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House of Assembly - Fifty-Second Parliament, First Session (52-1)
2010-11-11 Daily Xml
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Adjournment Debate

WINE INDUSTRY

Mr VENNING (Schubert) (17:06): I want to raise a serious matter here and I thank you for the opportunity to do it. I want to talk about the wine industry and I think most members would understand and know that there are problems, but you just do not understand how serious this is at the moment.

Mr Piccolo: Tell us why.

Mr VENNING: I will. The wine industry has been experiencing difficulties for a long time; oversupply coupled with low prices, protracted periods of drought and water shortages have all contributed to a difficult period for the industry. Now the rise of the Australian dollar is creating further challenges for those in the industry. Today, the Australian dollar was buying just over one American dollar and the Australian dollar has also been strong against the pound. The United States and Britain are the wine industry's two biggest export markets, as we all know.

The strong Australian dollar will have a major impact on our Australian wine industry, as it will harm our sales versus our competitors' on the international market, because it makes our wines more expensive for overseas buyers. Australia exports 65 per cent of our wine production, so if our exports fall because of the strong Australian dollar, it will be catastrophic for the industry, making it even worse. The Australian Institute of Export director, Mr Ian Murray, said last week:

Particularly those that depend on price are now having trouble selling to Europe and to the United States.

The strong Australian dollar also makes imported wines cheaper, which means that our domestic wine producers will be competing against cheaper imported wines. We have all seen this, particularly with New Zealand whites, which are readily available, very popular and cheap. That is really causing great havoc.

I remind members that our white wines, particularly that of the Adelaide Hills and the southern Barossa, are equally as good as any white wines in the world; yet, the New Zealanders seem to have this trendy promotion and the young ones seem to think that New Zealand whites are the way to go. Well, I remind them that we have some magnificent white wines available and grown by our producers here in South Australia.

Experts predict that we already have a 20 to 25 per cent surplus of grapes, which equates to approximately 800,000 tons of surplus grapes across the country. This will only be exacerbated by such a strong Australian dollar. This has a large effect on my electorate, and I know many others whose electorates cover wine regions would be experiencing the same hardships.

South Australia produces 731,000 tons of grapes, and many grape growers are really, really hurting. It was bad enough in year 2007, when we were first aware of the problem and the Australian dollar was equal to 70 American cents. What do you think it is like now, when we have parity? It was bad enough in 2007; just consider how bad it is today. The Winemakers' Federation of Australia Chief Executive Stephen Strachan said recently, 'Viability of the industry is at an all-time low.'

Based on the feedback that I am getting from my constituents, I would have to agree totally. Wineries were already reducing their intake of grapes before the Australian dollar reached parity with the US. With the dollar remaining high, I can only see wineries further reducing their intake on the upcoming vintage, and, to remain viable, increasing the level of imported product, and either market it or even blend it with the Australian product and sell it as Australian. I know there are laws about that, but you cannot blame them. It is all about surviving, and companies will do this just to keep their brand name out there.

This will have a significant adverse effect on many growers within my electorate. Many are struggling to pay their bills, let alone make a profit. I have been personally involved—that is why I am moved to make this speech now—in discussions with some families who have been involved in the wine industry for many years, some for over four generations, and they have said that they have never seen it as bad as this. Most made big losses last year; one grower in particular made an over $300,000 loss, and it is going to be the same this year. This is not sustainable in anybody's business plan.

Some have long-term contractual arrangements with the BIL water scheme, a scheme that I pushed. To some that is now a liability because they cannot use the water anyway. So, it is a gloomy picture. They have to pay their contractual things out. I still commend the BIL scheme; it has been a great scheme, but for some of those people who bit the bullet and went in deep to buy water that is now a liability.

Without doubt, over-planting and oversupply is a large part of the problem, as well as the dollar. Why did we do this? These management investment schemes are an absolute blight on the industry. They are still planting vines at the moment, as a leftover from the MIS schemes that were abolished a few years ago. They are still planting them; it is absolutely unbelievable.

Previous governments, and that includes the Liberals, should have removed section 75AA (the management investment scheme taxation arrangements) many years ago, but they did not. I can only condemn governments—all of them; us, them. I will mention one particular person, Mr Leo Pech, who advised me as far back as 2007 that this was going to happen. Mr Pech is a grower of longstanding, for whom I have great respect, and he said that section 75AA should be taken off immediately. It was not; it hung around for another five or six years.

Part of the problem is that we are seeing grapes grown where they were never grown before because the taxation arrangements encouraged people to do that. It is a disgrace that it was not removed. On Saturday afternoon I sat at the foot of a bed of a woman who was totally distraught about the situation. She cannot pay the family's bills. The property is up for sale; they cannot sell it, so they are selling off pieces of machinery just to get enough money to pay the family's bills. This was a very large and productive enterprise in the Barossa Valley.

I, personally, get very emotional about this. I hope that members of parliament can understand that I am very lucky in my position because I am a broadacre farmer. I have a lot of other options. If wheat is bad, as the member for Finniss will tell you, because he would be the same, if we have bad wheat prices or bad barley prices then we have other options: we can swing to sheep, we can swing to hay, we can do pastoral, there are so many other options, but a grape grower has no option other than to pull up the vines. That raises the issue of a vine pull; whether we go back to that. I hope that we never will. This is a situation where I cannot see what the solutions are.

Over 40 per cent of growers that I know of could be classed as not viable—close to bankruptcy. They say that by the end of this vintage it will be 60 per cent. So, what is the answer? You cannot sell the properties; no-one wants to buy them, and all these vineyards are for sale. I do not know. I still believe that some sort of finance has to be given to these people, even though they have a lot of assets—vineyards that were worth a lot of money, millions. You cannot eat them; you cannot sell them. I think that we must have some sort of scheme that says that we are not going to take into consideration so much the asset value, because we have to look at the income these people are making.

It might get worse. These people are very confident people. A lot of them made their own wine out of their own grapes. They could not sell the grapes, so they put it into the bottle themselves. That is a huge cost. Now they have it in storage—still cannot sell the product. So, now they have the cost of having to pay for what they have done as well as the storage. Really, those people who bit the bullet and were brave are getting burnt as well. It is a sad story.

We are so proud of our wine industry, yet here we are. It is desperate. I do not know what to do. I am open to hear any advice from any member of this place, as long as the members of this place understand and realise how serious it is. You hear about it, you read about it, but you have just got to see it firsthand to realise how terrible it is when you see families absolutely on their bones, too proud to make any public comment, too proud to call me up. I go there and stand in this bedroom with the husband and wife, just trying to gee the lady up because she really was despairing, saying, 'What can we do? I can't pay the bills.'

It was a worthwhile exercise for me. It certainly was an education. I only hope that I am able to say to the lady that there is a chance. Let us hope there is.

Time expired.

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