That will flow from a combination of domestic supply constraints and increases in export prices.

The forecaster is predicting Australia’s transformation, from exporter of cheaper wines to supplying higher end markets, will continue.

This will be helped by an increase of higher value exports, especially into North America, where the proportion of higher price wine sales has increase substantially from 2006 to 2007.

In America, 35pc of Australian wine sells for more than $5 per litre, up 10pc, despite the appreciation of the Aussie dollar against the Greenback, while 73pc of exports to Canada are in this high value bracket.

Australia, however, is likely to face stiff competition into price-conscious markets from new world producers such as Chile, Argentina and South Africa, all of which have an advantage in production costs.

In Australia, an improvement in conditions in the cool climate regions will be the main driver in a predicted increase in the 2007-08 season’s production, up 15pc from the previous period to 1.6 million.

The scarcity of irrigation water is again forecast to be a major constraint, right through to 08-09.

SOURCE: Extract from ABARE Outlook report, to be published in Rural Press agricultural weeklies, March 6