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Aussie winemakers toast trade war’s dollar drop

When the Global Financial Crisis hit more than a decade ago Australian wine exports to the US, the world’s biggest market, were valued at about $1 billion and the Australian dollar was below US70 cents.

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In the past decade period since the Australian dollar rose to above $US1.10, Australian wine became less competitive in the US and sales declined. In the year ended June 30 they were valued at $432 million.

“In the US we are seriously underweight…We think there’s another half a billion dollars of exports there, waiting for us,” Mr Battaglene said.

His comments on the opportunities in the US follow a Rabobank report on the Chinese wine market released this week which said that among countries who export wine to China that Australia was the “clear winner”.

In the first four months of 2019 Australia’s share of the imported wine market in China jumped to 25.7 per cent, up from 19.8 per cent in the same period of 2018, Rabobank said.

“The big thing that’s happened in the last four or five months is that we’ve overtaken France as the number one position in the (China) market,” Mr Battaglene said.

We are very vulnerable to any currency changes and arrangements. And as soon as the currency drops it gives a real boost to our exports.

Tony Battaglene, Australian Grape and Wine chief executive

One factor contributing to the surge in exports to China is the ongoing US/China trade war.

Rabobank said US wine now faces a total levy of 106 per cent, including tariffs, a value-added tax, and an excise tax.

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Tim Hunt, general manager of Rabobank research, said the low Australian dollar relative to the US currency was a “massive free kick for Australian agriculture” beyond just the wine industry.

The lower dollar makes Australian farm products more competitive, while helping sustain “unusually high” Australian dollar prices for major export commodities such as lamb, wool, cotton and dairy, he said.

“In the short term it means that any US dollar price we sell for in the world market has a greater Aussie dollar value for local farmers, and that’s what they care about,” he said.

While in the longer term, the weaker Australian dollar increased the competitiveness of Australian farmers compared to farmers in other markets, he said. This was because most costs, such as wages, capital and energy, were set locally.

“We are paying our costs in Aussie dollars. The weaker our currency gets, the lower our cost base is versus farmers in those (competing) markets, and that makes it easier to export, and easier to compete with importers,” he said.

The weakening Australian dollar is giving a boost to Australian farm exports.

The weakening Australian dollar is giving a boost to Australian farm exports.Credit:Amy Finch

Ben Eade, chief executive of Manufacturing Australia, said an Aussie dollar below US80 cents was “usually net positive for Australian manufacturing. But within that there are obviously going to be some businesses that fare better than others”.

Mr Eade said an Australian dollar buying US75 cents or less would be “a positive for the vast majority of Australian manufacturing”.

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