Australian wine companies have cut prices in the crucial under-A$10 market to try and reinvigorate a sluggish domestic market hit by GST, rising interest rates and worries of am impending economic downturn, according to industry leaders.

The Winemakers Federation of Australia (WFA) said price competition in the cheaper bottled wine market was the most competitive the industry had seen for years. However it was difficult to pinpoint reasons particularly as the Australian Bureau of Statistics showed figures reporting that bottled wine was still growing 6%.

Brands such as Orlando Wyndham's Jacob's Creek and Lindemans Bin 65 are selling at "fiercely competitive prices," according to one Australian source.

Reasons are hard to define, but several of Australia's bigger companies have reported flat conditions on the domestic market, with destocking after millennium celebrations a key factor.

Yesterday, BRL Hardy's Australian trading manager, Brian de Mamiel, was reported as saying that a flood of new companies on the market and improved availability of wine were putting pressure on big brands at the lower price points.

The WFA also pointed out that companies had lifted the price of red wine in the past 18 months due to the red shortage and were now perhaps "paying the price" with a consumer backlash.