To me it seems odd that an opera company would be funded by a government health agency. In the United States such funding comes from the National Endowment for the Arts.
That was my first reaction - why the hell is a government health agency funding an opera company? Must be one of those Australian things.
I've never heard of a play cancelled because it depicted cigarette smoking. Smoking on stage is banned in a number of jurisdictions in the US - I know that's the case in Chicago and New York. Of course, there are plays that still call for characters to smoke, which leads to some rather absurd pantomiming by the actors holding unlit cigarettes.
, in fact, doesn't have any smoking, as far as I'm aware. The first act takes place in the plaza in front of a Seville cigarette factory, but that's about it. Furthermore, the story doesn't glorify smoking - the title character, who works at the factory, is hardly an admirable person. And it's unlikely that someone who is attending an opera is at the impressionable age where depictions of smoking might lead one to try it for the first time. Frankly, I doubt many of the 60-somethings attending the performance will leave saying "you know, Myrtle, smoking sure looks cool, I think I'll take it up right after my hip-replacement surgery."