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Thursday, 31 May 2012
Page: 6488

Mr IRONS (Swan) (10:55): I rise to speak in this cognate debate on the Shipping Reform (Tax Incentives) Bill 2012, the Shipping Registration Amendment (Australian International Shipping Register) Bill 2012, the Coastal Trading (Revitalising Australian Shipping) Bill 2012, the Coastal Trading (Revitalising Australian Shipping) (Consequential Amendments and Transitional Provisions) Bill 2012 and the Tax Laws Amendment (Shipping Reform) Bill 2012, which are before the House.

I take a particular interest in the legislation because my electorate of Swan contains Perth's major freight and distribution hubs in Kewdale and Welshpool, and this area has a symbiotic relationship with the shipping industry. The freight network must be linked up and operating well to take advantage of the boom and reduce cost-of-living pressures in Perth which are higher because of the distance goods have to travel to get to the second most isolated capital city in the world. It is therefore important that steps are taken to help revitalise the shipping industry. However, one of the major problems with this legislation is that it is projected to increase shipping costs and freight rates by up to 16 per cent, which will be passed on to the consumers and will be an additional cost-of-living impost on top of the carbon tax for my constituents of Swan. I will go into some more detail on this later in my contribution.

I know that the Leader of the Opposition, Tony Abbott, understands the importance of the hubs in Kewdale and Welshpool as he has visited the area on a number of occasions since the last election, speaking to industry and transport services. By the way, I can say to the government members that the carbon tax has not gone down very well at all in this freight and distribution hub among the thousands of workers employed or the industry leaders. In fact, Tony Abbott was cheered by the workers on the shop floor during one particular visit that we did.

For a seafaring nation with a rich seafaring history, one would have thought that Australia would have a more prosperous shipping industry. However, while Australia has the fourth largest shipping task in the world, there has been a decline in the number of Australian registered ships over the last decade. In fact, there are currently only 22 Australian registered ships and, with Australia's freight task set to double by 2020, and travel along the eastern seaboard, this decline creates a certain amount of pause for thought. From Perth you can see the boats queuing offshore near Cottesloe all day and it is remarkable to think that across the country there are only 22 registered Australian ships and only four Australian flagged vessels participating solely in the international trade which, with sea transport carrying over 99 per cent of international cargo by weight and about 75 per cent by value, seems for Australia to be strikingly low.

Perhaps part of the issue facing the industry is that, traditionally, the Australian shipping industry has been uncompetitive internationally and the higher cost of running an Australian vessel as opposed to a foreign vessel has been prohibitive. It is in this context that in recent times there have been a number of calls to address this situation. While the idea of shipping reform has been around for many years and a number of inquiries and reports have occurred, these bills today are the government's attempt at addressing the situation.

In essence, the five bills before the House today are designed to provide a regulatory framework for coastal trading in Australia which will stimulate growth in the number of Australian ships on our coast and maximise the use of Australian flagged vessels. Yet the comments and submissions received suggest that there are a number of groups with serious concerns about the package—concerns which are wide-ranging but centred around the belief that these bills cannot meet the objective of revitalising the shipping industry and in fact may hasten its decline. I think that, after all the disasters and stuff-ups that this government has presided over, there would not be many members of the public who would be surprised that the Gillard government could create legislation that would do precisely the opposite of what it was intended to do. We in the coalition will do all we can to make the government see sense on these bills. The legislation has been rushed and proper consideration has therefore not been able to be given to the major issues in this bill. For example, the first draft of the Coastal Trading (Revitalising Australian Shipping) Bill that was released in December required a major redraft, along with the other bills comprising the total package, yet only a few weeks of consultation were undertaken before the package was introduced into parliament. When the coalition referred the bills to the House committee for scrutiny, the bills were given only a brief consideration and sent back with a dissenting report.

