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Thursday, 27 November 1986
Page: 2928

Senator MICHAEL BAUME(9.16) —I just raise a couple of very brief matters. Firstly, I want to refer to the annual report of the Department of Transport which outlined the volume of freight moved and the approvals given by the Department for the licences to ship around the coast. I refer to the massive cost consequences of using Australian bottoms in this trade. I will endeavour not to stray beyond the question of the specific relationship to estimates for the current year. That is why I very briefly refer the Committee to an article entitled `Australia's mineral markets future directions' by Mr Don Carruthers in the Mining Review, which maintains that the current policy of the Department as outlined in those approvals given in the annual report is disastrous for Australian industry, particularly that section of industry which seeks to upgrade the value of Australian raw materials by adding value to those raw materials as, for example, happens in the case of aluminium where, instead of just being bauxite exporters, we now are exporting a lot more alumina and aluminium, which involves a massive increase. We export bauxite at $70 a tonne. When it is made up into alumina, it brings $320 a tonne and aluminium brings $1,100 a tonne. Clearly the significance of coastal shipping in this sort of situation where resources from different parts of Australia are brought together to create a finished product is overwhelming. The inhibitions as a result of the activities of this Department insisting on the use of Australian bottoms can be enormous.

I make the point very briefly that the CRA group has estimated in the article I referred to that it would save $5m a year if the vessel that takes its alumina from Gladstone to New Zealand and Tasmania operated under conditions competitive with foreign vessels. The article states that having to use Australian vessels to take alumina from the Alcoa of Australia Ltd refinery in Western Australia to Tasmania is roughly twice as expensive. Typical freight rate costs were around $20 per tonne, compared with foreign vessel rates of less than $10 per tonne. The same thing happens with coal--

Senator MacGibbon —It is featherbedding in the maritime unions.

Senator MICHAEL BAUME —As Senator MacGibbon says, it is a featherbedding of the maritime unions under arrangements that this Department maintains. The point made by Kembla Coal and Coke Pty Ltd was that fuel coal currently shipped to Tasmania by KCC from Port Kembla-I have a specific concern about this because it comes from my region-has a freight cost of between $21 and $27 a tonne, but if it could use foreign vessels for the task, a freight rate of $10 to $14 would be possible. In fact, fuel coal from South Africa can be transported to Tasmania at a cheaper freight rate than from Port Kembla. I suppose the point that emerges from this is that the whole of the funds we provide to this Department to maintain this kind of regulation not only adds massively to the costs of production of Australian products but also inhibits our capacity to upgrade our own raw materials at a competitive price so that we can get the value added benefit in exports.

The last example I want to give is iron ore. Hamersley estimates that having to use Australian flag vessels rather than foreign ones to move its iron ore from Dampier to Kwinana adds over $5 to the cost of producing one tonne of iron. Put another way, iron ore can be transported more cheaply from Dampier to Korea than from Dampier to Kwinana, and the same goes for Queensland coal to Western Australia and Korea. As I say, the consequences of the activities of this Department are absolutely disastrous for Australia's long term future and for our capacity to increase our exports at a time of crisis such as we have at present. Quite frankly, I take the view that we would probably benefit massively if the Department ceased to exist and we did not have to deal with this kind of appropriation anyway.