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Wine Export Shocks and Wine Tax Reform in Australia: Regional Consequences Using an Economy-wide Approach


  • Revision of a Contributed Paper presented at the AARES/AAWE Workshop on The World’s Wine Markets by 2030, Adelaide Convention Centre, 8–9 February 2010. We are grateful for helpful referee comments. Thanks also are due to Jayanthi Thennakoon for research assistance and to the GWRDC (Project Number UA08/04) and the University of Adelaide’s Wine2030 Network for financial support. The views expressed are the authors’ alone and not necessarily those of any of the funders.

Kym Anderson, School of Economics and Wine Economics Research Centre, University of Adelaide, Adelaide, SA 5005, Australia. Email:


We provide economy-wide modelling results of the national and regional implications of two current challenges facing the Australian wine industry: a decline in export demand, and a possible change in the tax on domestic wine sales following the Henry Review of Taxation. The demand shock causes regional GDP to fall in the cool and warm wine regions, but not in the hot wine regions unless the shock is large. A change from the current ad valorem tax to a similarly low volumetric tax on domestic wine sales causes regional GDP to rise in the cool and warm wine regions, partly offsetting its fall due to the export demand shock, but GDP in the hot wine regions would fall substantially. The switch to a volumetric tax as high as the standard beer rate would raise tax revenue and lower domestic wine consumption by more than one-third. However, it would induce a one-third decrease in production of non-premium wine as its consumer price would rise by at least three-quarters (while the average price of super premium wines would change very little). This would exacerbate the difference in effects of a tax reform on GDP in hot versus warm and cool wine regions.