Desperate calls from the drinks industry for the Australian Government to pause the alcohol excise tax and support local producers have fallen on deaf ears in the Federal Budget.

Australia’s spirits tax, for example, is currently the third highest in the world, behind only Iceland and Norway. And this tax continues to grow twice a year, every year.

The Federal Budget, announced on 14 May 2024. has revealed it will drain $8billion from the industry – and drinkers – in the 2024-25 financial year.

That’s $2.63 billion for beer and $3.34 billion for spirits, rising up to $3.17 billion and $4.17 billion respectively in 2027-28.

Treasurer Jim Chalmers said: “This is a Budget for the here-and-now and it’s a Budget for the decades to come. It’s a responsible Budget that helps people under pressure today – and invests in the promise and potential of the more prosperous future we can make together.”

A key pillar of the Budget was the Future Made in Australia package.

“Our $22.7 billion Future Made in Australia package will help make us an indispensable part of the global economy,” Chalmers said.

He said it was a crucial part of a growth agenda which is about:

• Attracting investment in key industries.

• Making our country a renewable energy superpower.

• Strengthening our defence capabilities and economic security.

• Supporting small business to grasp the opportunities of our transforming economy.

• And expanding and reforming tertiary education for a more skilled workforce.   

 “To realise the opportunities of a Future Made in Australia we’re changing the way we attract and deploy investment;” Chalmers said.

“A new Act and new framework will impose the rigour – Focusing investment on transformational opportunities – And setting conditions to ensure investors benefiting from our incentives are supporting their people and communities – to lift private investment in skills, workforces and local supply chains.”

Brewers under threat

The Budget comes at a time when many craft brewers have been forced into administration by the cost of living crisis.

The latest to fall is popular Melbourne craft brewer Deeds Brewing, which announced last week that it was permanently closing.

Since the beginning of 2024 alone, Western Australia brewery Golden West, South Australia’s Big Shed, Victoria’s Hawkers and NSW’s Wayward have all gone into administration. Newcastle’s Steel City Brewing has also ceased production due to cost of living pressures.

“I don’t use language like ‘the situation is dire’ very often, but it absolutely is,” Independent Brewers Association (IBA) chief executive Kylie Lethbridge recently told 9news.com.au.

There are more than 600 independent brewers, with two-thirds of these small businesses based in regional and rural Australia.

The IBA represents 425 brewery members, primarily small producers making less than 700,000 litres annually.

In its Budget submission, the IBA called for the Federal Government to take action to help the beer industry. Suggestions included providing funding for a study to investigate the feasibility and potential structure for the creation of Beer Australia in line with the role and remit of Wine Australia; providing funding to the IBA to develop new market programs, resources, industry development and sustainability activities so they could continue to help alleviate the current pressures for members; and freezing indexation of alcohol excise for a period of two years

Its pleas were not heard.

Budget’s failure to take action on spirits excise

Australian spirits manufacturers are questioning the Federal Government’s overly optimistic growth projections for the industry.

The Budget shows that spirits excise is down $200 million on estimates published last year.

Forward estimates nevertheless predict growth of $180 million for 2024-25 and annual growth of $200 million for the three years thereafter.

Spirits & Cocktails Australia chief executive Greg Holland said: “It’s difficult to understand how Treasury has arrived at these growth predictions for our industry while we are still completely hamstrung by the world’s third highest spirits tax.”

“We are already paying $101.85 per litre, with six-monthly increases coming yet again in August and February.

“We wish we shared the Government’s optimism, but its growth forecast is simply not achievable under these conditions.”

Australian Distillers Association chief executive Paul McLeay said the inaction on spirits tax is particularly disappointing given the Government’s ambitions to grow domestic manufacturing. 

“While we are hugely supportive of the Future Made In Australia policy, we hope the Government does not miss the opportunity to scale other manufacturing industries like spirits, in pursuit of its more costly objectives in solar, green steel and minerals processing,” he said.

“We have 700-plus distilleries in this country making products that simply cannot be replicated by manufacturers in other nations, because they are singular expressions of Australian ingredients, provenance and technical prowess. 

“It won’t take billions of dollars of investment to kick-start our industry. We don’t need excessive subsidies, we just need modest adjustments to policy settings, starting with tax relief.

“We look forward to making this case for the Government in the food and beverage manufacturing inquiry over the coming months.”

Bundy’s campaign for a better deal

Queensland-based Bundaberg Rum launched a campaign across its sunshine state heartland in January highlighting Australia’s punitive spirits tax regime.

