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Fairyland: reflections in the window at Penfolds Magill; the Grange cottage in the vineyard ... with the Federal government's new cash splash, anybody'd think all cellars can now have a free view like this ... and the sort of profits Penfolds earns ... photo Philip White

Taxpayers fork out $50 free million for Oz vino-industrial complex

by PHILIP WHITE

This week two people who are ministerially responsible for managing the water in the notoriously mismanaged Murray-Darling Basin, Australia's biggest wine region, came to Adelaide to give $50 million of our money to the liquor industry. 

One of them, Country Party leader, Deputy Prime Minister and Minister for Agriculture and Water Resources, the Hon. Barnaby Joyce, is a Queenslander with New Zealand citizenship. 

While he seems to prefer beer, New Zealand supplies Australia's biggest-selling bottled white wine, Sauvignon blanc. 

Many great legal brains suggest the Deputy Prime Minister's dual citizenship made him ineligible to run for parliament, but here he was, giving quite a lot of our money away. 

He is a stalwart supporter of the coal industry, which many very fine responsible farmers, like those on the Liverpool Plains, or indeed the winemakers of the Hunter Valley, regard as a direct threat to their livelihoods, water resources and precious country.  

With him was his off-sider, the Liberal Assistant Minister for Agriculture and Water Resources, Senator Anne Ruston. The Senator was previously Senior Policy Advisor to the South Australian Minister for Industrial Affairs, Tourism, Recreation, Sport and Racing, Graham Ingerson, who eventually resigned that ministry over his handling of the racing business, and later resigned also from his position as Cabinet Secretary over his handling of the Hindmarsh Soccer Stadium. 

Speaking of stadia and grandstands, the National Wine Centre (above) looks a bit like one without a playing ground. Ms. Ruston became chief executive of this financially-disastrous folly, which was eventually passed to the University of Adelaide in a long-term peppercorn rental deal and is now sub-let and used as offices by the wine industry councils and operates as a glorified wedding shack in the Adelaide Botanic Gardens. 

Ms. Ruston was eventually appointed to fill the Senate position vacated by Mary Jo Fisher who resigned after twice being charged for shoplifting. 

With the Deputy Prime Minister, Ms. Ruston appeared not at the National Wine Centre, but Penfolds winery at Magill, where they announced the $50 million handover. 

Tim Whetstone, South Australian conservative parliamentarian representing the irrigated  Riverland, Deputy Prime Minister Barnaby Joyce and Senator Anne Ruston  

Under the tireless stewardship of chief winemaker Peter Gago AOC, Penfolds is singularly responsible for a great proportion of Australia's most profitable wine export bracket, expensive bottled wine, which is worth nearly $500 million per annum in total, in dollar value almost a quarter of the $2.2 billion of Australian wine exported but only a tiny fraction of its total volume. 

Having left Australia at the weekend, off on another of his endless international tasting and sales tours, Mr Gago AOC was not at the winery for the announcement. He's busy earning money for the shareholders.

The $50 million "Export and Regional Wine Support Package" is designed to "transform the Australian grape and wine sector by driving demand for Australia's wine exports and showcasing the nation's wine tourism offering." 

Some of the money will go to the cider industry, which competes for shelf space in the ready-to-drink canned kiddylikker category. 

"Australian Vignerons, the Winemakers' Federation of Australia and Wine Australia have worked in close consultation with the Australian grape and wine sector to develop the business plan for the package, which will be delivered over three years," Wine Australia's statement reads. These bodies "will jointly sign off on the developed plans and campaigns to ensure all Australian wine exporters are supported through the proposed activities." 

The Deputy Prime Minister said the money would be invested "to further expand the market globally for wine. The target now is to go from $2.2 billion worth of wine to $3.5 billion by 2021." 

So everybody, from Yellowtail to Kingston Estate, will suddenly follow Penfolds into the halls of irrefutable excellence and provenance? Not even free money can do that, unfortunately. 

Some of the money will be made available by grants to approved cellar-door operators, to improve their facilities. 

"With the cellar-door process," The Deputy Prime Minister said, "we have made sure that it's $350,000 with a possible extra $100,000. Now I know that's not gonna make much difference to Penfolds, because they're such a global brand and so exemplary, but with other small wineries, if they're growing the grapes, if they're actually producing the wine and they're selling it at their cellar-door, that is a big advantage." 

At a time when Australia produces so much poor irrigated wine that the $3 Murray-Darling bottle is now a standard expectation for many drinkers, this export handout is hoped to make producers of such liquor more profitable, principally in the Chinese and USA markets. Neither of which is stupid; both of which have very long memories. 

If this exercise succeeds, Coles, Woolworths and Aldi, who - until Amazon takes over - between them control two-thirds of internal Australian wine sales will be pressured to import more wine at lower prices. 

China, meanwhile, is rapidly expanding its vineyards. Now second in the world for total winegrape plantings, it is already exporting cheap bottled wine into markets Australia has long regarded as its own, like the United Kingdom. 

The Deputy Prime Minister stressed producers in the irrigated arid land vineyards, like the Riverland, stood to significantly improve their lot. 

As South Australia produces about 60 per cent of Australia's wine, the $50 million seems likely to prop up, or at least calm down, many of this state's struggling producers, who are concerned that changes to the inequitable Wine Equalisation Tax (WET) rebate will make their financial lives impossible. 

Equalisation, of course, is the wrong word here: wine is currently taxed so cheap plonk is unfairly hit at a lower rate than more expensive premium. 

There will be a state election in South Australia in March 2018. On July 1 the WET rebate will be cut from $500,000 to $350,000. Many New Zealand producers of wine sent to Australia will still have access to the rebate. 

While the package is wrapped to please many small winemakers, sceptics are quietly suggesting, however, that the majority of the money will go to assist the biggest marginal refinery-style wineries, who enjoy the camouflage provided by the tiny nuts-and-berries ivy-covered cellars. 

The expenditure of the $50 million will be overseen by Wine Australia, Australian Vignerons and the Winemakers’ Federation of Australia. A board of marketing experts from Accolade Wines, Fullglass, Kingston Estate, Leeuwin Estate, Pernod Ricard, Taylors, Treasury, Yalumba, and Yellowtail will look after that side of the cash. 

Just what does $50 million buy? That's roughly what the National Wine Centre cost the taxpayer all those years ago. The outfits which will supervise this expenditure still enjoy offices there. $50 million is also roughly what Treasury's insurers will pay its shareholders to settle a class action after it wrote down $160 million of cheap USA stock acquired in some ill-advised purchasing there, to be accused of misleading the market and breaching continuous disclosure obligations. 

But $50 mill is still a lot of money. It can buy a lot of parties. There will be a campaign of huge tastings and wine promotions in many of Australia's export markets. Just how the cellar-door grants are spent will depend on who gets them. One presumes the money will be more artfully spent than providing the desperate, unprofitableMurray-Darling irrigators with a string of deconstructed Rubik's Cubes. 

The winegrowers of Australia, meanwhile, could use some viticulture research money pronto if they're going to fulfil the Deputy Prime Minister's promise of increased profitability through better quality products. 

The incurable phylloxera vine-killing bug (above) is on the march in Victoria, the newly-imported Pinot gris vine virus - which kills other varieties as well - is little understood and threatening to spread, die-back or dead-arm is spreading in vineyards everywhere, dramatically reducing vine health and yields and global warming is quickly rendering our warmest winegrape regions very tricky to manage. 

The deputy Prime Minister is famously on the record for saying the climate change reality is "an indulgent and irrelevant debate because, even if [it] turns out to exist one day, we will have absolutely no impact on it whatsoever."