Q: The media has been suggesting that Australian wine is shortly to become much more expensive for Singaporean drinkers. Is there any truth in this?

A: There have, indeed, been reports in the Singapore media about such price increases. Due to Australia's recent drought, frost and bushfire smoke issues, unnamed industry sources have been quoted as anticipating prices to jump by 20 to 30 per cent.

In reality, it is extremely unlikely that such far-fetched increases will occur.

Australian wine is facing a crisis that is partially of its own making.

Right now, the industry is not trading in a sustainable manner. It needs to increase the price of its wines to enable producers and investors to gain a decent and viable return.

The short 2007 vintage, which is almost certain to be followed by another small vintage next year, has increased the costs associated with fruit and wine-making, since the vast majority of the costs involved in these processes are fixed.

You still need the same power, the same staff, the same harvesting costs, etc. So, the base costs to wineries have indeed increased.

The immediate impact of Australia suddenly moving from its wine surplus to wine shortage is likely to be felt within Australia itself, where there has been a proliferation of wine discount houses, clearance centres and 'clean skin' outlets, which somehow manage to circumvent food standards labelling regulations by selling 'anonymous' wine without labels attached.

Hopefully their days are all numbered. Walking into them is akin to visiting a palliative care centre for dying wine brands.

The Australian wine industry has woken up to the fact that Australia is not the most logical place within which to make the world's cheapest wine.

Yields have been low in recent drought-affected vintages, soils are relatively infertile, and labour and infrastructure costs are high. Regulation is a costly nightmare. So more Australian wine companies will vacate the cheapest end of the market but, at the same time, try to provide a higher quality option for consumers at competitive prices.

I would not expect winemakers like Jacob's Creek, Yellowtail and Lindemans to be jacking up their prices overnight.

Furthermore, I would not expect to see significant price increases at the higher segments of the market. The costs associated with these smaller production wines are already high, and are already being passed on to buyers.

Small vintages might lead to temporary scarcity - which might actually drive up prices on the secondary markets - but nothing of the hysterical order suggested in the press.

In fact, prices per litre of Australian wine have fallen in Singapore over the past year, from $8.19 per litre to $7.30 wholesale per litre in Australian dollar terms, a decline of 12 per cent.

So even while Australia might not be considering itself the Lucky Country right now with respect to its water issues, Singaporean wine drinkers will continue to enjoy its wine without having to visit their bank managers first.