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Thursday, 31 May 2012
Page: 6477


Mr RAMSEY (Grey) (10:08): It gives me pleasure to rise to speak on the Shipping Reform (Tax Incentives) Bill 2012, which at first glance looks like an attempt by the government to try and reinvigorate the local shipping industry, which is slowly dying, in fact very close to death. There are parts of the legislation which one might support.

Ms Hall interjecting

Mr RAMSEY: I would suggest, having just listened to her contribution, that the member for Shortland, instead of just reading the party speaking notes, should actually read the contributions to the Senate inquiry from the industry. She maintains that everybody is happy about this legislation except the opposition. If she was to read the submissions to the Senate inquiry she would find that many in the shipping industry are not happy at all and, in fact, will be severely implicated by the issues arising in this bill.

Ms Hall: There was majority support.

The DEPUTY SPEAKER ( Mr Lyons ): The member for Shortland has had her turn.

Mr RAMSEY: There are just 22 vessels remaining registered in Australia, down from 55 in 2006. The average age of the fleet is 19 years; the international average is 12. We have the fourth largest shipping task in the world and it is fair to say that we do not have an internationally competitive shipping industry.

I started digging around and having a good look at this package of bills because, as the member for Grey, I looked at the industries in my electorate that are using coastal shipping and there are a number. For instance, GRA is a joint venture between CSR and Boral. It produces around 90 per cent of the gypsum for Australian cement and plasterboard production at Penong in my electorate. It is west of Ceduna. The product, gypsum, travels by rail about 80 kilometres into Thevenard, where more than 1½ million tonnes a year are shipped out. Gypsum is not rare and not expensive to mine. In fact, it is virtually worthless at the mine gate. Most of the cost of gypsum in Australia is freighting it from a place like Penong to its point of manufacture—80 kilometres of rail and maybe 2,000 kilometres of coastal shipping. If coastal shipping is double the international rates, which it already is, suddenly gypsum from Thailand, Indonesia or India not only becomes feasible but cheaper. If the GRA contracts go, there go real Australian jobs and real Australian companies. More than 40 people are employed by GRA at Penong. I hope they are not to be the sacrificial lambs at the foot of this legislation.

OneSteel in Whyalla are big users of coastal shipping. Metallurgical coal is shipped from Queensland and New South Wales to Whyalla. Dolomite from Ardrossan is shipped around the bottom of Yorke Peninsula to Whyalla and to New South Wales for steel making. You would think that OneSteel would ship iron ore from their mines at Whyalla to Port Kembla but, no, it imports feedstock from Brazil. You can ponder why that might be so. I cannot be sure that the cost of coastal shipping is the only reason for this but, if it costs $20 a tonne to ship local product and $10 a tonne to import, it is likely to be a big part of the reason. I also understand that OneSteel import limestone, which is a flux in the blast furnace, from Japan. There is no shortage of limestone in Australia but OneSteel import it because it is cheaper at the furnace door than it is to use Australian product. The reason for that, of course, is that coastal shipping is uncompetitive.

Nyrstar are also significant users. They are already under considerable duress courtesy of the carbon tax of $6 million a year they will pay at the Port Pirie smelter—$6 million for absolutely nothing they can do about their emissions, but I will put that to one side for the moment. Over half of Nyrstar's concentrate is now sourced from overseas.

Australia is a major exporter of lead and zinc concentrates, but the only sum that matters here is the cost at the smelter door of the concentrate—that is, material costs plus freight. Australia's material costs are good, and that is why we make money out of exporting. But, increasingly, we must export our concentrates and import our feedstocks for the smelting industry because of the freight differentials.

To understand the change this promotes, we have to understand how the current system works. Essentially, Australian registered vessels are fully protected enterprises. If companies want to move product from an Australian port to another, they must use Australian shipping if available. They can currently engage offshore vessels if an Australian ship is unavailable or an offshore vessel is travelling between destinations with empty cargo space and they can obtain a special permit on a per-voyage basis. The single voyage permit is issued for a single voyage between designated ports for the carriage of specified cargoes or passengers. There is a continuing voyage permit, which enables a vessel to work within our waters for three months at a time. Currently, 29 per cent of the coastal trade is serviced by internationally registered vessels operating under these permits. The big sleeper in this legislation is that the single voyage permits will go. That is what the industry is concerned about. To understand how this works you have to understand demurrage. It is the period when the charter remains in possession of the vessel after the period normally allowed to load and unload cargo. That means, if a ship is held up at port waiting to load, there is a daily charge charged to the charterer. I believe the current waiting time at Port Kembla, for instance, is over 10 days. This comes and goes a bit. We often see a photo on the front of our newspapers of the ships lined up off Port Kembla or Gladstone.

