Chris Luxon's National-led government has decided to axe the world-leading legislation as part of its coalition deals with minor parties ACT and New Zealand First.
The decision created global headlines given the magnitude of the previous government's plans to stop the sale of cigarettes to anyone born from 2009 onwards.
"That's bad news for New Zealand. It's bad for an international brand," Mr Hipkins said on Wednesday of the policy reversal.
"We've seen the government announcing that they are going to partly funding their tax cuts by increasing the number of young New Zealanders that smoke cigarettes.
"That is morally reprehensible. It shows that just two days into government they have already lost their moral compass."
Beyond the international interest, the decision has created a huge local backlash.
Health groups - led by the Cancer Society and Royal New Zealand College of General Practitioners - have called on Health Minister Shane Reti to abandon plans, dubbing the new minister "Dr Shane Cigareti".
New Zealand's Smokefree 2025 goal was introduced in 2011 by John Key's National government, with the aim of fewer that five per cent of Kiwis to be smokers by that year.
Cigarette-related deaths in NZ are estimated at around 5000 per year.
Smoking rates have consistently fallen over the past decade. Eight per cent of adults smoked daily in 2022, down from 9.4 per cent in 2021, according to the health ministry.
Jacinda Ardern's Labour government legislated to supercharge the Smokefree goals with three key measures: banning cigarette smoking to anyone born in 2009 or later, removing addictive nicotine content, and slashing the number of retailers that sold cigarettes by 90 per cent.
The proposal won worldwide plaudits from public health experts, and inspired the United Kingdom government to adopt a similar policy.
The incoming government says it decided to axe the laws as they were fearful of a black market, and the smaller amount of retailers would be a focus for crime.
"How does it ultimately get enforced?" Mr Luxon asked on Radio NZ.
"A 36-year-old can smoke, but a 35-year-old can't? ... That doesn't make a lot of sense."
Axing the Smokefree goals will also produce a tax windfall for the new government.
The tobacco excise tax contributes more than one per cent of the government's revenue, at around $NZ1.9 billion ($A1.7 billion) in 2022.
Independent research from the Universities of Melbourne and Otago estimate the policies would save the health system more than $NZ1.3 billion ($A1.1 billion) over more than a decade.
University of Auckland professor Chris Bullen, a lead researcher in the field, said he wanted to buy a one-way ticket out of New Zealand when he heard about the government's climbdown.
"That's going to condemn many, many people to ongoing suffering, disease and disability for years to come," he told The Detail.
"There's blood on their hands here of our political leaders. I'm shocked. I'm aghast."
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