White wine production was worst affected by the drought

The Winemakers' Federation of Australia (WFA) attributed the decline to "drought conditions across most regions and cool weather during initial bud formation".

The total harvest was 1.36 million tonnes, down 10% from the 2002 season.

White grape production fell 16% to 558,000 tonnes while red grape output was 5% lower at 802,000 tonnes.

"With only limited plantings of white grapes in recent years, the seasonal conditions were always going to impact most heavily on whites," said WFA policy director Stephen Strachan.

'Above average to excellent'

In its annual vintage report, the WFA said the smaller harvest would help reduce oversupply problems, particularly for red grapes.

"With the dramatic increase in winegrape plantings until 1999, the 2002 and 2003 vintages were always going to challenge the industry's capacity to grow markets quickly enough to sell the finished product as profitable, branded wine," said Mr Strachan.

The report said the quality of the 2003 vintage would be "above average to excellent" because the dry conditions had helped the crop remain "generally disease-free".

Production of the Shiraz red grape fell only 2% - at 320,000 tonnes, Shiraz now represents almost a quarter of Australia's total winegrape harvest.