"This is another example of how AWI is building alliances with designers, manufacturers and retailers to ensure the best available technology and knowledge is used to deliver better performing Australian Merino wool products for consumers.
"The best way to get more Australian Merino wool into global apparel markets is to work directly with the designers and retailers who make the decisions about what fibres are used, and this is what AWI is doing.
"Increasing demand for Australian Merino wool depends on new innovative products and performance improvements in colour, softness, drape, handle and easy care, both through the development of new innovations and the application of the best existing technology."
Mr Cromb said the young fashion category was moving toward more natural fibres which was good for wool but warned that wool producers needed to remain innovative, refine the quality of yarns and continue to improve softness, easy case, drape and handle.
If the POSH Merino knit is a success in Australia, AWI plans to hold discussions with Kookai's international head office in Paris to discuss taking the development to the brand's northern hemisphere franchises.