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Thursday, 31 May 2012
Page: 6495


Mr RANDALL (Canning) (11:18): I am pleased to speak to the cognate debate on the Shipping Reform (Tax Incentives) Bill 2012 and other bills. Australia's shipping industry must play a more important role in our freight network. Australia has the fourth largest shipping task in the world, and sea transport carries over 99 per cent of international cargo by weight and about 75 per cent by value. Coastal shipping carries around one-quarter of interstate trade, and it is true that there has been a decline in the number of Australian registered ships over the last decade. Currently there are only 22 Australian registered ships.

With our freight task set to double by 2020 and treble along the eastern seaboard, coastal shipping must play a greater role. To that point I will mention an example. In Perth there has been an additional problem of overcrowding in the Fremantle port. At any one time between two and 13 ships might be waiting to enter the port. Those ships have to pay demurrage for the time spent waiting. For example, it cost a major Perth construction company, BGC, almost $1.5 million last year in demurrage. Fremantle port is also one of the most expensive for off-loading cargo. Again, for example, it charges $16 a tonne to off-load gypsum, which goes to make plasterboard, when the same work could be done for $8 a tonne at the Esperance port, $5 a tonne in Flinders in South Australia, and the international comparison is SGD$1.50 a tonne in Singapore.

These bills comprise the shipping reform package and they are designed to provide a regulatory framework for coastal trading in Australia, which will stimulate growth in the number of Australian ships on the coast and maximise the use of the Australian flagged vessels. That is its intention. The package attempts to achieve these objectives by introducing a variety of financial incentives for Australian flagged ships including company and income tax changes and accelerated depreciation for these ships. It is also creating a second register of Australian ships to be known as the Australian International Shipping Register. This is available to ships which meet the eligibility criteria, which include the requirement to have two senior Australian officers on board. Finally, the package abolishes part 4 of the Navigation Act 1912 and in doing so replaces the current permit and licence system with a new three-tiered licence system.

It should be noted that the bills do not address the serious problem of the cost and availability of ports that is also pushing up the cost of goods, as I said, in ports like Fremantle in Western Australia. The Minister for Infrastructure and Transport, Anthony Albanese, in announcing this package in September last year, said:

What we are doing is creating an economic and regulatory environment that will revitalise and sustain growth and productivity in our shipping industry.

I understand the coalition members of the House were not convinced that the bills before this House would revitalise the Australian shipping industry. I heard the member from Swan who outlined that very well. Many industry participants are also not convinced. The first objective listed in clause 3(1) of the Coastal Trading Bill is that the regulatory framework promotes a viable shipping industry that contributes to the broader Australian economy. In its submission to the House, Shipping Australia say, 'Some of the provisions, at least, in the Coastal Trading Bill, 2012 are confusing and, in our view, require substantial amendment to meet the effects of the bill.' Tom Pinder from Australian Coastal Shipping, which is involved in the east-west containerised coastal trading, says:

The proposed legislation, as it relates to coastal container shipping, can only exacerbate this situation and will not result in any Australian flagged/registered ships valiantly taking up the challenge of carrying containers on the principal coast route, namely, east coast to west coast.

That has been confirmed, which the member for Swan also referred to, in an article, which is headed 'Cabotage concerns leave WWL with dilemma'. The 30 May article, in Lloyd's List Australia, goes on:

Ro-ro operator Wallenius Wilhelmsen Logistics says it will not commit to carrying coastal cargo until new cabotage laws are finalised.

And further, 'Until this is finalised and the confusion taken away, it is going to be carefully considering its coastal shipping operations around Australia.' That is very concerning. Tom Pinder said, 'A continuation down the path of a one-size-fits-all policy would result eventually in all of the current east-west freight task being diverted to the inadequate infrastructure of road and rail with hugely increased costs and a totally detrimental effect on the carbon footprint of this country.'

The Dry Bulk Shipping Users, which represent 60 per cent of the customers of coastal trade, are worried about the impact that the shipping reform package will have on the Australian manufacturing industry. The department has done no modelling on how many ships will become Australian flagged as a result of the reform package. The department states:

Given the range of consideration that the shipping investors and companies may have regard to in assessing where vessels will be registered or entered into service it is not appropriate for the Department to speculate on the number of vessels that may take the opportunities afforded by the new investment platform.

A number of submissions to the House and Senate committee inquiries requested that a Productivity Commission inquiry be held to determine what impact this complex regulatory change will have on the Australian coastal shipping industry, the cost of freight and the costs to coastal shipping customers. As we know, the government do not like Productivity Commission inquiries. We saw that with the NBN and a whole range of other issues where, when they just want to ram something through, they do it at their own behest and will not go anywhere near a Productivity Commission inquiry in case it comes up with results they do not like.

Minister Albanese has not been able to put a figure on how much more it will cost to ship freight around our coastline under this new regime. But according to Deloitte these changes will inflict a $466 million burden on our economy over the next decade, with freight charges to soar to 16 per cent and with 570 full-time Australian jobs tossed overboard. We heard the previous speaker discrediting the Deloitte contribution because he did not like what it said.

