Industry leaders this week read the riot act to Australia's winemakers and grape growers, but the country is far from down and out.

Australia is producing up to 40m cases of wine annually more than it is selling, according to a report by industry leaders published this week.

Industry leaders are right when they call for fundamental reform of the sector, for this is not a short-term dip brought about by global financial woes, but more a structural problem that must be actively addressed.

Australia has been roughly jolted out of its supremacy among New World players on exporting wine to the world in recent years. Exports fell in value for the first time in 15 years in 2008.

Growing competition from the rest of the New World, such as South America, California and arch-enemy New Zealand has asked more questions of the Aussies. Winemakers in the Old World triumvirate of France, Spain and Italy have also shown signs of getting their act together after a tough few years earlier on this decade.

Consumers have, arguably, also grown tired of the mass market, and often explosive, Australian wines that helped to catapult the country onto the world stage.

However, Australians are a proactive bunch and, while a painful period of readjustment beckons, there is no reason to believe that the country is going to wither from the world wine scene.

For one thing, consumer markets, just like the world economy, are shifting to the east. Geographically, Australia is perfectly positioned to serve emerging markets in Asia, and notably China.

Production in Australia needs to fall and a tough couple of years seems inevitable. But, there is hope for those that will remain.