Changes in the sheep industry over the last 20 years represent a trend that is unlikely to be reversed. The farm gate value of wool production has decreased from over $6 billion to ~$2.5 billion and the value of sheep meat has increased from $0.5 to $2.2 billion. Wool and meat are now on an equal footing in terms of the economic value of each sector of the industry. Future profitability of both wool and sheep meat production depends on achieving a high rate of productivity gain and improving quality attributes valued by consumers. Wool and sheep meat cannot compete on price or volume with synthetics and cotton in the textile market or with chicken and pork in the meat market. Differentiation based on quality and consistency needs to be measurable and clearly understood by consumers. The combination of genetic selection and good management can deliver improved productivity gain. Skills development and training will be essential for the industry to fully utilise available knowledge and new technologies.