Getting back to the Western Australian coastal shipping exercise, given that this bill is unlikely to meet any of its objectives we should take time to consider alternatives that might revitalise our shipping industry and its ability to ply its trade. A good example is the proposed James Point Port, a private port to be established in Perth around Kwinana under an agreement signed in 2000 by the state Liberal government under Richard Court. This private port would be established by James Point Pty Ltd at no cost to the taxpayer, as it would be built and maintained wholly by the private sector. It will provide an alternative point of entry and thus address the problem of the overcrowded Fremantle port where, at any one time, more than 10 ships can be waiting to enter and, as I said earlier, reducing demurrage costs for those shipping goods into Perth via this port. The private port could also offload cargo at a cheaper rate than the expensive rate of Fremantle port, as has already been said, and the cost of unloading cargo in Fremantle is significantly higher than at a number of other ports around Australia and in South-East Asia.

The Fremantle Port Authority has reportedly expressed concern about the impact that a private port would have on its profitability. But looking at its charge structure—as I said, $16 a tonne for gypsum, compared to $8 in other WA ports—it is clear it has some room to move to adjust its prices. Competition would benefit customers overall. Why is the Fremantle Port Authority concerned about competition? We know that competition ultimately brings down prices. The Fremantle Port has been the site of extensive industrial action over the years. Two strikes have occurred in the last six months alone, one in December 2011 and another in March 2012. The strike last December affected around 34 shipping movements. Hold-ups such as these strikes disrupt the operations of the port and worsen the existing problems related to overcrowding. About $26 billion worth of trade goes through Fremantle port every year, which equates to $3 million worth of trade every hour of the day. This puts into context the very significant impacts of even a one-day stoppage.

There is also a flow-on effect from any disruption to work at this port. Ports Australia have said:

… there will be flow on impacts for the whole of the transport chain and the backlog resulting from the delays to shipping movements which in turn adversely affects the ability of shipping lines to meet schedules in other Australian and international ports. Such disruption will also further erode our international reputation as a reliable supplier.

When costs for hold-ups are related to strikes and demurrage costs, and high offloading costs are incurred, these are passed on directly to WA consumers in the form of more expensive goods. This affects everything from the cost of clothing to construction, as well as the price of an average Japanese produced car, for example, which is offloaded at the port. The James Point Port would be a much-needed alternative to entering via Fremantle. It would take the pressure off this crowded port. It would offer competition, as I have said, and would go some way towards reducing offloading costs, and it would help reduce the impact of strikes and disruptions to the transport chain.

However, the WA government is yet to follow through on its agreement, as it has not even facilitated the sale of the land and adjacent land by LandCorp. I consider this to be an excellent example of the type of measure that will need to be taken to improve the shipping industry within Australia. To me, it beggars belief that the Western Australian Premier, Colin Barnett, who I think is doing a good job, is intransigent and seems to have a mental block on this issue, because he actively obstructs the BGC company in its willingness to build this alternative port. Rather he should demonstrate leadership and honour the previous government's compact to see that this vital piece of infrastructure is built in Western Australia.

I would point out that the Fremantle port has a whole lot of issues with its local residents. As the member for Fremantle in this House will tell you, sheep going through the port is a huge problem. The residents continually complain about sheep going through a large port like this. It will also help alleviate the need for Roe Highway extension 8. Because, as we know, this piece of infrastructure is not finished yet, huge container trucks carrying containers are continually using urban roads to try to get to the port and an alternative to the James Point port in Kwinana would take this huge logjam of trucks from the roads. There is lead going through this port, and we know there have been a whole lot of issues about the lead contamination through the Fremantle port. We saw what it did in the Esperance port when a whole lot of birds fell from the sky because of the contamination that had been caused there.

Just recently in an article in the Australian newspaper we read that the company Toro Energy, which is about to mine uranium in Western Australia, was going to have to truck its uranium either to a South Australian port or to Darwin to be able to export it. The member for Brand, Gary Gray, whose electorate also adjoins both the James Point port and the electorate of Fremantle, has said that he does not believe that they should have to go to another port somewhere else in Australia because they cannot ship uranium oxide through Fremantle; he is on the record as saying that they could. But I am sure the member for Brand would see the opportunity for an alternative port which was not in a built-up residential area like the city of Fremantle so that they could export this uranium oxide through a port like James Point port.

I understand that BGC are not just going to lie down and take this, because they met the same sorts of problems when they tried to build a brickworks in Western Australia and were thwarted at every level. Eventually they did build their brickworks, and the effect was to bring down the price of bricks in Western Australia by bringing competition into the market. The beneficiaries were the Western Australian people, particularly first home buyers who were trying to build a new home. So, on the same analogy: competition brought lower costs with bricks; competition bringing lower costs through an alternative, low-cost port is something that should be advocated here, and I strongly urge the Premier to take on board the opportunity to do this as soon as he can and while the company is still interested in building this private port.

Finally, on this bill, when the minister announced the package in September, he stressed the importance of the compact between shippers and unions. Traditionally, Australia's shipping industry has been uncompetitive internationally. We recall all the events that had to be gone through to bring competition to the ports. The higher costs of running an Australian vessel as opposed to a foreign flagged vessel has been prohibitive. In March, when the minister introduced this package, he said:

The final element of the reform package is labour productivity.

We are committed to aligning Australian productivity practices with the best in the world.

To do this, we will need a compact between industry and unions.

This compact must include changes to work practices, a review of safe manning levels and the use of riding gangs on coastal vessels.

This compact is essential to the reform agenda.

As I said, we are opposing this bill because we believe that it should go to the Productivity Commission and it does not achieve the objectives it set out to achieve. (Time expired)