With the concerns that have been raised by the industry, it is clear that some scrutiny is needed. Given the reluctance of the government to use the committees for this purpose, I agree with the suggestion that has been made for a Productivity Commission investigation. This suggestion of a referral to the Productivity Commission was made, in part, because of the regulatory impact statement deficiencies, with customers and industry participants wanting to know basic details about the financial implications of the package—which you would have thought the government would have provided prior to introducing the legislation into parliament.

Another reason for a potential referral is the unfinished compact between the shippers and the unions which remains uncompleted, despite Minister Albanese having said it is vital for productivity. At this point, we do not know what, if any, productivity gains are likely to be made from this package of bills. As the coalition dissenting report notes, any improvements in productivity cannot be guaranteed, because they 'depend on yet to be concluded negotiations with notoriously militant unions such as the MUA'.

In asking the parliament to pass these bills, the government is effectively saying: 'Trust us. Trust us to keep our word and to confidently deliver a negotiated result.' I do not think there is anyone left in Australia who has any level of trust in the government—and the coalition will certainly not be affording the government this trust.

Mr Sidebottom: Come on, come on!

Mr IRONS: I hear the member from Tasmania interjecting. I would support moves for a referral to the Productivity Commission, which I know the Independents have indicated their support for. However, in the absence of any proposal to adjourn the debate and refer the matter to the Productivity Commission for further attention, the coalition will be moving a series of amendments. Today, I want to go to several of the specific problems with the legislation raised by concerned shipping industry groups, but I want first to make a few general points about the package of bills we are debating in the chamber this morning.

First, I would point out that this package is being billed by the government as a 'regulatory framework to stimulate growth' yet it is on this point that the government often falls down in its handling of industries. It is difficult to stimulate growth through the new regulations and, as I will discuss in a moment, it is the regulatory aspect of this package that has created many of the issues raised by those concerned. As Caltex has said in relation to the Coastal Trading (Revitalising Australian Shipping) Bill 2012:

The shipping reform package, in particular the Bill, will increase red tape at a time when Commonwealth and state governments, together with business, are seeking ways to reduce it. The Bill contains clear examples of unnecessary and unproductive regulatory requirements and therefore should be subjected to close scrutiny to remove all regulation not essential to the objects of the Act and the broader national objective of improving business productivity through greater efficiency.

The member for Grey and the member for Mayo have already spoken about an article in Marine Publications Lloyd's List yesterday which had the heading 'Cabotage concerns leave WWL with dilemma'. That article said:

… [WW] Logistics says it will not commit to carrying coastal cargo until new cabotage laws are finalised.

In a statement released this morning, WWL said it was “regrettably announcing” it was unable to commit to the carriage of coastal cargo after July 1.

"The new legislation ‘Coastal Trading Bill 2012’ shows there will be substantial changes to the way foreign carriers apply for and be granted permission to carry coastal cargo around Australia", the company said in a press release.

Based on these proposed changes and new requirements it may become very difficult for WWL to continue participating in the coastal trade, according to the new laws that are set to come into effect from 1 July. However final recommendations from the Senate committee are unlikely to be finished until June 19.

"This will give only 11 days notice before the planned legislation enactment," the company said, "and there are also other aspects of the legislation that are still not known."

This, again, is typical of this government in all the things they become involved with: not getting the detail out to industry or out to stakeholders.

While the idea of shipping reform has been around for many years, and a number of inquiries and reports have occurred, the specific details of the legislation have only recently been announced. The minister announced the broad outline of the shipping reform package in September last year and, at the same time, announced that the start date would be brought forward by 12 months so that the new scheme would commence on 1 July 2012. This reminds me of the National Disability Insurance Scheme, which has bipartisan support in the House.

After the budget, commentators were critical of the government for not sticking to the recommended time frame for the implementation of the package—a time frame that had been recommended by the Productivity Commission. By rushing the announcement in the budget, the process, which is important in the long term for getting this policy right, has been disrupted. It may be a hangover from the chaotic Kevin 07 days, but there still seems to be an element of disorder in how this government approaches major changes.

