Wednesday, 9 December 2020
Wine Australia Amendment (Label Directory) Bill 2019; Second Reading
In my electorate of Indi, grape and wine production is a major industry, employing hundreds of people directly and thousands across our broader tourism sector. Our five wine regions of King Valley, Alpine Valley, Beechworth, Rutherglen and Glenrowan are some of Australia's best and well known. With fires and then the pandemic shutting down the restaurant and tourism trades, they have had a very tough year.
This bill makes a straightforward and welcome reform to protect the integrity of our wine exports sector. I support this legislation because it will help secure the future of the wine sector in Indi. This bill establishes a wine export label directory, a public-facing online database of all Australian wine labels for export. It empowers Wine Australia to establish and maintain a directory of labels that are attached to great products such as wine intended for export from Australia. This is a response to calls from the sector to strengthen our export regulatory system to stop the proliferation of copycat labelled wines. The directory will allow winemakers to search the database to easily see where other labels may be seeking to trade-off their intellectual property so they can pursue civil action against copycat exporters.
Indi's winemakers know that protecting our hard-earned reputation for quality is critical for the sector to continually prosper. But they equally know that this issue is not the biggest issue facing them and that, if we are to continue to make the world's best wines in north-east Victoria, we need a concerted strategy from our government. Two key challenges to the long-term viability of the sector stand out. The first is the increasing risk of bushfires. In the 2019-20 fires, the north-east wine sector suffered $140 million worth of damage from smoke taint. We've heard other speakers today talk of this, and in my region it was an enormous problem. Of the 25,808 tonnes of grape on the vine prior to harvest, only 69 per cent of that was picked. The farm gate value of the harvest prior to the bushfires was $36 million and, as a result of the damage, that fell to $13 million—one-third of the original value. The bushfire royal commission found that, in the future, Australia will face increased frequency and severity of bushfires as a result of a heating climate. This climatic disruption poses a significant threat to the viability of viticulture in our region. If we see catastrophic smoke taint events every 10 years or even five years it fundamentally changes the business model and viability of our producers.
The second key challenge is the uncertain trade outlook. I want the use this opportunity to sound the alarm about the impact of China's tariffs on our grape growers and wine producers. Last week, I emailed all the grape growers in Indi asking them how the announcement of significant tariffs on Australian wine from the Chinese government would affect them. Some of the responses I received are cause for serious concern. One winemaker near Mansfield told me:
We've had a couple of orders cancelled over the last 3-4 weeks as a result of the trade war. Our importer was told in face-to-face meetings with officials in Shanghai that they would not be able to import any more wine from Australia—they were given 2 days' notice of this ban being put in place. This happened in early November. We don't expect to sell any more wine into China for the next 12 months and it was looking like we would sell wine worth around $120-150k this financial year.
Another grower near Violet Town told me:
We have had a long-term relationship with a winery in the Macedon Ranges which has purchased the majority of our grapes each year. On Monday, following the tariff announcement the winery informed us that they can no longer purchase any of our Shiraz grapes as the majority are exported to China. This will significantly impact our business as it our main grape variety and there is little chance of finding a new home for the grapes as there will be many other growers in the same position. Our Shiraz are now likely to be left on the vine to rot and we will have to make a decision to either keep maintaining the vines until a market is available or pull them out.
From a winemaker in the King Valley:
We could be severely impacted by the tariffs if those that cannot get their wine in to China are not able to find new export markets and have to sell their wine back in the domestic market. One way for these companies to move their excess stock would be for them to offer very good prices to the chain outlets and restaurants—two of our biggest markets and I would suggest for most wineries in Indi, this would be the case.
This situation would cause increased competition for shelf presence and could cause a situation where we would have to fight on price to keep shelf space going forward. Not ideal after the year we have just had or for future sales at usual pricing.
Finally, from another King Valley winemaker:
As we are all aware, the impact of this on the wine sector broadly will be very significant. Due to limited China exports the local sector will be less directly impacted in the short-medium term, however I expect the knock on impacts on the local sector to be more significant.
Many producers who do export to China will now find that with tariffs their product will be priced out of that market and will therefore need to look at shifting product into alternative markets - both export and domestic.
Given China export volumes, this will inevitably result in a large oversupply, which in turn will place significant downward pressure on prices, this too has short and longer term impacts. Whilst the industry will simply need to ride out the short term price pressure, in the medium term if access to the Chinese market takes years to resolve then the risk is we will see a wholesale devaluing of Australian wine.
Australian producers, through a focus on quality have been very successful in growing both volume and price point into China and achieved a shift in the perception of Australian wine more broadly - it would be devastating if this is reversed.
Quite clearly, these responses show the seriousness of the challenges our wine sector faces on the international trade front, and I'm using this opportunity in this House to call on the government to move quickly to help our grapegrowers and winemakers to respond to these fast-moving challenges on the climate and trade fronts.
One way we could do this would be to fund a proposal submitted by the North East Wine Zone for $1.6 million in bushfire recovery funding to set up a world-first regional smoke-taint sensor system. The North East Wine Zone, or NEWZ, was set up in the wake of the summer fires to provide a forum for the five north-east wine zones to coordinate their responses to their shared challenges. I'm so pleased to see the emergence of NEWZ as an effective body to advocate for this critical sector in our region, and I'm even more pleased to back their bid for bushfire recovery funding. NEWZ is proposing to set up a system of sensors across the region that can, in the event of a bushfire, automatically test smoke levels in the air and conduct real-time predictive analysis of smoke composition, so that grapegrowers can understand the likely impact of smoke taint on their crop and make early on-farm decisions to manage crop risk. This project is a world first and has the potential to be scaled up across the state and other Australian wine regions. As we look towards a more uncertain climate future, knowing that north-east Victoria is already one of the most bushfire-prone environments in the world, this is precisely the type of climate resilience investment we should be making.
On the trade front, I'm calling on the government to put forward a serious plan to support the sector to diversify its export markets. In a more uncertain world, it is critical to our national interest that we are not reliant on a single market. Supporting our world-class wine sector to break into new markets is a sage move as we enter this period of global trade uncertainty.
So I will be supporting this bill tonight in the House, and I'll continue to work with our wine sector on a long-term resilience plan. Wine has been a linchpin of our economy and community in north-east Victoria for a century and a half. At a time of great challenges, we must be making the investments and putting the supports in place to keep it that way for many, many years to come.