Australia stands firm on wine 'subsidy'

The Australian Government will not withdraw the tax rebate it has given its wine producers, says its Foreign Minister, Alexander Downer.

New Zealand ministers are questioning whether the rebate breaches the Closer Economic Relations (CER) pact between the two countries, because it disadvantages New Zealand wine exports to Australia.

Mr Downer, who was in Wellington for the Australia-New Zealand Leadership Forum, made it clear that while his Government was prepared to discuss the issue the rebate would not be withdrawn or reconsidered.

"We're happy to talk to New Zealand but we're not going to abandon the policy," he said at a press conference.

"We'll be interested to hear from the New Zealand Government whatever concerns they might have, and any way in which their concerns can be taken into account.

"But they won't be taken into account by abandoning the assistance we're providing to small wine makers."

Mr Downer said the wine makers who would get the concession, which was announced in the latest Budget, represented only about 10 per cent of Australia's wine production.

"That's a pretty small component. I reassure the New Zealand wine industry that I don't think this is going to have much impact on the New Zealand access to the Australian market."

Foreign Minister Phil Goff, speaking at the same press conference, said New Zealand did not want its wine makers disadvantaged and wanted to ensure that the measure was within the boundaries of CER.

"It is currently the subject of discussions between [Trade Negotiations Minister] Jim Sutton and [Australian Trade Minister] Mark Vaile," he said.

"Those discussions, if necessary, will be formalised and we will get a clear interpretation of what CER requires."

Last week's federal Budget in Australia included a commitment that the country's 1600 winemakers would each receive a wholesale tax rebate of up to A$290,000 ($331,000).

Until now wine producers have paid a 29 per cent wine equalisation tax, but their tax will now be reimbursed up to the first A$1 million of sales.


The NZ producers believe the move is effectively a multimillion-dollar subsidy which breaches CER.

- STAFF REPORTER, NZPA