Ahead of Australia’s alcohol excise tax rising once again next month, the latest data from the Australian Bureau of Statistics (ABS) shows alcohol is currently one of the major contributors to inflation.

Australia’s monthly Consumer Price Index (CPI) indicator rose 2.3% in the 12 months to November 2024, up from a 2.1% rise in the 12 months to October.

According to the ABS, the largest contributors to the annual movement were alcohol and tobacco, which were up 6.7 per cent.

Independent brewers say the next alcohol excise hike could push brewers to the brink.

”Many that are just on that edge of survival, will not be able to make it,” Independent Brewers Association Chief Executive Kylie Lethbridge told 9News.

“If we continue to put off staff and we continue to close, then that tax revenue is lost anyway.”

The tax is expected to rise between 2-3%, which will push the price of a pint at the pub to about $15.

Alcohol excise increases backfire on government

The Australian Government has dramatically downgraded its expected revenue from the alcohol excise tax over the next four years as price rises dent consumer demand.

Spirit excise proceeds, for example, have been revised downwards by $1.7 billion over the four years to 2027-28 (a drop of 8%).

The Australian Government’s Mid-Year Economic and Fiscal Outlook 2024–25 (MYEFO) shows a significant decline in forecast revenue since the previous estimates in the May budget.

Beer, spirits and “other alcohol” excise revenues are expected to be down $330 million on estimates for 2024-25, with 2025-26 predicted to be down $380 million.

Australian already has one of the world’s highest alcohol excise taxes and it was increased yet again on 5 August 2024 to $103.89 per litre for spirits and as much as $61.32 per litre for beer.

The CPI increase was the 75^th tax hike on alcohol since automatic indexation was introduced by Paul Keating in August 1983, in his first Budget as Treasurer.

Recalibrating from initial predictions

The Labor Government’s first Federal Budget in 2022 predicted spirits and RTDs would add an extra $400million in excise tax to the Treasury’s bottom line.

The forecast in the Budget for excise on spirits and RTDs was up 13% compared with the pre-election budget forecasts. However, excise from beer was forecast to fall by $30 million to $2.62 billion, a drop of 1%.

“The outlook for alcohol excise receipts has improved, driven by stronger consumption of higher-taxed spirits and pre-mixed beverages compared with lower-taxed beer,” page 160 of Budget Paper No. 1 read.

Spirit tax collected $3.2 billion in the 2021/22 financial year and was expected to grow to $3.8 billion in 2025/26 as Australians continue to switch from beer to spirits.

Spirits and Cocktails Australia noted in December 2023 that the MYEFO revealed a projected $170 million shortfall in revenue from spirits excise in 2023-24 alone, as the combination of high spirits excise and inflation continued to dampen consumer demand.

Spirits and Cocktails Australia Chief Executive Greg Holland said: “Declining spirits sales are now being reflected in the Federal Government’s tax coffers.

“The rate of spirits excise has increased, yet revenue is down. This tells us everything we need to know about the appropriateness of this tax in the current economic climate.”

The news follows The Independent Brewers Association announcing last month that it will not be running its BrewCon conference or Indies Awards in 2025 due to the challenging economic climate experienced by independent brewers over the last year.

Australian Distillers Association calls for government support

The board of the Australian Distillers Association has called on the Australian Government to create a body called Spirits Australia, alongside the existing Wine Australia.

According to the board, the Australian spirits industry could be a $1billion export industry by 2035 if policy conditions were improved.

Spirits Australia could be set up as a standalone statutory body and would be dedicated to promoting Australian spirits. Responsibilities for Spirits Australia could include, but are not limited to:

• fostering and supporting the growth of profitable, resilient and sustainable Australian distillers
• building markets, disseminating market information and knowledge
• growing industry networks domestically and internationally
• encouraging adoption and ensuring compliance of quality and safety standards within the industry.

According to the board, reinvesting in the spirits industry through Spirits Australia would generate significant value for both the industry and government and help set up a similar growth story to the Australian wine industry.

“As an example, less than 86 cents from every $100 of spirits excise tax would be equivalent to Wine Australia’s annual revenue in FY23,” the board said.