Twenty five years ago, the Southern Hemisphere contributed 12 percent of the worldÂ’s wine production and North America added another 5 percent. Together those countries accounted for less than 2 percent of global exports. By 2009, however, the New World accounted for 26 percent of global output and almost one-third of global wine exports. AustraliaÂ’s export-led growth is particularly striking, its shares rising from barely 1 percent to more than 4 percent of global production and from a mere 0.2 percent to 9 percent of global exports. Australia now exports two-thirds of its output (up from 2 percent in 1980-84) and is currently the worldÂ’s fourth largest wine exporter after France, Italy and Spain. The huge vineyard expansion that delivered that dramatic transformation led to output expanding faster than sales in recent years, causing stocks to accumulate. In the light of the current over-supply situation, and drawing also on lessons from past booms, this paper focuses on how the Australian wine industryÂ’s international competitiveness and market shares might evolve over the next two decades and its implications for other wine-exporting countries. Climate change is certainly one of the challenges facing local producers, but that is affecting overseas competitors as well. Other prospective challenges include changes to tax and water policies, the recent fashion swing against Australian wine, and the strong Australian dollar associated with the countryÂ’s mining boom that is linked to ChinaÂ’s industrialization. Nonetheless, appropriate adjustments are beginning to be made, including to plantings and to marketing efforts. The longer term should see Australia trading its way out of the current surplus and back to expanding its global market share, especially in value terms as producers seek to differentiate their product more and focus on raising quality.