James Halliday: China will become Australia's largest wine market by 2015

THE Australian wine industry can expect a super profits-style tax possibly within five years, the nation's leading wine commentator has warned.

Wine maker, author, critic and judge James Halliday predicted mixed fortunes for the industry, following the release of his latest Australian Wine Companion 2011, launched last week.

"There is no question we will see a change in the tax regime on alcohol, perhaps in the next five years," Mr Halliday said.

"It's a sin tax, it's an easy tax to get through, especially with the issue of binge drinking."

However he predicted the growing wine export market to China could absorb the negative impact of any new levy, with taxes levied on domestic sales only.

He said China was predicted to rise to Australia's number one wine export market by 2015 from its current fourth place.

"It's inevitable China will become Australia's largest wine market and we could well find ourselves in the position in five years of having a serious shortage of grapes."

Despite the recent over-supply of grapes and under-selling of Australian wine, 111 new wineries opened in the past year, making 2800 wineries in total.

"It's extraordinary. Between 2000 (when there were about 1000) and now more wineries came in to existence than the previous 180 years."

He said the five-year forecast for the wine industry was volatile.

"I don't think the future is grim. I think it's uncertain, but it's up rather than down."

Mr Halliday said the Australian wine industry only escaped a super profits tax - similar to the mining industry - because "there are precious few making even modest profits".

Any tax increase would see Australia "continue to be the highest-taxed major wine producer in the world".