The former federal Labor government promised to revolutionise coastal shipping through reforms introduced in the Fair Work Act of 2009 and the Coastal Trading Act of 2012.
These Acts imposed Australian shipping industry award rates on foreign vessels wanting to trade between Australian ports, and also gave so much preference to Australian flagged vessels that it became a logistical nightmare for foreign vessels to apply for a licence to participate in the coastal trade.
In the end, by seeking to exclude foreign-flagged vessels from the coastal trade between Australian ports – or at least to make it extremely difficult and impractical for them to do so profitably – these so-called ‘reforms’ have left many of Australia’s major industries, including agriculture, left high and dry.
In short, Australian shipping is in a mess.
It is not uncommon for a foreign ship to discharge cargo at one port (eg Fremantle) and load at another (eg Gladstone). Understandably, they want to shift cargo between those two ports to make the whole voyage more profitable. This is called triangular trade.
The aim of the Labor legislation was to protect cabotage, the practice of restricting access to transport in domestic waters. They wanted to reduce the number of foreign ships working the Australian coastal trade; while at the same time making Australian ships more competitive.
Former Transport Minister Albert Albanese called it ‘Australian ships on their own blue highway’.
The effect has been to increase the costs of shipping generally, regardless of whether they be Australian or foreign flagged. This has resulted in increased shipping charges across the board. In some cases, it has forced some ships out of the market, as we saw in Tasmania with the withdrawal of the AAA consortium from the Bell Bay run in 2011.
Foreign shipping lines say that the Australian coastal trade is now too expensive for them, particularly the triangular trade. Rio Tinto has been quoted as saying that they could crew a dry bulk carrier with international seafarers at around 26 per cent of the cost of an Australian crew.
Another consequence is that it can be cheaper for businesses to source bulk commodities from overseas; and this leads to imports displacing domestic production. When it is cheaper to buy product in New Zealand and land it in Brisbane than it is to purchase the equivalent Australian raw material from Victoria and ship it to Brisbane; or when it is cheaper to ship product from Melbourne to Singapore than it is to ship the same product from Melbourne to Brisbane, it is not hard to realise that Australian exporters are finding it tough to compete with overseas competitors.
Furthermore, recent reports have confirmed that the number of major Australian registered ships with coastal licences has fallen from 30 in 2006/07 to just 13.
So much for the Australian economy reaping the benefits of these shipping reforms.
Earlier this year, the Productivity Commission undertook an inquiry into coastal shipping policy and regulation.
In our submissions, NFF and TFGA called on the federal government to
repeal the Coastal Trading Act and legislate to preserve importation rules as necessary to avoid unintended harsh outcomes or further restricted access to the coastal trade;
repeal collective bargaining provisions in the AISR Act;
repeal regulations in the Fair Work Regulations that extend the Fair Work Act to ships engaged in the Australian coastal trade and to majority Australian-crewed ships; and
make new regulations to expressly exclude ships engaged in the coasting trade from coverage by the Fair Work Act.
The Commission’s draft report noted that cabotage rules are effectively industry assistance that increases costs and reduces competition. It found that cabotage ensures ‘significant cost disadvantage for Australian businesses reliant on the movement of bulk commodities’ and recommended abolishing cabotage policy.
This followed the Productivity Commission’s draft report on Tasmanian shipping and freight, which found that the ‘cumulative effect’ of recent changes to Australian coastal shipping laws was ‘reduced interest from international vessels engaging in the Australian coastal trade’, ‘reduced shipping options for users of domestic shipping services’ and increased ‘costs of providing domestic coastal services’.
The federal government has yet to respond formally to either of these draft reports.
Tasmania is an island state. Unlike the other members of the Australian federation, we are largely reliant on coastal shipping for both inbound and outbound services. It is therefore vital that the federal government takes urgent steps to support Tasmania’s efforts to build a strong and robust economy. Following through on the issues raised in these two reviews is, in our view, an urgent priority – and long overdue.
Before the last federal election, the now Infrastructure Minister, Warren Truss, said he was “determined to put the current system under the microscope to streamline processes and foster a vibrant and sustainable shipping industry in Australia”.
Minister, your time has come.
TFGA Chief Executive Jan Davis
