Global model maps future Australian wine exports
New economic research on Australia’s wine export markets has revealed the real cost of the recent high Australian dollar, but also suggests it could be time for some cautious optimism.
Undertaken by the University of Adelaide and Monash University, the research project mapped new and revised data to create an updated model of the world’s wine markets.
University of Adelaide School of Economics Professor Kym Anderson and Monash University’s Dr Glyn Wittwer led the research project, which was funded by the Grape and Wine Research and Development Corporation (GWRDC).
The research showed Australia’s super premium wine exports lost one-fifth of their value between 2007 and 2011, mostly as a result of the high exchange rate.
Professor Anderson said although the harsh effect of the high AUD relative to the US Dollar, UK Pound and Euro was common knowledge, he was surprised by the model results.
‘What they reveal is that, thanks to exchange rate movements, wine exporters lost competitiveness far more in Australia than in other Southern Hemisphere countries during 2007–12’.
The model was first created and released a dozen years ago to project the growth and structural changes occurring in the world’s rapidly globalising wine markets.
‘So much has changed in wine markets since then, in particular because of exchange rate movements resulting from the global financial crisis and the unprecedented growth of China’, he said.
The newly revised economic model also projects wine exports over the next five years, based on assumptions about future exchange rate movement and China’s wine import demands.
Professor Anderson said with the recent drop in the AUD, the Australian wine industry would be much better positioned to compete internationally, including in China as its demand for wine imports increases.
‘Wine consumption is projected to increase faster than production in China over the next five years’, he said.
‘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 per cent in 2012 to 20+ per cent by 2018.
‘That suggests some cautious optimism in the industry is warranted given the recent changes in exchange rates, which are making Australian producers more competitive not only in our home market and in China, but also in our traditional markets, particularly the US’.
Prof Anderson said the research presents three scenarios for the Australian wine industry by 2018.
The three different scenarios highlight how much the projected outcomes for different countries depend on changes in future exchange rates and in China’s consumption, production and imports.
‘The three alternatives show the big differences between projections based on varying exchange rate movements – one of the most positive being if the rate changes experienced during 2009–11 are reversed as is currently happening’, he said.
GWRDC executive director Dr Stuart Thomson said this research has offered an important insight into the Australian wine industry.
‘These results about international wine demand and global exchange rates will help Australian wine businesses better understand future opportunities, which helps support a competitive Australian wine sector’, Dr Thomson said.
Professor Anderson presented preliminary results at the opening session of the Australian Wine Industry Technical Conference in Sydney in July and a revised paper titled ‘A global macroeconomic perspective on the Australian wine industry’, is available at:
For more information contact Kate Harvey, GWRDC General Manager, firstname.lastname@example.org