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Monday, 6 September 1993
Page: 932

Senator VANSTONE (4.38 p.m.) —I move:

That in the opinion of the Senate the following is a matter of urgency:

The urgent need for the government to ensure the continuing viability of the wine industry as a developing exporter by abandoning its plan to increase the sales tax on wine by 55 per cent

The wine industry is a particularly South Australian industry, but it is contributed to very substantially by Victoria, New South Wales, Western Australia, Tasmania and even the Northern Territory, the ACT and Queensland. I have been to wineries in nearly all of these states and have enjoyed some of their produce. This industry is not peculiarly a South Australian industry; as I say, it is an Australian one.

  It has one other very special characteristic at the moment: compared with just about any other Australian industry, it is enjoying the most phenomenal increase in exports. For those who are not familiar with the details, I will provide some. In 1986 Australia exported 10 million litres of wine. In 1993 it has jumped to 103 million litres. The value of those exports in 1986 was $20 million. The value of those exports in 1993 is $289 million. As people like my colleague Senator Ferguson, who is here today, will tell you, that is one of the most dramatic increases in exports of any industry in Australia. Coming from South Australia, as does Senator Ferguson, I cannot resist saying that this was particularly contributed to by my state.

  Three-quarters of Australian wine is currently consumed on the domestic market. That should tell us that this massive move into exports has been perhaps the greatest public relations exercise for Australian industry that has ever been undertaken. It does not matter how much someone increases their exports in, for example, furniture. That is not going to go on every table around the globe. If someone increases exports in some sort of computer software, that is a very valuable sort of thing but it is not a public relations exercise that reaches the tables of individual people around the globe. What we have here is a fantastic public relations exercise. People can buy a little bit of Australia, take it home, put it on the table and enjoy it with their meal. If you like, bottled wine represents the spirit of Australia that one can purchase at the local wine store.

  With this phenomenal export increase, we find that those opposite want to increase the sales tax on this industry by 55 per cent; they want to jump it up from 20 per cent to 31 per cent without warning. Senator Sherry, who is not here, is the next speaker in this debate. He was telling this chamber the other day that he had consultations on this matter with the industry before and after the budget. I hope he takes the opportunity in his speech to tell us whom exactly he did consult with about this increase prior to the budget. The information the industry has which has been passed on to us is that the Minister for Primary Industries and Energy (Mr Crean) found out about this increase being imposed at 6 o'clock on budget night.

  Senator Sherry has just graced the chamber with his presence. I welcome him and invite him in his speech to list the winegrowers that he consulted with, the industry people that he personally consulted with, about this increase prior to the budget. That is what he is on record as saying.

Senator Sherry —Not about this increase.

Senator VANSTONE —Yes, indeed. We will check the Hansard on that. It has already been checked. I am not going to debate the matter with Senator Sherry at this time. I put that request to him. He has already signalled an intention to worm out of what he said the other day.

  If the government does not want to listen to what people on this side of the chamber have to say about the devastating effect that this tax increase will have on exports, I think we could turn to the Premier of South Australia—one of the last Labor premiers. He will not be there for much longer if Senator Ferguson and other South Australian senators have their way. If all South Australians had their way, he would be gone by now—if he had the guts to call an election. He turned the State Bank into a disaster. He turned the entire state into a disaster. Desperately clinging to power, he finally came to his senses and thought, `I have been sent down the chute by my federal colleagues. They do not care what happens in South Australia'. In relation to the most recent study on this matter which was released in South Australia last week, the Premier of South Australia, Mr Arnold, said that the study made it clear the federal government had made the wrong decision.

  I say to Senator Sherry that the Labor premier of South Australia is telling the Labor federal government that it has made a mistake. This is what it really comes down to. Who is the government going to listen to? I do not mind if it does not listen to us, it never does. That is why the country is in such a mess. Perhaps it should listen to Premier Arnold. He is, after all, one of theirs. He went on to say:

The results confirm our concerns—

that presumably means the entire Labor Party in South Australia; I will come back to that point—

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.

I presume `our concerns' means the concerns of the Labor Party in South Australia. But when I look over at those empty benches, even if I can imagine a South Australian senator sitting there, I cannot imagine that senator crossing this floor to support us, to support the Democrats who I understand will support this tax not being imposed—albeit with a caveat on it for 12 months—and to support, possibly, the Greens. If that is what the South Australian Labor Party thinks, let us see the South Australian Labor senators put their money where their mouths are.

