Australian winemaker turns waste water into winning wines

World-beating winemaker Michael Fragos sees his South Australian vineyards as the perfect spot to grow grapes -- the soil, climate and afternoon sea breeze are all ideal.

The only problem is the lack of water in one of the country's driest states, a hurdle that he and other McLaren Vale vignerons have overcome by using treated waste water to irrigate the deep green vines.

A visit to the area is testimony to the long-running drought and scorching Australian climate -- any land where vines are not growing is crackling dry.

THE soaring Australian dollar is costing major wine exporters millions of dollars

While exports reached a record $3.02 billion last year, experts say a combination of drought, the high dollar and foreign competition means the industry now faces significant challenges.

Bottled wine exports are still growing but at a declining rate and experts believe the growth may stop within two months.

The rising dollar is particularly hitting the price-sensitive cheaper end of the market, as the buoyant Aussie dollar makes exports more expensive.