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Wine Economics
Introduction
The Australian wine industry has enjoyed spectacular export-oriented
output growth during the past decade. So too have some other Southern
Hemisphere producers, including Chile and South Africa. Meanwhile,
California and both Western and Eastern Europe have been upgrading
many of their vines to premium varieties. How long will this continue?
Will it be followed by a glut-induced crash, at least in terms of
prices paid to grapegrowers by wineries? What policy and industry
responses would reduce that risk of over-investment in vineyards?
What were the contributors to this extraordinary success? Is the
expansion sustainable in terms of its demands on water and other
resources? What are the relative contributions of factors affecting
activities prior to as compared with after the farm gate? What are
the lessons for other agricultural and value-adding primary processing
industries seeking to become more internationally competitive?
This program seeks answers to these and related questions from
the perspective of the Australian industry. It uses a combination
of analytical economic history (back to 1850 in Austraila's case)
and formal projections modelling to 2010. Lessons will be sought
from previous booms, while model simulation results will show the
likely effects of various possible developments in domestic and
export markets, and of alternative tax and other policy changes.
The Australian wine industry's exports increased from less than
$50 million to more than $500 million p.a. or from less than 5%
to more than 30% of production during the past decade, and now exceed
$1 billion. The industry's Strategy 2025 targets Australia to become
5% of the world's wine market in 30 years, up from less than 2%
in the early 1990s. Grapegrowers and winemakers have shared the
benefits of growth so far, with the real value of wine production
up 90% and that of winegrape production up 150% over the past decade
(compared with only a 25% increase for the real value of other farm
production). But that sharing may not continue: grape prices may
well fall as the large areas of new plantings in Australia and elsewhere
come into production in the next few years.
Key outcomes from the research from an industry viewpoint will
be comprehensive data bases on the Australian and global wine markets,
and two purpose-built models for analysing issues of concern to
the industry (a general-equilibrium model of the Australian economy
with three grape and wine types, and a partial-equilibrium model
of the world wine market which includes bilateral trade between
the 40 countries/country groups spanning the world). Both models
are used to examine likely effects of economic growth, structural
changes and reforms to wine consumer taxes, producer subsidies,
and trade taxes and subsidies in Australia and elsewhere. The results
of that research, and of work on the implications of the Australia-European
Union Wine Agreement, will be used as inputs into the next round
of multilateral trade negotiations under the WTO which began at
the end of 1999.
The Program Co-ordinator is Professor
Kym Anderson. (Prof Anderson is currently on leave to the World
Bank.)
Comments about the program are welcome, as are possibilities for
research collaboration. Please contact kanderson@worldbank.org
Program Publications
Links
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The University of Adelaide
