A lifelong user, he had started dealing in order to supplement both his habit and his age pension. At the time, I considered him an entrepreneurial anomaly, but these days more and more Australian pensioners are cultivating and/or selling illegal drugs. Some do it for the promise of regular visitors, others to fund hobbies, others to be able to afford to self-medicate. Most, however, seem to be happy to be on the wrong side of the law for the chance to top up their pensions with tax-free cash.

Brian Ogilvie, for example, was a 68-year-old pensioner living in a caravan in Bowen, Queensland, when he decided to deal marijuana in 2008. His wife had died 40 years previously and he'd been on antidepressants for three decades. The former fisherman and council worker had grown bored and isolated, so he opened his caravan for business. He treated his dozen or so customers as friends, serving them tea and sandwiches, before he was raided and charged in 2010. Before his bust, he'd been planning to save funds from his dealing to travel around Australia as a grey nomad.

"You can't live off the pension," 71-year-old Queenslander Alan Hogan told the police in July 2011. "I can't work. I had a shoulder reconstruction." After his Cooroibah property was searched, a sophisticated hydroponic set-up was discovered behind a cupboard. Police also discovered two kilos of cannabis, 40 plants and more than $1000 in a drawer. Hogan was sentenced to two years in jail, to be suspended after he'd served eight months.

Meanwhile, a month earlier, an 80-year-old man was arrested during a raid in Broome, WA. He'd been caught selling cannabis from the front door of his property. The court was told that Ahma Bin Haji Mohamed Noor lived on a pension of about $400 a week. The magistrate noted that the retiree had a history of similar offences and had been fined $600 only 18 months before. Noor was fined again, this time for $2000, and warned that if he got into trouble in the future, he'd be going to jail.

Last June, a 78-year-old woman living in a unit in Sydney's south-west was charged with selling cannabis from her home. A police raid had allegedly uncovered a large amount of cannabis and cash, scales and other drug paraphernalia.

A few months later, a couple of grey nomads in their mid-60s from South Australia were charged with trafficking. Police allegedly discovered 16 packages, each containing about 450 grams of cannabis, in a purpose-built compartment in the undercarriage of the couple's caravan. They allege the couple were planning to sell the product interstate.

More than a quarter of older Australians struggle financially. The Global AgeWatch Index 2013 is the first international league table to rank the welfare of people aged over 60. Australia trails behind Sweden, Norway, Germany, the Netherlands, Canada, New Zealand, the United States and the United Kingdom overall, and our ranking is diminished by the financial circumstances of our older people, just over a third of whom have an income less than half the country's median income. It's little wonder that some are peddling drugs in order to make ends meet.

It's Saturday morning on the main street of Nimbin and the footpath is alive with stalls of clothes, jewellery, jams and floppy hats. Buskers play raucous trombones and drums, barefoot toddlers run around and dogs wander in and out of cafes, nosing for scraps of food. Everyone, it seems, wants to sell you something, whether it's the skinny man flogging clay ocarinas or the young "Laneway Boys" hawking weed to tourists who arrive on buses several times a day.

As I walk beneath the awnings, I hear a high-pitched voice crying, "Cookies! Cookies!" and notice a plump older woman waving a small plastic bag in the air like a miniature flag. Her face is deeply lined, her grey hair is swept up into a roll, and she's wearing a loose orange-and-black caftan and a pair of rubber thongs. Her bag contains three round biscuits. "How much?" I ask.

"Three for 20, or six for 30."

We sit down on some nearby milk crates. Nanna*, now in her late 60s, worked full-time as a nurse in Sydney before retiring to northern NSW. Seven years ago, in order to supplement her pension, she began baking marijuana cookies and selling them two days a week to day-tripping tourists.

"Why only two days a week?" I ask her. "Is it because you get tired?"

She shakes her head. "It's not that. The Laneway Boys get the shits. They don't like me moving in on their territory."