The distiller noted that the tax sees 63% of the cost of a 1L bottle of Bundaberg Rum UP go straight to the Australian Government.

Chair of the Bundaberg Distilling Co. Amanda Lampe said “you can buy a bottle of Bundaberg rum cheaper in Los Angeles than you can in Bundaberg.”

“We’ve been talking to Bundaberg Rum customers across the length and breadth of this great state and we know many of them are doing it tough,” she added.

“They know alcohol should be taxed, but a 63 per cent tax on a 1L bottle of Bundy UP just seems outrageous.”

“We do our best to make our products as affordable as possible for our customers, as we grapple with increases in energy, raw material and freight costs, but the way we’re taxed makes this a real challenge.

“We know this isn’t a problem that the current Federal Government created, but today we’re asking them to help fix it by freezing the excise on spirits, because the tax on Bundy is frankly too much to bear.”

Australian Distillers Association chief executive Paul McLeay congratulated Bundaberg Rum for taking a stand against Australia’s spirits taxation regime, noting its impacts were also felt keenly across Australia’s 600 spirits distilleries.

“It’s great to see an iconic brand like Bundaberg Rum stand up and say this tax has gotten out of hand, because it’s also wreaking havoc on the hundreds of small, emerging distilleries we have right around the country,” he said.

“If the Australian Government wants to make good on its rhetoric and encourage our tourism and manufacturing industries, then it should stop and think about the impact of policies like this one, which serves as a handbrake on the potential of Australia’s spirits industry.”

Wine industry ‘left to wither’

Australian Grape & Wine has condemned the lack of assistance for grape growers and winemakers in the Federal Budget, calling it a “missed opportunity” that ignores industry’s pleas for urgent support.

“This Budget provides no relief for the serious challenges facing growers and winemakers in regional communities across much of Australia,” said CEO Lee McLean.

“The industry’s struggles are not the result of normal market fluctuations, but stem from factors outside the industry’s control, including the loss of our largest export market in 2020.”

McLean criticised the omission of the industry’s modest pre-Budget submission requests, including a $30 million sustainability package, $36 million for export assistance, and $20 million for domestic wine tourism.

“We made it crystal clear – many in regional wine communities across Australia are on their knees and need urgent government action to stop a bad situation from becoming a catastrophe,” McLean said.

“However, instead of support, all we got was a new tax in the form of the deeply flawed Biosecurity Protection Levy.

“While China’s decision to lift import duties is positive, it will simply not resolve the issues facing growers and winemakers. “The economic shock experienced by our industry has led to unsustainable prices for grapes, an oversupply of wine, and increasing economic disadvantage in regional Australia.

“It’s a damning indictment of just how dire the situation is when the refund on an empty wine bottle is worth more than what many of our growers receive for the grapes that fill it.

“It’s disappointing that despite the sector’s $45.5 billion economic contribution, the government has turned a blind eye to our pleas for assistance. We call on them to reconsider this missed opportunity.”

Australian Grape & Wine said it is committed to fighting for growers, winemakers and regional communities.

“We will not let this go,” said McLean. “This deliberate failure to help families in regional Australia jeopardises the viability of entire communities, and without help it is only going to get worse.”

Hospitality industry says Budget is inhospitable

Restaurant & Catering Australia (R&CA), Australia’s peak body for restaurants, cafes and catering businesses, said the Budget has left gastronomy in Australia by the wayside with very few initiatives for hospitality.

R&CA CEO Mr Suresh Manickam said the budget was crucial to ensure the viability of small businesses in hospitality, as they face energy costs spiralling out of control, a skilled shortage crisis and turbulent economic headwinds from volatile consumer sentiment.

“The Budget provided an opportunity for the Federal Government to demonstrate their care and support for Australia’s hospitality industry, but the announcements tonight have overlooked the restaurant and catering sector for the second year in a row. This year’s Budget leaves a bitter taste in the mouths of Australia’s restaurant and catering sector.”

He said the Budget is a missed opportunity to assist a sector that is already in pain. Of concern, tonight’s announcements are not commensurate with the packages handed out to other industries. Of further concern is the effect that government spending will have on inflation and what this might mean over the next 6- 12 months.

“Whilst the energy packages for businesses are welcome, it does not provide a sustainable pathway forward, especially in the backdrop of rampant energy price hikes over the last 18 months.”

“The announcements in training and education are welcome, but again, do not go to addressing the massive skills shortage within our sector. It is disappointing that other sectors received substantially more in terms of education and training than our sector, all the more so given the need to reskill and retrain a sector that has not yet returned to pre-covid employment.”