Abstract
This project set out to improve our understanding of the economic and market consequences of supply and demand trends in – and of various shocks to – the winegrape and wine markets in Australia and abroad in recent years and prospectively to 2030. The project resulted in several times the promised outputs including 10 industry journal articles, 11 economics journal articles, 3 books, 2 chapters in other books, 4 large databases, 19 other publications, and 40 presentations at conferences and workshops in Australia and abroad. The outputs covered a wide range of issues including impacts of possible changes to alcohol consumption taxes, regional consequences of shocks, effects on competitiveness of recent and prospective real exchange rate movements, effects of developments in China, the evolving varietal distinctiveness of wine regions in Australia relative to the rest of the world, R&D’s role in Australia’s wine industry growth, and lessons from history for Australia’s latest wine industry boom-slump cycle.
Summary
The long-run growth of the Australian wine industry has been characterized by cyclical booms followed by long slumps in profitability. The length of those cycles from boom to bust and back to the next boom has ranged from 20 to 30+ years. The latest cycle was about 20 years, from the low prices in 1986 to the low prices in the latter half of the previous decade. A key question being discussed intensively within the industry at the outset of this project was: what is in store for the next two decades as growers recover from drought and adapt to water policy changes and the double threats of climate change and increasing competition from other wine-producing countries (due in part to the real appreciation of the AUD induced by the mining boom)?
The best way to assess market prospects is to develop pertinent empirical models of those markets, to calibrate them to the latest year for which the essential data are available, and to project them to a future year of interest. Both a national economy-wide model and a global model of wine markets were employed for present purposes. The first step was to update and expand available models and their databases. The global model was expanded to include 5 different wine quality types and two different grape types (premium and non-premium). To revise its database we updated, expanded and re-published our Global Wine Markets Statistical Compendium, which for the first time now disaggregates national wine markets by quality and provides information on consumer and import taxes for all the key markets. We were then able to undertake a wide range of empirical analyses.