Senator Newman —But they are not here.

Senator VANSTONE —Yes, they are not here. As my colleague Senator Ferguson interjected a moment ago, the reason Senator Sherry does not give a tuppence halfpenny about what the Premier of South Australia said is that, federally, the government has given South Australia away—and so it should; it is such a disaster and Premier Arnold has made such an absolutely irretrievable mess.

  If the government does not want to listen to what we say about an investment decline, it might like to look at an independent report which will be released this afternoon by KPMG Peat Marwick showing that investment decisions in this industry—the industry that has had such a dramatic export increase—will decrease by $400 million to $500 million. A massive export drive in the wine industry cannot be funded unless it is coupled with a successful investment program. We just cannot produce more grapes from the same acreage every year; we have to have more plantings, more equipment and more vats—the lot.

Senator Sherry —That's true. We will accept that.

Senator VANSTONE —With the greatest of respect, what Senator Sherry's government has been saying since the election and during the election would not be an indication that it knows what true is. We will see a reduction in investment of $400 million to $500 million—a downturn in investment of half a billion dollars. If for some reason the government does not like KPMG Peat Marwick, it can turn to the Elton Mayo School of Management in South Australia which has put out a paper entitled `The adverse effect of increased wholesale sales tax on the competitive advantage of the Australian wine industry'. It has three things to say that I would like to mention. First:

It is now well accepted that domestic market conditions can have a substantial impact on the international competitiveness of an industry.

We accept that. Most of us have read good parts, if not all, of Michael Porter's book. Someone on the government side has probably given members of the government a briefing of some sort. Senator Sherry would do well to acquire a copy for himself. The second point made by the Elton Mayo School of Management study is:

There is little doubt that reduced profitability and potential for profitability will result in scaled down investments in new vineyards and winery up-grades.

So it is not looking too good at that point. The two points made are: firstly, that the domestic market does impact on the capacity to export; and, secondly, this change will produce an investment downfall. The third point is probably the most important point—the point that the wine industry says the government just does not understand. It is:

. . . the Australian wine industry's competitive advantage is neither as secure or as strong as some would wish.

It is a fragile export market that we are exporting into. I commend the study by Byron Sharp to anybody who would like to read it.

  That brings me to today's article in the Sydney Morning Herald by Ross Gittins, reproduced in the Age. Mr Gittins basically says, `This is a con by the wine industry. It doesn't deserve to be saved from this tax. It has managed to increase exports under increased taxes before and it follows that it will be able to do it again'. With the greatest of respect to Mr Gittins, that argument is like the one run by the chicken when there were 20 chickens in the yard. Every time the farmer came in and took another chicken, the chicken said, `See, he proves it every time; he doesn't want to cut off my head'. He kept saying that until he was the last chicken in the yard. That is what Mr Gittins is doing; he is saying, `It has all worked before; it follows that it will continue to work'. It does not follow like that at all. The industry has tried its very best. It has burnt the midnight oil to accommodate the cost increases that came with an increase in sales tax in 1986—another unannounced increase in sales tax, which I had the pleasure of voting against at the time.

  The wine industry has accommodated that increase. Its members have done their best to say, `If this tax has to be doubled'—as it was in 1986—`we will take it in our stride, we will overcome that difficulty and we will nonetheless achieve'. They have done that, and their reward for that effort from this government—from Senator Sherry and his colleagues—is a 55 per cent increase in the tax yet again.

  I recommend to Mr Gittins and others who do not understand the fragility of the market we are moving into at such a rapid pace an article which is soon to be released in a wine magazine by the editor of that magazine and of Wine and Spirit International called Robert Joseph. Robert Joseph will explain to senators opposite, if they care to read the article, the fragility of the market into which Australian wine goes.

  It is a very sensitive market on two aspects—it is very sensitive on price and it is very sensitive on quality. Our reputation with respect to quality is almost second to none. We can produce better wines than the French. There is no doubt about that; we can do it, and we do it, with some regularity. We do not always do it, but neither do the French—I have drunk some pretty dreadful French wines in my life.

Senator Sherry —Now the truth is coming out. You have been drinking French plonk.

