Working Paper: CEPR ID: DP13201
Authors: Kym Anderson
Abstract: Despite favourable growing conditions, Australia’s production or exports of wine did not become significant until the 1890s. Both grew in the 1920s, but only because of government support. Once that support was removed in the late 1940s, production plateaued and exports diminished: only 2% of wine production was exported during 1975-85. Yet over the next two decades Australia’s wine production quadrupled and the share exported rose to two-thirds – before falling somewhat in the next ten years. This paper explains why it took so long for Australia’s production and competitive advantage in wine to emerge, why it took off spectacularly after the mid-1980s and why it fell in the ten years to 2015. It concludes that despite the recent downturn in the industry’s fortunes, the country’s international competitiveness is now firmly established and commensurate with its ideal wine-growing climate, notwithstanding the likelihood of further boom-slump cycles in the decades ahead.
Keywords: boom; plateau; wine cycles; comparative advantage; wine competitiveness; wine trade; specialization
JEL Codes: D12; F15; L66; N10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| High transportation costs and the dominance of other export sectors (F69) | Limited growth of the wine industry (L66) |
| Removal of government support in the late 1940s (H53) | Plateau in production and decline in exports (F14) |
| Favorable market conditions and increased international competitiveness (F23) | Quadrupling of wine production and significant rise in exports (L66) |
| Rising domestic incomes and changing consumer preferences (F61) | Interplay between economic growth and industry expansion (O49) |