Australia's wool industry is suffering on two fronts by China's hardline lockdown policy

Most growers know they are dangerously exposed to a monopoly buyer as China is by far the largest processor of their wool clip.

But they may not realise nearly half of all Australian wool is ultimately bought at retail in China as well.

The country's continued hardline stance against COVID-19 transmission hurts Australia at both ends of the market.

This retail exposure was detailed in the most retail market intelligence report from Australian Wool Innovation.

Last month's AWI annual meeting was told ongoing COVID lockdowns in China were a significant factor in the weakness of the current wool market.

About 80 per cent of the Australian wool clip is at least early stage processed in China but what is little understand is that half of that volume is consumed in China at retail.

Australian wool began the year on a high with the Eastern Market Indicator on a healthy $14.49/kg.

But demand has been sliding since June.

MORE READING: Australia's wool domination comes with trade risks.

China's continued policy of pushing for COVID-zero through lockdowns at both manufacturing plants and domestic residential areas is making it hard for both the Chinese population but also the Chinese economy.

"There is no doubt as to the significant effects of the policy as people cannot move around and purchase garments as easily and while online purchasing can continue, the uncertainty around economic activity only compounds the issue," AWI's report states.

Strong foreign exchange rates through a significantly weakened Australian dollar "have somewhat cushioned" Australian woolgrowers from the retail demand drop.

Continued flooding has also impacted on the volumes of wool coming onto market due.

AWI chief executive John Roberts said wool was "relatively well positioned" through the global trend towards natural fibres.

Mr Roberts said consumers were more eco-friendly and sustainability-conscious across key markets.

"This is an ongoing trend that is expected to only grow into the medium term at least.

"However until our major processor and market is back into production and confident to again spend, there is significant uncertainty for the price of wool and those who purchase it both through the supply chain and ultimately, at the check out," he said.

Economic analysts across the world are closely watching for signs China will relax its hardline stance on COVID, and so are Australian woolgrowers.