Global model maps future Australian wine exports

Tuesday, 20 August 2013

New research by the University of Adelaide and Monash University reveals how much the high-value Australian dollar (AUD) harmed the Australian wine industry in recent years, and how exports could grow if the recent AUD devaluation is sustained.

In a project funded by the Grape and Wine Research and Development Corporation (GWRDC), University of Adelaide School of Economics Professor Kym Anderson and Monash University's Dr Glyn Wittwer mapped data using a newly revised and updated model of the world's wine markets.

"Producers are well aware of the debilitating effect of the high AUD relative to the US$, UK Pound and Euro. However, our results suggest exchange rate changes during 2007-11 reduced super-premium wine prices in Australia by one-fifth, which was more than in any other Southern Hemisphere wine-exporting country," says Professor Anderson.

"We can also use the model to project wine exports over the next five years. Those prospects depend very much on both subsequent exchange rate movements and China's wine import growth."

Professor Anderson says that with the recent drop in the AUD, the Australian wine industry will be much better positioned to compete internationally, especially in China as its demand for wine imports increases.

"Wine consumption is forecast to increase faster than production in China over the next five years," Professor Anderson says.

"If Australia invests as much as other wine exporters in that market, and the AUD doesn't rise again, our results suggest China's share of Australia's wine export earnings could rise from 13% in 2012 to 20-28% by 2018," Professor Anderson says.

Dr Stuart Thomson, GWRDC Executive Director, says this research has offered an important insight into the Australian wine industry.

"This data about international wine demand and global exchange rates will help Australian wine businesses better understand future opportunities, which helps to support a competitive Australian wine sector," Dr Thomson says.

Professor Anderson presented preliminary results at the opening session of the Australian Wine Industry Technical Conference in Sydney last month, and a revised paper titled, A global macroeconomic perspective on the Australian wine industry, will be uploaded later this week at www.adelaide.edu.au/wine-econ/pubs/working_papers

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