While a strong Australian dollar means Australians can now afford to buy the world’s worst coffee in places like London, it is dealing our wine industry the toughest set of trading conditions it has faced for two generations. Not only is it virtually impossible for Australian producers to retain their margins on contracted deals, it is easier than ever for Australian consumers to choose imported wines ahead of local production. Some Australian producers have no choice but to walk away from contracts, with the result that wine initially destined for export must then be ‘repatriated’ into Australia, contributing further to the glut already in this market. The very real risk faced by Australian producers who increase prices to reflect the exchange rate movements over the last year is that their wines will cease to be stocked by wholesalers and retailers. Competing wines from South America, South Africa and southern Europe are revelling in Australia’s lack of ability to bite on price, and Australia is facing a tough road ahead in its numerically strongest current markets of the UK and US.
