Jan Davis: Sailing the high seas

While the first months of the new government have highlighted proposed changes to Bass Strait shipping from both the public and private sectors, we still have fundamental inefficiencies on our domestic shipping regime around the Australian coastline.

Australia’s agricultural sector is worth about $50 billion at the farm gate and three times that when you add the value of the industries that process food and fibre that we grow.
Transporting that produce comes at a significant cost, particularly around the coast and especially across Bass Strait.

Governments have found coastal shipping reform particularly difficult, because there are many vested interests at work. TFGA recently made a submission to another review of coastal shipping regulations. You can see our submission on our website.

The 2012 Coastal Trading Act was supposed to revitalise Australian shipping, but there is no evidence of that having happened. In fact, shipping goods by sea has become more expensive as the Australian coastal trade is all but closed to foreign ships.

Australian shipping operates under a system of registration, licences and permits along its coast. Under Australian industrial legislation, Australian workers employed on Australian owned/operated/registered vessels working in Australian waters have always been covered by Australian legislation. However, foreign seafarers have always generally been exempt from Australian domestic legislation.

This changed from in 2010, when amendments to the Regulations to the Fair Work Act 2009 meant that foreign vessels operating on the Australian coast continuously or on frequent occasions in a relatively short period of time will be covered by Australian industrial law, and be obliged to provide Australian minimum wages and conditions for the duration of that vessel’s Australian journey.

In other words, most foreign flagged ships operating in Australian waters must comply with Australian work conditions and wages. This is called cabotage.
Cabotage is a pseudonym for protectionism. It reduces competition and increases costs – and nowhere is that more evident than in Tasmania.

Under the Australian International Shipping Register Act 2012 (AISR), all registered ships have to have a collective agreement with maritime unions. This means collective bargaining is compulsory, which means the unions hold the whip hand in registering ships that can work the coastal routes around Australia.

Foreign ships wishing to work on the Australian coastal trade must comply with Australian workplace laws, thereby increasing costs. This has deterred foreign ships seeking to provide services around the Australian coast.

The TFGA supports the view of the National Farmers’ Federation that the Coastal Trading Act should be repealed to encourage greater competition in the Australian coastal trade and that the AISR’s collective bargaining provisions be repealed.

The Tasmanian economy bears the costs of a modern service economy but struggles to generate the growth and economies of scale to absorb these costs. Achieving this outcome is unlikely without an increase in the level of economic activity.

There has to be a true equalisation of freight costs for Tasmanian shippers with their mainland counterparts who move freight by road or rail.

The 2006 Productivity Commission inquiry established that Bass Strait freight rates were equal to or higher than most other short haul sea freight distances around the world. This continues today. Sea freight rates from northern Tasmania to Melbourne are equivalent to shipping the same goods to Asia. Further, the Commission confirmed that Australian coastal shipping policy does not assist competitiveness in respect of manning, wage rates and access by international flagged ships.

On the immediate home front, we welcome SeaRoad’s proposed upgrade of its fleet across Bass Strait, made now more important by the new Tasmanian Government’s decision to impose passenger priority on the two Spirit vessels. However, this is a long way off – and we need increased capacity and greater certainty now.

We need faster, more versatile, energy-smart, short-haul feeder vessels to facilitate efficient freight service delivery. This capacity has to be capable of delivering fresh produce to markets in a timely manner. And we have to overcome the need to trans-ship exports through Melbourne. It is killing us.

Just as fundamental to our future is a clear acceptance by other governments – state and federal – that Tasmania’s geographical location should not put us at an economic disadvantage; that we are all part of a federation; and that, barring a miracle, moving freight from Tasmania via more traditional land-based routes to major markets can never be a realistic option.
TFGA chief executive Jan Davis