Additional comments from Labor Senators

1.1Labor Senators make the following points in line with the Viticulture and Wine Sector Working Group established by Commonwealth, State and Territory Agriculture Ministers and the specially commissioned research from eminent wine economist, Emeritus Professor Kym Anderson AC.

1.2Regarding Recommendation 3—it is the view of Labor Senators, as noted in Kym Anderson’s Australia’s Wine Industry Crisis and Ways Forward, that a subsidy to distil excess wine would not reduce the long-run supply capacity issues. Instead, it would encourage continued overproduction and require ongoing subsidisation to prevent continuing oversupply, effectively subsidising underperforming producers. Distillation into industrial alcohol also nets too little of transport costs to be an effective response.Therefore, Labor Senators do not support this recommendation.

1.3Regarding Recommendation 4—Labor Senators believe that the support packages and payments as proposed in this recommendation often result in a “moral hazard”, as outlined in the Anderson report, which makes clear that there is a “moral hazard reason” for not making a habit of such payments, and that such assistance is not justifiable on efficiency grounds and can even impede helpful adjustment.

1.4Further, it is the view of Labor Senators that a subsidy to mothball vineyards would assist some growers to leave the industry but would not reduce the long-run supply capacity and be difficult to target. We note that a previous vine pull program in Australia was not considered a success either by industry or government.

1.5While some jurisdictions around the world have committed to, or are exploring, vine pull subsidies, the proposed 27 000 ha reduction in capacity is less than one per cent of global capacity, which would not have any material effect on the global oversupply. Given that Australia accounts for just 4.1 per cent of global wine production, reducing our wine production capacity will have little effect on global prices, which is more relevant to our export focused red wine industry.

1.6Therefore, Labor Senators do not support this recommendation.

1.7Labor Senators recommend that the Australian Government wait for, and examine, the recommendations of the Grape and Wine Sector Regulatory Impact Analysis being undertaken by Dr Craig Emerson.