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Thursday, 2 September 1993
Page: 882


Senator COONEY —by leave—I was wondering whether Senator Tierney could adopt the same course. I would accept whatever Senator Kemp and Senator Tierney incorporate in this respect.

  Leave granted.

  The documents read as follows

The South Australian Centre for Economic Studies

(A Joint Centre of the University of Adelaide and the Flinders University of SA)—Telephone (08) 303 5555

P.O. Box 125, Rundle Mall, SA 5000

IMPACT OF WHOLESALE SALES TAX ON WINE—1993 BUDGET

EXECUTIVE SUMMARY

An increase in the wholesale sales tax of wine from 20 per cent to 31 per cent will result in retail price increases of at least 9 per cent. The increase in the wholesale sales tax will have the following effects:

Displace about 15 million litres of wine in Australia produced from non-premium wine grape varieties. It is estimated that about 8.8 million litres of this wine would be sourced from grapes grown in South Australian vineyards. Premium wine grape varieties displaced from domestic wine consumption would be produced into wine suitable for export markets.

Exports of Australian wine are constrained by the availability of premium wine grapes. Currently, about 50 per cent of Australian wine is sourced from other than premium variety wine grapes. The wine produced from these grapes is not in demand in our export markets.

Exacerbate the economic depression in the irrigation regions of Australia and in the Riverland area of South Australia, in particular. About 48 per cent of Australia's non-premium wine production is sourced from the Riverland. In addition, about 70 per cent of Riverland wine grape production is from the production of non-premium wine grape varieties.

Reduce the international competitiveness of Australian wine on the export market because of the increased costs of production associated with a lower level of production. It is through the production of wine from non-premium grape varieties for the domestic market that significant economies of scale can be obtained in production and packaging that enable Australian wine to be produced at a competitive cost on world markets.

The growth in exports in Australian wine since the mid 1980s can be attributed to:

the dramatic increase in the production of premium wine grapes that has occurred since 1986,

the devaluation of the $A relative to the currencies of other wine producing countries since 1985, and

cost efficiencies in the production of Australian wine that have been obtained through major rationalisations amongst wine companies.

Reduce the profitability of the wine industry and therefore discourage investment that would have occurred in new vineyards.

A loss of employment and associated increase in the incomes of the wine producing states from reductions in investment in vineyards and reduced expansion plans in future years for wineries. In addition, lower incomes for grape growers in the irrigated regions are predicted.

A decline in profitability for small wineries who face higher marketing and distribution costs if they sell product displaced from the Australian market overseas.

THE PREMIER OF SOUTH AUSTRALIA

State Administration Centre, Victoria Square, Adelaide SA 5000

MEDIA RELEASE

PREMIER LYNN ARNOLD

September 1, 1993

WINE TAX STUDY SHOWS DROP IN DEMAND AND EXPORTS

Premier Lynn Arnold today released an independent analysis of the impact of the Federal Government's decision to increase taxes on wine.

Mr Arnold said the study made it clear the Federal Government had made the wrong decision.

`I urge Prime Minister Keating to read this report and reverse his decision on wine', the Premier said.

The Premier today wrote to the Prime Minister and sent him a copy of the SA Government study.

The study, completed by the South Australian Centre for Economic Studies, makes three key findings.

*  Any increase in wine tax will reduce the demand for wine both in the short and long term, by up to 13 per cent.

*  The international competitiveness of Australian wine on the export market will be significantly reduced because of increased costs—with estimates showing a 16 per cent increase in the cost of producing a litre of wine due to reduced production and increased cost overheads.

*  Regional economies, including the Riverland stand to lose millions of dollars through a drop in demand for non-premium wine grapes.

The study, is the first of the State Government's $250,000 research program into the impact of the tax on all sectors of the community.

Speaking at the Rotary Club of Adelaide today, Mr Arnold said the study clearly showed why the wine tax increase was wrong.

`The results confirm our concerns that the Federal Government will not gain income from the move, rather it will cause serious disruption and downturn in an industry just beginning to make its impact on our export horizon', Mr Arnold said.

`Recent studies into South Australia's economy identify the wine industry as one of our State's vital industries, capable of taking on the world with product that is the envy of many other wine producing countries and regions.

The Federal Government has a responsibility to carefully consider the impact of their policies on all regional economies.

The increase could take more than $380 million from the industry over the next four years.'

Mr Arnold said South Australia produces approximately 60 per cent of Australia's wine. While exports were increasing rapidly, 75 per cent of all wine was consumed by the domestic market.

He said the wine industry was aiming to achieve $1 billion of wine exports by the year 2000 and that this would require an estimated $1.2 billion of new investment in vineyard and winery expansion.

`The increased tax will severely undermine future investment decisions. We will not stand by and let this have a ruinous effect on our State', the Premier said.