A group of young Asian men shuffles past. Nanna jumps to her feet and waves the bag again. "Cookies!" she trumpets, in a voice so warm and maternal that they stop and enquire about her prices. As she quietly negotiates, I can see why the Laneway Boys feel so threatened by Nanna. Scoring from the Laneways requires handing cash to a paranoid and pimple-faced teenager, then following him down several back lanes, where the cash is handed over to yet another paranoid and pimple-faced teenager, who disappears beneath a house or onto the roof of a cafe and returns with your marijuana in a paper bag. Buying home-baked cookies on the main street from a woman who looks as harmless and gentle as your grandmother is an appealing alternative. It obviously works: a few moments later one Asian man is giving Nanna his money and she is whispering to him to hide the purchase in his jacket pocket before the coppers spot them.

As she sits back down I ask her if she's ever been arrested. She brushes a stray grey tendril away from her face and nods. "I've been raided three times and busted twice." Most recently, in 2011, she was fined $365 and given a two-year good-behaviour bond.

"But that still hasn't stopped you?"

She smiles and shouts, "Cookies!" to three passing people so pale I wonder if they are albinos. Nanna says she doesn't grow the cannabis, but sources it through a local grower. She's never been a recreational user. ("Oh, I had a toke or two when I was 19, but didn't everybody?") Instead, she eats half of one of her own cookies every night - and has done so for the past seven years - for relief from arthritic pain and to help her sleep.

The albinos are now in a huddle nearby and are glancing back at Nanna. I ask her how much money she makes in a week and she replies, "Depends on the weather and the time of year." As I watch $10 notes flutter between pale hands, she adds, "Roughly between $100 and $600 for the weekend."

The albinos approach and a discreet deal is done in a matter of seconds. The cash disappears into Nanna's bra and the cookies are sequestered in a buyer's bumbag. As the albinos leave, Nanna warns them, in a voice reminiscent of the caring nurse she once was, "Remember, it takes an hour to kick in. And don't drive a car, all right? It's far too dangerous!"

In Byron Bay there is a gift shop filled with candles, tie-dyed saris, feathered dreamcatchers and Balinese bells. Towards the back, you'll notice a small door ajar. If you nudge it open you'll see a small, enclosed verandah cluttered with boxes of stock, a desk littered with papers and plastic lunch bags filled with marijuana. You'll probably also spot a balding man named Lotus*, whose silver hair and beard make him look like a well-tanned Gandalf. He'll usually be perched over the desk, weighing up buds or trimming stalks from dried plants.

Today he's sitting on a towel on the floor, trying to salvage stock: sheets of fluorescent smiley-face stickers that got wet during last night's storm. The tin roof is still leaking and the tiny area smells like damp dog fur.

Lotus looks up and gestures at me to take a seat. As he continues to dry and stack the stickers, I ask him how long he's been selling pot in the back room of his legitimate retail business. He pauses and pulls on his beard. "About 10 years," he replies.

"Do you think you'll ever stop?" I ask. "I mean, as you get older?"

His lips curl into a cheeky grin and he shakes his head. "I can't ever see myself stopping, no."

Now nudging retirement age, he began smoking weed when he was 17 and suffering from severe arthritis. Within a year he was symptom-free and playing touch football every weekend.

I notice a bag full of marijuana sitting on the desk. "How much do you charge for a bag of this?"

"Two [hundred and] eighty for an ounce," he says. "Or ten dollars a gram."

He explains that he buys the weed from a local farmer, and is also involved with two companies in Thailand to develop alternative seed stocks for the hemp food industry and for hemp fibre production. He makes two trips a year to confer with his overseas colleagues.

Lotus tells me the main reason he sells pot nine hours a day, seven days a week, is to fund his research into the medicinal potential of marijuana. He estimates that he sells about 40 per cent of his product to recreational users. The profits allow him to give away the remaining 60 per cent to sufferers of cancer, arthritis, Parkinson's disease and multiple sclerosis. "At the moment, I'm developing a massage oil with a very high THC level to use on sufferers of cerebral palsy." THC is tetrahydrocannabinol, the main psychoactive ingredient found in the cannabis plant.

When I ask Lotus if he has ever been busted, he rolls his eyes and nods. "The last time was about two years ago. I got a 'section 9' [good-behaviour bond] and had to enter into a three-month merit course." The program involved regular urine testing as well as education on the long-term effects of drug abuse. "During that time, my blood pressure went through the roof! My arresting officer reckoned I wouldn't make the three months, but I did." And how soon was it before he was back in the shop, smoking and dealing dope on a regular basis? "About a week."