Senator VANSTONE —Not too much. Some people keep a narrow focus in their life and can never put things in perspective to see what they are competing with. As Senator Sherry well knows, those who do not understand their competition will never get anywhere. That is how the wine industry in Australia has done well—by sending people away to study overseas and take every bit of skill and ingenuity that is overseas and bring it back here to add to ours. There is no shame in the industry doing that, and there is no shame in anyone tasting imported wine—quite the contrary, the more informed Australian consumers are, the more they will realise how good Australian wine is. I encourage Australians to buy a bottle of overseas plonk. They will pretty soon rush back to the local product.

  We are exporting into a fragile market. Senator Sherry will undoubtedly want to say, `This is going to affect the domestic market; there will be a domestic market downturn.' Of course there will. What does he think happens from that? Investors will be scared off. Who, with a large amount of money to invest, will invest in an industry where 75 per cent of its sales area suffers a dramatic decline because of government intervention through an increased sales tax?

  The government admits that there will be some downfall in the domestic market. We could argue until the cows come home what percentage it will be. The crucial point is that the truth of the matter is that when there is a downturn in the domestic wine industry market, investment in the wine industry is reduced. There is no way that the industry can go on with its planned dramatic increase in exports unless it has that investment. The regional impact on grape growers and small wineries is that they will be put out of business, especially in my state but in some other regions as well.

  Why, one might ask, pick on the wine industry as opposed to the beer or spirit industries? I notice that Mr Gittins made some comment about this in his article. Whenever it is desperate, Labor drags out the equality issue and says, `Why should wine be treated any differently?'. There is every reason why it should be treated differently—it has been a responsible industry all along. The wine industry started the `Drink in Moderation' campaign. That campaign has been very effective. The wine industry is a responsible industry and does not deserve to be treated the same as others which, perhaps, in the past have not been as responsible.

  I note a survey done in 1989, and I do not know that our drinking patterns have changed that dramatically since then. It showed that, yes, more people drink wine than beer on a reasonably regular basis—that is true—but the percentage of those who drink at heavy or very heavy levels is dramatically higher for beer drinkers. Ask members of the medical profession whether the problem with alcohol abuse lies primarily with beer or wine and, if they are informed and honest, they will say that it lies primarily with beer.

Senator Sherry —Rubbish!

Senator VANSTONE —Senator Sherry says `rubbish'. I look forward to Senator Sherry, in his speech, drawing our attention to the statistics he relies on to show that what I have said is not the case.

  The wine industry has tried to do its best. It has tried to work with government and industry together investing in research and education. It has taken a socially responsible attitude towards the amelioration of alcohol abuse. It has worked as a team. When industry members are overseas, they work together. You do not see Orlando arguing with Penfolds arguing with someone else. They work as a team overseas to generically promote Australian wine and, they would argue, Australia.

  The nature of this industry is not like the beer industry, which is basically made up of international beer barons. Sure, there are the big four wine producers—no-one denies that—but there are 600 small winemakers and 5,000 independent growers, and these are the people who will be affected by this tax increase. Six hundred small winemakers, all employing a number of people and paying for some packaging, printing, labelling and bottling; and 5,000 independent growers. Basically, they are family operations, but nonetheless they employ people.

  If this tax increase goes ahead, the domestic market will take a dramatic downturn, which will cause a rush of new investment to other places—that is, it will put a stop to new investment in the wine industry, and that will put a stop to the export push.

Senator Newman —And jobs.

Senator VANSTONE —And jobs. The reduction in quantity at the domestic level, which the industry may or may not be able to handle in one sense, means that its total costs will go up. For the same costs, it will be producing less for the domestic market. That means that some may be encouraged into some sort of quality degradation to keep up with their export demand; they will cover costs by slightly lessening quality here and there. That is why the article that is about to be released by the editor of that wine magazine and Wine and Spirit International is important. We cannot afford to have the domestic producers, who also export, trying to pass on any of the costs or absorbing the cost by quality reduction in the export market. If that happens, there will be a very dramatic loss to Australia in exports and, at the very least, an absolute full stop to the dramatic export drive being undertaken by this industry.

  In conclusion, I remind Senator Sherry that I want to hear with whom he consulted prior to the budget. He told us the other day that he consulted on this matter of the wine tax increase, or did he mislead the Senate? He does not have too many planks to walk down. He has to choose between one or the other. I look forward to hearing that argument. I look forward to hearing him tell us how his government plans to support the wine industry and how he thinks it can possibly be saved in its massive export drive, if this increase is permitted to go ahead.