Currently, for an international vessel, demurrage is $10,000 a day. For an Australian vessel it is $37,500. So a shipping company does not have to have a ship hanging at anchor for long, waiting to load or offload, to incur some pretty serious costs—and that spills over into the overall cost of the charter. That is effectively doubling the shipping rate. However, coming to these bills: the Adelaide based company Penrice Soda estimates that, after the passage of these bills, the transport cost could be 500 per cent higher than the lowest rate available when using foreign ships. That is using foreign vessels with crews operating under the International Labour Organisation wages and conditions, which is basically ships coming from the OECD countries. International shipping is a tough industry and vessels from the OECD countries meet those international shipping standards.

Since the government passed the Fair Work Act 2010, Fair Work Australia now insists that any vessel operating under permit on Australian coastal shipping must comply with the provisions of the act—that is, essentially, Australian pay and conditions. This has already lead to significantly higher costs for our industries. It is protecting Australian jobs, and that sounds pretty fair. But I have already pointed out that that may well come at the cost of other jobs in the economy—like the GRA workers at Penong.

It is interesting to have a look at who the operators of the remnants of the Australian shipping fleet are. The biggest company is a player called CSL. It sounds a bit like the Commonwealth Shipping Line, but it is in fact the Canadian Shipping Line, a privately held company with global reach. It is a multinational company. There is nothing particularly wrong with that, but we are in this case protecting a multinational company, not an Australian company. Yes, we have Australian workers. But my sources tell me that, while some crew members are Australian, most of the crews are the same as every other multinational vessel in global shipping—that is, predominantly Filipinos, Ukrainians, Indians and various others from around the world. And I bet they love it, because working on Australian pay and conditions in our waters is probably pretty good.

But this bill is actually likely to make their employment less likely because the incentives will be to convert to Australian crews. Of itself, that sounds okay. But it brings us closer and closer to a closed shop because it insists on either Australian labour or seafarers with permanent residency be employed on Australian registered vessels. It is interesting that the government would insist on changes like this at a time when they have approved 457 visas for Roy Hill. These would seem to be totally conflicting policies. The government are trying to move for full Australianisation of labour on Australian vessels when at the same time they are prepared to be more flexible and accommodating—quite rightly—in other parts of the economy.

These bills move to make the ships tax-free businesses, and wages paid to sailors tax free if they are engaging in overseas voyages. This would largely bring Australian tax arrangements into line with the rest of the OECD nations. I support that part of the bill, but of course I do not get the opportunity to support one part of it and not other parts of it. Theoretically, this would make our shipping lines more competitive and put them on a level playing surface to be able to offer cheaper services to business. But unfortunately there is little confidence in the business sector that this will be the outcome and that the tax breaks will not be vacuumed up by the MUA.

Of particular concern is the commitment of the unions to engage in negotiation for productivity efficiencies as a trade-off for the tax-free status. But as we debate the bills here today we are expected to take the minister and the unions at their word—and nothing of their past behaviour would give me any confidence that we are likely to see a significant improvement in productivity. Surely we should have been presented with the whole deal before being expected to tick off on these bills. The new arrangements are expected to start on 1 July. Here we are, just one month before that, with no possibility of the bills passing within the next two weeks before the Senate resumes. So we have a two-week kick-off time for the new arrangements.

I noticed an article in the marine publication Lloyd's List quoting a press release from Wallenius Wilhelmsen Logistics, or WWL. It said: 'WWL regrettably announces they are unable to commit to carriage of coastal cargo from 1 July. The new legislation the Coastal Trading Bill 2012 shows there will be substantial changes to the way foreign carriers apply for, and are granted, permission to carry coastal cargo around Australia. Based on these proposed changes and new requirements it may become very difficult for WWL to continue participating in the coastal trade.' The article goes on to say that it does not really know where it is heading in a month's time.

This is typical of this government. They have been in government for almost five years and they make these broad announcements with a broad-brush approach—'We're going to fix this, we're going to change that'—yet they leave it to the wire to make the legislative changes. They have had plenty of time to have these bills in the House long before now and not leave industry up in the air wondering where they are going.

The legislation also moves to establish a secondary register. This is not a bad idea but the associated red tape will see the end of special short-term permits. I raised this issue earlier. That really is the big problem in this legislation. Ships operating on the second register must nominate their voyages 12 months in advance and engage at least five voyages. This is simply impossible for industry to accord with. If alterations are needed, they must be done in multiples of five. So if you have engaged a ship over a 12-month period, nominated five voyages and nominated the dates, and you want to put two extra ones on, you cannot. You have to put five extra ones on or make a wholesale change. These are impossible regulations for the industry to comply with. What this is saying is: 'We are not interested in any other ship. You must use Australian ships only, even though it might cost you five times as much as internationally registered and regulated ships.' That is a cost too big for Australian industry to bear. It is certainly too big for the industries in my electorate to bear and I think it is too big for industries in the rest of Australia.

It is the same as every other tariff wall. In the efficient industries, for the jobs the economy has in steel making, mineral refining, plasterboard manufacturing, even coalmining, one man's tariff is always another man's job. It flies in the face of the Hawke and Keating reforms. What on earth must the Minister for Trade think of this? Dr Emerson is of the dry, practical, economic view. I have not heard him speak on this bill—I do not know if he intends to—but I think this would be making him sick. (Time expired)