcare and lost productivity.

Health lobbies welcomed the radical packaging initiative, saying it would help stop children experimenting with cigarettes.

"Research evidence confirms retail displays predispose children towards smoking, and make them more likely to experiment with tobacco products," said the Heart Foundation's Cameron Prout.

"Banning displays is an excellent public health initiative which will not only save lives, but also reduce the burden on the health system with less smokers presenting with cardiovascular disease and cancer."

Meanwhile neighbouring New Zealand also raised the price of cigarettes by 10 percent on Thursday, with further 10 percent rises to follow at the start of 2011 and 2012.

"This move will put the price of cigarettes and roll-your-own tobacco up enough to save hundreds of lives," said Associate Health Minister Tariana Turia.

Turia is also co-leader of the Maori Party, which aims to represent indigenous New Zealanders. About 40 percent of adult Maori smoke, double the rate for all New Zealand adults.