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Australia's wine 'cheaper than a bottle of water'
Dec 31, 2014
(BBC) - It depends what wine you're looking at and where you get your bottled water, but on some big retailers' shelves in Australia it's not too hard today to find water that is more expensive than wine.
You may be considering a little-known bottle of red that's sitting in a bargain bucket selling for one Australian dollar (53p).
Or you could be about to purchase a well-known white going for A$2.99.
That's all before you spot your favourite four-litre box of cask wine selling for less than A$17.
Whatever you fancy, if you compare your purchase to an average 350ml of bottled water selling for about A$2.50, "then you've certainly got wine that's cheaper than buying a bottle of water," says Prof Kym Anderson from the Wine Economics Research Centre in Adelaide.
"And that does seem a bit bizarre, especially when there's a wholesale tax and a retail tax on top of that," he says.
How did it happen?
It's not the first time this kind of pricing scenario has made news in Australia, but today, the situation according to some experts is quite dire.
Prices across the board have been affected by several interconnected factors, including recent foreign exchange rates, falling international demand, and a glut of product in the domestic market.
Some of the highs that Australia's currency saw against the US dollar from early 2011 until early 2013 have had two major impacts on the wine industry, says Paul Evans, chief executive of the Winemakers' Federation of Australia (WFA).
"A lot of the export volume that we were previously selling to overseas markets has come back to the domestic market as international demand for our wine has dropped off."
This scenario increases competition between local producers, he explains, which in turn drives down prices.
"But of course it provides a commercial incentive for imports to come into the country as well, and we've seen the proportion of imported wine sales in the domestic market increase substantially," he says.
Tax and prices
Another contributing factor keeping wine prices low in Australia is the tax on alcohol, which varies according to the product.
"What you have in Australia is a regime where wine and cider are taxed differently," explains Prof Robin Room, an internationally recognised leader in alcohol research who heads up Melbourne's Turning Point Alcohol and Drug Centre.
"They are taxed on the value of the product as it is sold, rather than on any particular amount of alcohol it has in it,"
This situation, he says, means that if wine is sold very cheaply, then there's a very small tax on it.
"So the people who are making the expensive stuff are taxed at a higher rate, and if they don't make the cheap stuff as well, they feel that they're being treated rather badly."
And this has caused a division in the industry, he says.
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