In addition to these general points, there are a couple of specific areas that should be the focus of attention here. The most significant one is the new licensing system and the red tape and increased costs associated with it. The licensing system proposed in the Coastal Trading (Revitalising Australian Shipping) Bill 2012 establishes a completely new, tripartite licence system consisting of: (1) a general licence, which provides unrestricted access to engage in coastal trading in Australian waters over 5 years; (2) a temporary licence, which provides limited access to engage in coastal trading over a 12-month period for foreign or registered vessels; and (3) an emergency licence, which is designed to cover emergencies such as natural disasters.

The regulations surrounding the temporary licence in particular just do not make sense. According to the explanatory memorandum to the Coastal Trading (Revitalising Australian Shipping) Bill, a temporary licence will be issued only for voyages where required information is known, including expected loading dates, loading and discharge ports, and cargo type and volumes. However, as Shipping Australia has said in a statement, it is impossible to forecast the movement of such cargoes over a 12-month period in terms of expected loading dates, kinds of volume of cargo, type of vessel and the ports of loading and unloading of cargo.

It just makes no sense to create a temporary licence that requires a 12-month plan. And if a 12-month plan is submitted and needs to be modified—which one would have thought a likely scenario—the shipping company would be required to add a minimum of five extra voyages. This for a start is an arbitrary number, but it will add red tape and reduce flexibility of Australia's shipping industry, the opposite of what I thought the bills were supposed to be doing. On a further point, to apply for a temporary licence in the first place, a minimum of five voyages is required, which inevitably discriminates against smaller coast shippers—another parallel here, this time to the mining tax deal that the Prime Minister did with the big miners at the expense of the small miners. These patterns just keep repeating and repeating in this parliament, and I appeal to the Independents: this is your chance to break the pattern and make sure this poorly thought out bill does not progress. It is this discrimination that in part has caused the projected 16 per cent increase in shipping and freight rates associated with this legislation that has been modelled by Deloitte Access Economics. Due to the five voyages a year requirement, smaller companies will be squeezed out of the market, reducing competition. Combined with the cost implications of the red tape in the new licensing scheme, this will see costs rise.

There are a few positive measures that are included in the tax incentives and shipping reform bills including a zero company tax rate for Australian shipping companies and provision for an accelerated depreciation of vessels via a cap of 10 years to the effective life of those vessels, down from 20 years. I note there are also measures for rollover relief from income tax on the sale of a vessel where a replacement ship is purchased by the end of two years, and an employer refundable tax offset in relation to seafarers and exemption from royalty withholding tax for payments made for the lease of shipping vessels by Australian resident companies. These measures would cost $254 million over the forward estimates and would bring taxation of the shipping industry in Australia more into line with international practice. While we are broadly supportive of these measures, it is important to note that there are a couple of issues, such as the fact that franked dividends are not permissible under the system and profits cannot be transferred overseas, which will provide no incentive for global companies to register on the AISR to take advantage of taxation changes. But, unfortunately, these positive measures are subsumed in this cognate debate and associated with the many flaws in the bill which cannot be separated.

To conclude, the idea of shipping reform has been around for many years, and a number of inquiries and reports have been undertaken in this time due to the diminished state of the coastal trading industry in Australia. These bills are the government's best attempt to deal with these issues but unfortunately, in their present form, I think we have to conclude that they would do more harm than good. The legislation represents a regulatory system that is meant to promote growth but instead creates red tape. There are more regulations to add to over 18,000 regulations, with only 86 repealed since the Labor Party came to power, despite their one-in one-out promise. This is not just a broken promise, but an obliterated promise. The regulations are projected to increase shipping costs by 16 per cent and will have damaging cost-of-living impacts for my constituents.

We support reform to the industry, and some elements such as tax incentives and accelerated depreciation rates. But these are overshadowed by the regulatory approach and chaotic approach the government has taken. Groups believe that in its current form this legislation will not achieve the objective of revitalising the Australian shipping industry but may, in fact, hasten the decline of the industry. That is why the coalition cannot support the passage of the legislation in its current form. Careful consideration in the Productivity Commission is the way to go, and I call on the Independents to meet their commitment to do the right thing. (Time expired)