Lotus tells me a story about a pensioner named Chicken George*, who retired from his council job in Coffs Harbour in the late '90s and moved to the Byron Bay area. Chicken George soon realised he had two problems: a growing taste for marijuana and an inability to live well on the pension. "At the start of every winter, he'd buy up a few kilos of weed and then have a mate - who owned a trucking business - remove the wheels of his van and store the dope in the tyres. Chicken George would then drive up to Cairns on his own, check in to a caravan park and spend two months dealing there, which funded his lifestyle for the rest of the year." Lotus adds that Chicken George did this for several winters, without being arrested, until his death seven years ago at the age of 66.

"I do have one rule, though," says Lotus, "and so did Chicken George. We don't sell to minors, no matter how much they offer to pay."

One of the most recent trends among retirees, primarily on the Gold Coast, is to on-sell prescription drugs such as the painkiller oxycodone (nicknamed "hillbilly heroin" and usually sold as OxyContin) to youths who like to mix them with alcohol. Between 2009 and 2011, for example, more than 580,000 taxpayer-funded scripts were approved in NSW for OxyContin and similar opiate painkillers, such as OxyNorm and MS-Contin. Older people generally find it easier to get a doctor to prescribe these drugs, and pensioner subsidies on those prescriptions ensure a tidy profit. A $34 script for OxyContin yields a box of 20 tablets, which can then be sold on the black market for as much as $50 each. With further discounts to pensioners, the box can be bought for as little as $6 - and then be on-sold for $1000.

But it's not just the trafficking of cannabis and pills that provides financial assistance for Australia's ageing. In 2008, a 74-year-old man from Sydney was arrested on charges relating to the dealing of meth-amphetamine, also known as ice and crystal meth. He and one of his co-accused, a 67-year-old man from Macquarie Hills, were allegedly the kingpins of one of the largest trafficking operations of the drug in NSW. Police said the drugs they seized had a street value of $500,000 and were the equivalent of 10,000 single doses.

On a sunny afternoon in Sydney I have lunch with Don*, an 83-year-old chemist who's been on a weekly retainer for the past five years with a major Australian bikie gang. His only job is to develop alternative molecular structures for the production of crystal meth, ones that can evade the ever-changing federal laws.

We meet at an outdoor cafe, just around the corner from his unit in leafy Killarney Heights. His hair is cloud-white and styled into a curly pageboy cut and he's sporting a black eye and bandaged wrist from a recent fall at home. Even though he's apparently unsteady on his feet these days, Don refuses to use a walking stick, let alone a Zimmer frame. With him is his friend Snapper*, 50, the middleman between Don and the bikie gang. Snapper's secondary, legitimate business is a pizza shop in Sydney's west.

In a soft, child-like voice, Don remarks that it's impossible to make money in Australia by cooking up meth these days. "Too many taxes [on the precursor drugs] and too much bureaucracy."

"The chemicals are hard to get," Snapper adds. "I mean, on an industrial level." Snapper has lost some of his front teeth and I have to lean forward to hear him. "In the old days we used to be able to buy 200-litre drums of benzyl methyl ketone for fuck-all ..."

"And then all of a sudden you can only get 10-mil bottles!" interrupts Don, horrified.

For a few minutes, Snapper and Don forget I'm here and argue like an old married couple over the correct names of various chemical combinations they're experimenting with, including those concocted from a kangaroo-tanning product derived from ox blood.

"No," says the older man, shaking his head. "It's phenylacetic. I should know!"

Don explains that he flies to China three times a year, buys precursor chemicals for a fraction of the Australian price and on-sells them to another international destination. They eventually arrive in Australia through a covert operation he's not willing to discuss.

"So how does it all work?" I ask. "I mean, between you and Snapper and the bikies? Who's in charge?"

The two men exchange glances. "There's only one law," says Don. "Whoever has the money makes the rules."

