What exactly does Chalmers’ budget mean for Australia’s drinks industry?

May 17, 2024
By Cody Profaca

The Labour Government’s Federal Budget, announced on Tuesday, has already been widely criticised by leading food and drink bodies for being a budget that targets specific industry sectors. Overall, Australia’s drinks industry is a sector that has received very little support. 

Over the next financial year, the budget is expected to drain $8.1 billion from Australia’s liquor industry through alcohol excise. By 2027/2028, this revenue is expected to increase to $9.35 billion. 

According to Anneke Thompson, Chief Economist at CreditorWatch, Jim Chalmer’s Budget “is attempting to ‘thread the needle’ here – helping Australians with their bills while not making the shorter-term fight against inflation harder.”

Or as Stephen Ferguson, CEO of the Australian Hotels Association, puts it, “they are addicted to the revenue and the punter in the main bar is paying for it again and again.”

The biannual indexation of liquor excise tax has recently come under heavy fire in the industry, and was even recently proven to be adding to inflation and preventing export growth. Currently, distillers in Australia pay the third highest rate of tax per litre of alcohol of anywhere in the world.

“This hidden fun tax hits everyone who enjoys a beer or a whiskey with their mates,” said Ferguson.

A similar sentiment is shared by the Australian Independent Brewers Association.

“The Federal Government may only think of our members as just a “revenue line” but we are much more than that. And we are not going away,” said Callum Reeves, Board Director and owner of KAIJU!.

The independent brewing industry is currently experiencing an ongoing economic crisis that has seen more than 12 breweries enter into voluntary administration over the past 18 months. The crisis has also seen two breweries, Deeds Brewing and Temple Brewing, entering into liquidation over the past two weeks alone.

According to CEO of the Independent Brewers Association Kylie Lethbridge, “stopping excise from increasing, if only on a temporary basis would have enabled our breweries to stem the tide of cost-of-living pressures, retain employees or even afford the ingredients necessary for crafting a quality product. We are very disappointed the federal government did not see fit to use its power to help the small businesses that this nation was built on.”

Anneke Thompson believes that, while the budget offers some assistance to currently-struggling small businesses, it doesn’t do enough. 

“The budget includes $325 energy bill relief for businesses on smaller electricity plans, as well as extending the $20,000 instant asset write off scheme. These are small measures that will help businesses. But what businesses really need, especially the struggling food and beverage and construction sectors, is more confident consumers,” she said.

According to Thompson, consumer confidence won’t redevelop until the RBA begins to reduce the cash rate.

“Energy relief payments in the pockets of consumers, even in conjunction with already locked in tax cuts from July 2024, are unlikely to convince shoppers to go out and spend again. Inflation is still too far out of the target band, and the last thing the RBA wants is for goods inflation to take off again.”

As it stands, all areas of Australia’s liquor industry have been feeling the brunt of recent economic pressures. This includes liquor retail, hospitality, wine, spirits, and beer.

“Our members are people too and our issues cannot keep being put on the backburner,” said Lethbridge. 

“With every liquidation, voluntary administration and story of struggle we are seeing peoples’ lives impacted and jobs stripped from regional communities… its simply not sustainable.” 

Responses to the Federal Budget by Australian Grape & Wine, Spirits & Cocktails Australia and Australian Distillers Association can be read here.

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