Why your favourite prosecco may be getting harder to find

“When the dollar slips below €0.60, it makes life really difficult, and we have to pause or limit how much we import, and we can’t ramp it up again until it returns, with €0.65 being the sweet spot in terms of costing.”
The Australian dollar has been in the “danger zone” at about €0.60 – or it takes $1.66 to buy one euro – since August. Boccaccio has cut back his container shipments from Italy by 25 per cent. In August last year, Australians could buy one euro for $1.43.
AMP chief economist Shane Oliver says the euro’s strength against the $A is attributed to two factors – interest rate differentials and the Chinese economy. The Aussie’s August low of €0.59 was the lowest since May 20, while it fell to an 11-month low against the US dollar earlier this week after the Reserve Bank opted to hold the cash rate at 4.1 per cent.
It has now shed 11 per cent of its value against its US counterpart since mid-July, as the RBA’s cash rate is significantly below that of comparable central bank rates overseas; for example, Canada’s at 5 per cent, or New Zealand’s at 5.5 per cent.
Australia’s 4.1 per cent cash rate is also 40 basis points lower than the European Central Bank’s (ECB) key lending rate, Mr Oliver says.
“The problem is primarily interest rate differentials. The Aussie-Euro was fairly stable for much of last year, around 64, then it started coming down through February and March, and dropped to 59 in August,” Mr Oliver said.
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“The interest differential against Europe has gone from being positive in Australia’s favour, to negative.”
The second factor stems from the $A being seen as a “risk-on, risk-off currency”, meaning it rises against the euro and $US in times of optimism about global growth, buts falls when there is pessimism or uncertainty, as there is now.
“So overall, a big chunk of the weakness against the euro is the deteriorating interest differential, with another chunk being China and risk-off sentiment among investors,” Mr Oliver said.
“And as that interest differential looks like it will remain for the Aussie dollar for the foreseeable future, unfortunately the pressure will remain difficult for importers from Europe, including this particular business.”
The situation is likely to remain until global inflation recedes further, central banks start to think about cutting rates, and optimism returns. “They might be holding out for a while,” Mr Oliver said of Mr D’Anna’s business.
Boccaccio Cellars, which imports 70 per cent wine and 30 per cent food, including prosciutto, cheese and tuna, predominantly from Italy, has also been struck by high shipping costs, more expensive glass and aluminum in Europe, and a widespread shortage of refrigerated containers.
Mr D’Anna said one order already paid for has been sitting at his warehouse in Italy since May.

This data comes from MediaIntel.Asia's Media Intelligence and Media Monitoring Platform.