Snapper lights a rollie and tells me that recently a Lebanese gang tried to move in on Don. They, too, offered him a generous retainer in return for "chemical consultations". When members of the bikie gang discovered what "the Lebs" were up to, they directed two of their girlfriends to beat up the interlopers, which they did - right in front of the pensioner. The only problem was that the bikie chicks then moved in with Don for a few days, polished off his whisky and used up all of his hospital-prescribed Xanax, Valium and morphine.

Developing alternative strains of crystal meth is not Don's only preoccupation. "I've also experimented with diet drugs, synthetic skin ..."

"What are the other challenges when manufacturing meth," I ask them, "besides sourcing the chemicals?"

Don begins. "It takes three people a week to cook one batch up ..."

"Glassware," overlaps Snapper. "Sometimes we buy it second-hand from an internet firm ..."

"Yes, but even second-hand glass has to be registered with the government," adds Don.

Snapper sighs and rubs his two-day growth. "But it's a code of practice, not a law. Nothin' we can't deal with."

Snapper tells me that the reason Don was freed from remand in Long Bay jail a few years ago was because he'd become too popular with much younger inmates. "He was like an old grandfather teaching them all how to cook. The screws got so mad they had to kick him out before he totally corrupted them all!"

As Don rummages in a shopping bag, I ask him if ever uses the drugs he is obviously so skilled at developing. He shakes his head and continues rummaging. "So is it the money?" I add, wondering aloud why he'd risk so much to assist an infamous and dangerous bikie gang. He laughs and pulls out a notebook. "The money's good, but that's not all."

"Well, what is it then?" I persist. "The company? The sense of risk?"

He looks at me directly with his good eye and hands me his business card: "Don Miller: Consulting Chemist; Chemical Analysis; Custom Synthesis." He grins and places a plump hand on mine. "It's to satisfy my boundless curiosity."

Lives Lived Well is a Queensland not-for-profit organisation that supports people struggling with addiction. Its chief executive, Mitchell Giles, believes that Australians' idealisation of a peaceful retirement belies a raft of problems that today's elderly face, including isolation, depression and stress. "These factors can strongly increase the likelihood of older people misusing alcohol or other drugs as a coping mechanism."

Not only are many retirees trafficking drugs for financial reasons, some are also becoming regular users of the products they deal. Figures from the Australian Institute of Health and Welfare, reported in The Courier-Mail, show that between 2003-4 and 2011-12 there was a 321 per cent increase in amphetamine use among Australians 60 years or older, while treatment for cannabis use among the over-60s increased by 231 per cent.

If these statistics seem to have come out of the blue, we'd do well to remember that many of today's pensioners are yesterday's hippies: former Vietnam War protesters, alternative-lifestyle practitioners, flower children, anarchists. The generation that came of age during the '60s is either past retirement age or rapidly approaching it. During the '70s, these same people enjoyed the largesse of a generous Whitlam government: free tertiary education, various social services, and dole payments that they could actually live on.

During the '80s, many baby boomers were enticed into more conventional lifestyles, had families and settled into the security and comfort of middle age. It's not a generation accustomed to making sacrifices or "going without". It is also, paradoxically, the generation that began, and continues to fuel, the self-help industry. Put the two together and it's a perfect storm.

This older population is already putting a strain on our hospitals, aged-care services and pensions, with economists predicting an escalating financial crisis. What many people have not predicted, however, is that with more and more elderly Australians appearing, and reappearing, in court for issues related to illegal drugs, our already-full prisons - and prison hospitals - will be in danger of becoming crowded with ailing grandmas and grandpas.

During his twilight years of smoking and dealing cannabis, my father spent his extra tax-free cash on improving his lifestyle. He invested in a rowing machine, a racing bicycle, a surfboard and a wetsuit. He bought health food in bulk from a co-op, purchased plane tickets to visit friends and relatives interstate, and picked up new cymbals for his treasured drum kit - acquisitions that kept him healthy and independent until the ripe old age of 80.

When I think of the last, happy decade of my father's life, I'm reminded of a piece of graffiti scrawled on the wall in the back room of Lotus's place in Byron Bay. It's a quote by the 13th-century Persian poet Rumi: "Out beyond ideas of right-doing and wrong-doing, there is a field. I'll meet you there."

This is an extract from Griffith Review 45: The Way We Work, published on July 23.

* Names and locales have been changed.