Shipping industry needs help

Australian produce is generally exported by ship. We are an island nation and, apart from some air freight, the great bulk of our commodities and the vast majority of Australia’s international trade by volume travels on the seas.

The importance of shipping to modern trade in our economy cannot be underestimated. In 2012-13 Australian ports managed more than $400 billion worth of international cargo and saw some 4,900 overseas cargo ships make almost 14,000 port calls. With this level of activity we cannot afford for this industry, like all industry, to be beset as it has been by the dead weight of red tape and uncompetitive costs.

Under Labor’s bureaucratic and protectionist permit system, which was put in place to placate the maritime union, there were almost 1,000 fewer coastal voyages and almost two million fewer tons of freight moved by foreign vessels in 2012-13.

Figures released in the report Australian sea freight 2012-13 show that 49 million tonnes of coastal freight was loaded in 2012-13 but that five years earlier, in 2007-08, the figure was over 59 million tonnes. This represents an average 2.4 per cent decline each year in the total weight of coastal freight.

In addition, the Australian trading fleet continued its downward spiral. The number of major Australian registered ships with coastal licences declined from 30 in 2006-07 to just 13 by 2012-13. Since the Australian Sea Freight 2012-13 report, five ships have been added to the fleet. However, over the two years of Labor’s failed changes, the deadweight tonnage of coastal shipping has plummeted by 64 per cent.

The protectionist dogma used to justify Labor’s reforms did not save Australian jobs on the water and it has literally cost Australian jobs on land. The situation is even more grim when it comes to domestic freight. Between 2000 and 2012, shipping’s share of national freight plummeted from 27 per cent to less than 17 per cent.

Over the same time, the volume of Australian freight grew by 57 per cent. Projections for 2010 to 2030 see Australia’s national freight task growing by a massive 80 per cent. However, while the national road and rail tasks are expected to double, coastal shipping movements are expected to rise by only around 15 per cent.

This is due to the uncompetitive nature of sea freight in the current settings. Operating costs, particularly labour arrangements, are uncompetitive when compared with operating costs of foreign ships. We need to fix all of this to build a competitive shipping industry. For example, coastal shipping is bound by regulations where a ship has to wait idle in a port for a day before loading can start.

This can cost companies $10,000 to $20,000 a day, and it hits domestic sea freight companies whose costs have been increased by up to 50 per cent in some cases by Labor’s changes. This costs jobs and has the potential to cost a lot more jobs in our mining and manufacturing industries.

The Business Council of Australia estimates that Labor’s system has inflicted over 1,000 extra administration hours a year, every year, on the industry to comply with the new system. Thanks to Labor, Australian shipping has become uncompetitive. Shippers are telling the Australian government that container rates from Melbourne to Brisbane are almost twice the cost of those from Singapore to Melbourne, and bulk freight rates on the east-west route have reportedly doubled in the past year.

Transporting sugar from Thailand is cheaper than shipping it from Queensland. According to Cristal Mining in my electorate, Australian shipping can cost around $5 million a year more than a comparable foreign-owned ship on comparable routes.

On 8 April 2014 the Deputy Prime Minister released the Australian government options paper on approaches to regulating coastal shipping in Australia. The paper was very well received by industry. The Department of Infrastructure and Regional Development received a total of 85 submissions and is continuing to receive supplementary submissions and additional information.

There is a lot to consider. The submissions highlighted the problems experienced by producers, by manufacturers and by other users of coastal shipping with the current system. The five-voyage minimum requirement before a temporary licence can be granted hinders the ability to move just one-off cargoes by coastal shipping. For example, a piece of heavy machinery was unable to be shipped as a single voyage and therefore a temporary licence could not be granted and the machinery had to be moved by road.

That required a police escort, because of the oversize load, and the removal of overhead power lines. Where is the common sense in that? It was more complicated and costly than a voyage by ship. Certain products like LPG are moved exclusively by foreign ships operating under temporary licences. Even though there are no Australian ships capable of carrying the products, the shippers must still obtain licences for the movement of goods—red tape, unfortunately, for the sake of union red tape. It is a costly, time-consuming process that delivers no real value to the Australian economy.

Tolerance limits make the current system inflexible for coastal shipping users. The tolerance limit for the amount of cargo means, for practical purpose, that last-minute changes to cargo just cannot be made, or, if a change has to be made, the ship has to wait—it is delayed while waiting for the change to be approved. These delays can cost foreign vessels around $10,000 a day, and more than $20,000 a day for Australian ships.

It is extraordinary. Ships carrying petroleum products from offshore petroleum production facilities are not able to apply for a temporary licence, making it difficult to bring those products directly to mainland Australia. Submissions on the options paper have highlighted cost pressures faced by coastal shipping users.

Bell Bay Aluminium indicated an increase in costs from $18.20 a tonne in 2011 to $29.70 a tonne in 2012—an increase of 63 per cent—following the introduction of the current regulations. Compare that with the freight rates offered by foreign vessels, which sat at $17.50 a tonne in 2012. How can an Australian ship be competitive?

Overall, the submissions shared a common goal—to reform the current regulations, to increase flexibility and affordability for the users of coastal shipping and to encourage more coastal shipping. The coalition government is carefully considering these issues and is committed to developing an internationally competitive coastal shipping framework that enables the industry to operate effectively, to operate efficiently and to operate in the national interest.

Surely they are very worthy endeavours. These policies are also impacting onshore. They are having a knock-on effect on land-based Australian jobs and industry. The Business Council of Australia said that around 90,000 Australians are employed in manufacturing sectors that use coastal shipping, including oil refineries, cement, steel and aluminium. The BCA says that restrictions mean Australian firms are paying rates that can be up to double the rates offered by foreign ships, adding tens of millions of dollars to their cost base and making their operations less viable as a result.

There is a critical policy need for more affordable and flexible coastal shipping for major trade-exposed manufacturers that employ large numbers of Australians, especially when that employment is largely in a regional area like my electorate of Forrest. The Port of Bunbury in my electorate is central to the economic growth and development of the south-west region. The major products moving out through the port are alumina, woodchips and mineral sands.

The port does not currently have a container-handling facility, despite calls for the development of this capacity for many years. There appears to be adequate cargo within the south-west region as its origin or destination to allow for the development of container-handling facilities; however, the port does suffer from competition with the Perth based Fremantle-Kwinana ports. The Port of Bunbury does need to expand to handle containers, and I am going to keep working on this.

I remember well in 2005 that the state Labor government announced they would build a new gas-fired power station in Kwinana instead of a coal-fired one in Collie. To compensate, they committed $60 million for the Port of Bunbury for a dedicated coal berth to assist coal exports.

However, like many Labor promises, it did not eventuate. I find that particularly pertinent today, as a private coal company has been looking to export coal and there is no coal berth. At a time of uncertainty in Collie, as we see in the coal industry, an additional export opportunity that such a berth would have delivered would have been extremely valuable indeed. I support the legislation before the House today.