Wine Industry Outlook 2014 Conference, October 2014

It’s an honour to have been invited here today to speak at the opening of the wine industry’s 2014 Outlook Conference.

It’s especially an honour to be here with my friend Amanda Vanstone, who’s already stolen half my speech with her introduction.

I can’t think of a better choice as MC.

Those of you who know Amanda know she runs a tight ship, and she calls it as she sees it.

In 2004 renowned Australian interviewer Andrew Denton introduced Amanda like this:

“My next guest couldn’t go unnoticed if her life depended on it. In an age of perfectly manicured spin, she’s a throwback to a time when politicians spoke first and asked for permission later.”

A bit later in the same interview Amanda was asked about her decision to join the Liberals and enter politics.

She said joining the Liberals was easy, and while she liked some of the things Labor was trying to do, she didn’t like them always “getting stuck into business” for making profits. And I quote:

“If you’re not making a profit, you’re not employing people, you’re not paying tax, they’re not paying tax. Where’s the government revenue going to come from to do all these good things? It seems to me they’ve missed a vital part of the equation here.”

And in typical Amanda fashion she then told Denton: “They must be lunatics!”

That brings me to my first wine topic of the morning: tax.

I’m very much a believer in small government – governments should only do what the private sector can’t, won’t or shouldn’t do.

Sadly, that’s an ideal because the reality today is very different, with government involved at many levels with the private sector and that includes the Australian wine industry.

Decisions made in Canberra today can therefore have a huge impact on your industry, and these decisions are often taken by people who have little understanding or appreciation of the consequences of these decisions.

This is why there’s so much concern over the WET, particularly whether or not it will remain an ad valorem tax or move to a volumetric tax.

Let me say right here, right now, that the Coalition Government has no appetite for changing to a volumetric tax.

We’re not motivated in any way to change it.

In fact the only way that will happen is if you, as an industry speaking with one voice, seek for it to be changed.

If you want the Government to retain the ad valorem tax, I can’t emphasise enough the need for you to be united in communicating this to us.

If governments see division, they will often make decisions that no-one likes.

It’s also worth remembering that governments are not renowned for making decisions which reduce their tax revenue.

As many of you know I live and work in the Riverland.

Growers in the Riverland are obviously concerned about proposals to make the WET a volumetric tax, particularly at a time when the industry itself is at a crossroads and growers are constantly worried about farm gate prices.

In responding to the current Federal tax review I urge you to send a resounding message to the Government that the Australian wine industry does not want any change to current taxation methodology.

The same goes for the Government’s review of competition policy – if the wine industry wants tougher competition laws to address market power issues you need to tell us what you want.

Don’t send us a mixed message, and don’t come to us with several different or conflicting arguments because – in effect – this gives the Government responsibility for making industry decisions and that is plainly stupid.

Issues like the WET rebate also need to be approached in this manner, however I have another message for the industry today on this issue, and that’s to be careful what you wish for.

While the Government of which I am a part is not looking at abolishing the rebate, it’s worth the industry noting that future governments desperate for money will take a hard look at industry subsidies – especially a subsidy where there is a question mark hovering over whether some people should be getting it, and whether it is
delivering the outcomes for which it was originally designed.

I’m sure no-one in this room thinks the WET rebate was designed to subsidise New Zealand wineries.

I think there is little doubt the WET rebate is distorting the marketplace in Australia and it’s putting too much focus on the domestic market when you should really be concentrating on exports.

Australia is an exporting nation and we ain’t gonna get rich by selling to ourselves.

Our domestic market simply isn’t big enough.

The success of the wine industry in the 1990s and early 2000s was driven by a united vision and a focus on exports.

The high dollar notwithstanding, that’s where the industry’s focus needs to be now.

The original intent of the WET rebate was to recognise and assist the industry’s commendable investment in regional Australia.

Now it’s just assisting Coles and Woolworths as the rebate has moved its way up the supply chain to the guys with the most market power.

The industry needs to have a serious think about the rebate in this context, because you are the ones who are vulnerable.

I just want to touch briefly on something to which the Government has recently been dedicating a lot of resources.

This year we’ve been very pleased to announce the finalisation of two important free trade agreements with South Korea and Japan.

These will see the elimination or reduction of tariffs for a wide range of Australian agricultural produce and products, including wine.

Your product is not only highly sought after, but now will be more competitively priced in these markets.

The $42 million Japanese market for the Australian wine industry will see the tariff on bulk wine eliminated immediately and the 15% tariff on bottled wine will be phased out over seven years.

Korea is a $10 million export market, and the 15% tariff on all wine exported to Korea will be eliminated as soon as the agreement comes into force.

The next challenge is our largest trading partner China, and we are accelerating FTA negotiations with a view to finalising an agreement before the end of the year.

Like the agreements with Korea and Japan, we’re working hard to get the best outcome for Australia’s farmers in the Chinese market, including for the wine industry.

In conclusion, I think the industry needs to have a frank and open discussion about its future if it is to capitalise on these opportunities, and I wish you well for this important conference.

Thank you.