The Mid-Year Economic and Fiscal Outlook (MYEFO) confirms Australia’s spirits excise regime is untenable and must be urgently reformed, the spirits industry warns.

The MYEFO reveals a projected $170 million shortfall in revenue from spirits excise in 2023-24 alone, as the combination of high spirits excise and inflation continues to dampen consumer demand.

Spirits and Cocktails Australia chief executive Greg Holland says the budget update confirms the pain that is currently being felt among spirits manufacturers.

“Declining spirits sales are now being reflected in the Federal Government’s tax coffers,” he said.

“This lower tax revenue is despite spirits excise having recently hit at an all-time high of $100.05 per litre of alcohol.”

Holland said the Budget update suggests the tax has reached a tipping point similar to that experienced in the UK, where spirits sales fell by 20 per cent immediately following an unprecedented 10.1% duty rise in August.

The UK government found the tax increase contributed to the largest rise in UK inflation ever recorded and lower tax revenue.

“With another excise increase for the Australian spirits industry due in February, we call on the Federal Government to follow the UK’s lead and better align alcohol taxation to the current economic conditions,” he said.

“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.”

Australian Distillers Association chief executive Paul McLeay said the rampant excise increases are putting the emerging local industry at risk.

“We now have more than 600 distilleries operating in all corners of Australia, the majority of which are in regional areas, contributing 5,000 manufacturing jobs to the Australian economy,” he said.

“Spirits excise in Australia has risen by a total of 12.5% in under two years, fuelling inflation and cost of living pressures on hard working Australians.

“As consumption is falling our spirits producers are also being hit with higher costs of production, and now they are facing another excise hike in February.

“We call on the Government to ease the pressure on the Australian industry by freezing spirits excise.”