Adelaide’s dying hospitality industry under threat with new alcohol tax

Another huge blow to the hospitality industry spells trouble for Adelaide’s fizzling night-life, after a brutal few months has seen several iconic city venues close their doors.

Local bar and club owners fear Adelaide’s night-life could become a dead zone, with this week’s federal alcohol tax hikes dialling up the pressure on the already-struggling industry.

Hugh Scobie, co-owner of cult Hindley St bar Ancient World, told The Advertiser there was no doubt there’d be more closures on the party strip as owners are forced to respond to wholesale alcohol prices going up.

“It’s grim,” Mr Scobie admitted.

“It’s just one thing after another, I don’t know how much more the market can take to be honest,” he said, adding that the uncertainty is a constant threat to his business.

As of this week, Australia has the third-highest alcohol tax in the world, with spirits having risen to $101.85 per litre of alcohol, up from $100.05 in the previous six months.

Meanwhile, the tax on a pint of beer has jumped to 90 cents, while the tax on a slab is $20, according to the Brewers Association of Australia.

The increase is the latest blow amid ongoing cost of living pressures faced by Aussies, with nationwide brewers, distillers and hospitality industry figures concerned it will prove another unwelcome impost for drinkers.

Hugh Scobie, one of the owners of alternative bar Ancient World, says they’re feeling the pinch of the cost of living crisis. Picture: Adam Davies Photography

“There definitely will be more (closures) … Most people can’t afford to spend that $50 on a night out,” Mr Scobie said this week.

“A lot of our punters are young people and students and they just don’t have disposable income.”

Ancient World has feeling the pinch for months, appealing to the masses in November in an impassioned Instagram post prompted by the closure of Enigma, 1000 Island and Wnderland nearby.

“It’s hard for us to share, but we are also feeling the heat of these same issues,” it read.

“We have made it through the lockdowns and harsh restrictions … We really hope to make it through the aftermath that has brought on such hard financial times for everyone.”

Since then, the surrounding area of the city has lost Hades Hula House, Super California and Fat Controller, with Mr Kim’s up for sale and Red Square shutting its doors in March.

“We understand a lot of people are doing it tough at the moment,” Mr Scobie said.

“Keep coming out if you can, keep trying to support independent venues.”

Several shock closures recently have been blamed on the tight grip of the cost-of-living crisis.

The outlook for the rest of the year is increasingly dire as remaining venues are forced to jack up the price of drinks while already fighting to get customers through the door.

Red Square on Hindley Street was once one of Adelaide’s most popular night spots. Picture: Naomi Jellicoe

Michael Keogh of the Gonzo Group, which runs hot spots Shotgun Willie's’s, Memphis Slim’s, Cry Baby and Sugar, recently told The Advertiser the alcohol tax started generating concern in the industry two years ago.

“That’s when CPI started to increase,” Mr Keogh said.

“It was 5.1 per cent at once … That was an unprecedented increase, then six months later, the next one came.

“The price for a base spirit when I was 18 was about $8. Now, depending on which venue you go to, it can range from anywhere between $10 and $12.”

Aussies may find the cost of a base spirit creeping towards $20 at some venues in the coming weeks.

“That’s not because businesses have just decided to do that. They’ve had to because they’re passing on the cost,” Mr Keogh said.

Jasmin Patel, owner of Mr Goodbar off Rundle St, similarly said taxes imposed on the industry were “unreasonable”.

Mr Goodbar owner Jasmin Patel expected things to get worse this year. Picture: Supplied

He said he “wouldn’t be surprised” to see a number of instant closures and businesses on the market for cheap prices in the coming months.

Spirits & Cocktails Australia chief executive Greg Holland this week pointed out federal government data shows the automatic twice-yearly indexation of spirits tax is actually undermining efforts to curb inflation.

“The alcohol category was the biggest contributor to the December CPI quarter increase, accounting for a 2.8 per cent rise,” Mr Holland said.

He urged the Albanese government to reconsider the automatic indexation of spirits excise, introduced in 1984.

John Preston, CEO of the Brewers Association of Australia, highlighted the country now has the third-highest beer tax globally, surpassed only by Norway and Finland.

The excise tax, which varies based on the alcohol content of beverages, is adjusted biannually in alignment with inflation rates.

Australians have seen an almost 15 per cent surge in excise tax since the last federal election in May 2022.