Australia wants a separate dialogue with China on their dispute over wine, the agriculture minister said on Sunday, rejecting Beijing's proposal to link wine with other trade issues as the two nations slowly seek to improve battered relations.

China's removal of tariffs last month on Australian barley has raised hopes for an easing of wine tariffs, in place since 2021, which have hammered the country's wine exports.

Bilateral relations sank in 2020 when Australia called for an inquiry into COVID-19 origins, triggering reprisals by Beijing, including a raft of trade restrictions that hurt Australia's export-reliant economy.

China on Thursday proposed a "packaged solution" that would tie the wine dispute to those about duties on Australian imports of Chinese railway wheels, wind towers and stainless steel sinks, state news agency Xinhua reported.

But Agriculture Minister Murray Watt said on Sunday, "We see them as entirely separate matters." The government wants the wine dispute "resolved in the same way the barley dispute was resolved - through dialogue", he told the Australian Broadcasting Corp.

"We will continue our WTO (World Trade Organization) case when it comes to wine and we will continue to defend the case when it comes to steel," Watt said, referring to disputes ongoing at the global trade body.

China was Australia's top wine export market before COVID, peaking at A$1.2 billion ($770 million) for the 12 months to January 2020 when the pandemic hit. In the year to June, they had plunged to A$8.1 million ($5.2 million).