Australia has become the first country in the world to approve voluntary national labelling standards for olive oil.

Up until now many people buying olive oil have been confused by labels such as "premium" and "extra light".

The president of the Australian Olive Association, Paul Miller, says most of the terms used to label olive oil are meaningless and do not tell the buyer whether the oil is fresh or refined.

"Most of the world olive crop is swept up off the ground and the oil when it's made has off flavours, it's often rancid and so it needs to be taken to a vegetable oil refinery to be made edible or palatable," he said.

"That refining process changes the oil and refined olive oil is a much lower grade than extra virgin.

"The new standards say that consumers should be told whether an oil is refined or whether it's extra virgin."

Mr Miller hopes the new standards will stop the use of terms such as "extra light", "pure" and "premium" on labels - instead, they will have to tell you what you are buying.

"What we really want is that if an oil is labelled extra virgin that it is, that it doesn't contain any refined olive oil," he said.

"That people are getting what they should be getting when they are buying that and if want to buy lower grade they need to know its a lower grade.

"So for example terms like extra light - our research has shown that consumers may think that's low fat extra virgin olive oil, when in fact it's the most refined product."

About half of the olives grown in Australia are produced in Victoria.

Rob Culkin-Lawrence from Birregurra Estate Olives in the state's south-west has welcomed the new standards.

He says consumers should be able to taste when they have got the good oil.

"A good olive oil is an extra virgin olive oil so has a very, very low acid level. Good olive oils are routinely fruity, they can take on a number of tastes," he said.

"I pressed an oil this year that had a taste of banana which is quite regular but it just had a beautiful note to it."

Mr Culkin-Lawrence says most imported olive oils are not much good.

"By far the majority I have tasted, I would say that they're 18 months, two years old when they come into the country," he said.

He says while the standards will be good for consumers, there will not be a huge effect on Australian producers because most of the olive oil made here is extra virgin and any refined oil is usually exported.

Australia represents just 3 per cent of the world market in olive oil, but Mr Miller says the national standard is a world first, and other countries are watching with interest.

"[The labels have] had a lot of support from Europe for this outcome, a lot of support from the US, a lot of support from growers and producers from around the world who have all been expressly concerned about this," he said.

"I'm proud to say that Australia has taken the lead and we're the first ones to take it on."