Australian wool growers will be paying more income tax after sustained price rises for most of this year. While returns from superfine fleece are lagging the general market, buyers of the stylish lots and broader merino and cross bred fleece continue to buy at a premium. Wool volumes are falling below a critical threshold. Prices are at four year highs and still rising. Market's upward trend and relative stability hide powerful forces bringing unprecedented change to the industry. The current prices mean good returns for graziers growing medium fleece wools.

Demand has picked up particularly in the US as the influence of the global financial crisis subsides. The main buying is being done by Chinese mills. Fashion houses are using more wool, there is stronger demand for knitted fabrics, and in the US and Europe consumers are looking at woolen fabrics in a more favorable light. That is reflected in a very strong demand for the broader types of wools, the 25, 26 and 28 micron wools and the cardings.

The wool market is very volatile at the moment and this is another effect brought on by very strong demand and low wool supply in Australia.