South Australia—vintage year for wine exports

Robust demand for wine will support South Australia’s export outlook. Agriculture exports accounted for over 40% of total exports in 2016, with wine exports the largest segment. Wine exports have grown an impressive 5% p.a. over the last five years supported by a weaker AUD, improved market access, and recovering household incomes in the US.

Growth in the Chinese market has been particularly impressive—with wine exports up 40% in 2016. Much of this growth has been in the premium wine segment, up 47% in 2016, owing to the expanding middle-class. The free trade agreement with China that came into force in late 2015 has also been an important catalyst—tariffs on Australian wines have come down from between 14% and 20% in 2015 to between 5% and 8% in 2017, with tariffs expected to disappear by 2019. Australian wines continue to outperform most other global competitors in both volume and values (Chart 5).

China will remain an important growth market for South Australian premium wine producers— dominated by the McLaren Vale and Barossa regions. On the supply side, the unusually wet summer will be good for South Australian crop yields, though harvesting has been delayed as the grapes need longer to mature.