Australian spirits have the potential to emulate the success of the country’s wine industry, according to the Spirits Industry Competitiveness Plan prepared by research firm Mandala. However, the report, commissioned by the Australian Distillers Association and Diageo Australia, identifies government policy and regulatory barriers, such as high excise taxes, as significant hurdles impeding the growth of the spirits sector.
Paul McLeay, CEO of the Australian Distillers Association, emphasized the adverse impact of the current spirits tax regime on the industry’s competitiveness and its ability to attract investment. McLeay welcomed the federal government’s initiative to establish a parliamentary inquiry into expanding innovation and value addition in food and beverage manufacturing, expressing readiness to contribute expertise to these discussions. However, he underscored the urgent need to address the inhibitive effects of the spirits excise tax to foster regional job growth, tourism, and manufacturing.
Presently, Australia’s spirits industry sustains 5,700 jobs in manufacturing, with nearly half of the country’s 701 distilleries located in regional areas. Distillery visits have emerged as the fastest-growing tourist activity for overnight domestic visitors, attracting 631,000 visitors annually. Despite robust domestic demand, Australian spirits exports remain modest compared to the wine industry and global competitors, indicating substantial growth potential.
The report highlights challenges faced by distilleries, including declining average size and limited scalability, primarily due to the burdensome excise tax. To unlock the full export potential of Australian spirits, the federal government is urged to enact policy reforms, such as freezing biannual increases to spirits tax and establishing a dedicated ‘Spirits Australia’ body to support industry growth.
Dan Hamilton, Managing Director of Diageo Australia, echoed concerns over the current policy landscape stifling industry growth and deterring foreign direct investment. Hamilton emphasized the need for tax reform to alleviate burdens on consumers and attract investment, drawing parallels with Japan’s successful cultivation of its spirits export industry.
In addition to boosting spirits exports, proactive government measures are projected to generate a $111 million increase in direct economic contribution and support nearly 878 new full-time equivalent jobs, particularly in regional areas.
Amit Singh, Managing Partner at Mandala, underscored Australia’s potential to significantly enhance its spirits exports, comparing the country’s current standing with leading spirits exporting nations. Singh highlighted the opportunity for Australia to achieve $1 billion in annual spirits exports by 2035 by optimizing trade efficiency and performance.
