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Friday, 1 May 1987
Page: 2438

Mr LLOYD(12.16) —As everyone knows, the coalition has ended, but because the Ships (Capital Grants) Bill 1987 was considered by the last joint shadow Ministry meeting, I have been asked to lead the debate on it, and I am happy to do so. I am confident that after the next election I will be leading with legislation on the other side on behalf of a coalition government. The Ships (Capital Grants) Bill provides for a taxable grant of 7 per cent to any ship- owner who upgrades his fleet with new or modern secondhand ships. It is certainly an encouragement for Australian shipowners to improve their fleets with more modern, more fuel efficient and more crew efficient ships. The approval depends on an agreed reduction in manning levels to a maximum of 21 for bulk carriers, container ships and tankers engaged in international trade, and 23 for tankers engaged in domestic trade.

The legislation follows an agreement between the Government, the shipowners and the seafaring unions. It includes the requirement to introduce multi-skilled ratings on Australia ships-that is, those who can work in, say, an engine room as well as on the deck; to establish and conduct training and retraining programs to provide this necessary greater range of skills that will be necessary; and, overall, to encourage a greater emphasis on teamwork and break down some of the old demarcations and barriers. It also allows for further crew reductions below the maximum specified as at present. I believe that those further crew reductions will be necessary because without them Australian ships will continue to fall behind those of comparable Western nations. But the important point is that multi-skilling and changes to arrangements for crew amenities and so forth will be possible.

The taxable grant of 7 per cent will be paid after 1 July until 30 June 1992 for new ships, and until 30 June 1990 for secondhand ships. It will also be available for significant modifications to existing ships. Although I failed to establish the cut-off date for the modifications, I presume it will be 30 June 1990, the same date as for secondhand ships. By `significant' I understand the modifications must be quite significant. Obviously, changes to crew quarters and other changes must be made to make the new, reduced manning arrangements possible, and also to allow the re-engining of ships so that they can gain some of the dramatic improvements in fuel efficiency which have occurred in shipping over the last few years. I have been told that if one looks at gains in fuel efficiency in, say aviation, automotive vehicles and shipping the greatest gains have been made in shipping.

For a ship to be eligible it must be owned and registered in Australia. It must be crewed by Australian residents at the appropriate level and it must be engaged in the carriage of the correct category of cargo. The Minister for Transport (Mr Peter Morris) in his second reading speech estimated that, after tax, the cost will be $18m to $20m or before tax, it will be about double that amount. That will be provided by an appropriation from Consolidated Revenue. Generally, I wish to commend the Minister for his initiative, along with that of the industry, not only in establishing this new incentive but also, initially, in maintaining and developing the Crawford initiative that the honourable member for Gwydir (Mr Hunt) and the previous coalition Government initiated.

If one refers to the report of the earlier review of Australian shipping in 1982-which became known as the Crawford report after Sir John Crawford-entitled the `Revitalisation of Australian Shipping', one will see that the point was made very clear then, as it is now, that capital cost is the most significant and single most important item in relation to running costs of ships in Australia. The items, broken down are: Capital costs, 47 per cent; fuel, 19 per cent; manning, 14 per cent; and other costs, 20 per cent. I am told that port charges are the most significant of those other costs, about 8 per cent. Crawford recommended that to upgrade Australian shipping we must, first and foremost, provide the incentive, and also allow the capital cost to be written off over the life of the ship. In the Crawford days, unless one replaced a ship, it was very difficult to alter the manning structure.

Crawford recommended replacement of the then inequitable depreciation rate for ships of only 6.25 per cent per annum and extension of the investment allowance, which at that time was restricted to Australian ships engaged in the coastal trade. He recommended that the 20 per cent investment allowance be made available to all Australian owned and crewed ships, that the 20 per cent depreciation rate replace the 6.25 per cent rate and that the first year of the depreciation be the pre-commissioning year. That is a very important concession or initiative because of the costs that are incurred ahead of the actual delivery of a new ship.

To the credit of the present Government and the Minister, in 1984 this Government introduced the enabling legislation for the Crawford recommendations to be put in place. However, it is not to the credit of this Government that it terminated the investment allowance only a few months later, on 30 June 1985. For any Australian shipowner to take advantage of the Crawford recommendations, the ship had to be ordered before 30 June 1985 and delivered prior to 1 July 1987 when the general investment allowance terminated. Only a very short period of about 14 months was available to Australian shipowners to take advantage of what is a complicated procedure of purchasing a new ship. I think it is to the credit of the Australian shipowners that in that short period 12 ships were ordered, and I am told that only one is still to be delivered. Presumably, that will happen prior to 1 July. That new tonnage equalled 10 per cent of the total Australian fleet, including 25 per cent of the tanker fleet.

Since the termination of the effectiveness of the Crawford recommendations by the ending of the investment allowance only three ships have been ordered. They are basically ships of a special nature, such as gas carriers, but they come under the new manning arrangements, that is, the Crawford manning arrangements. Meanwhile, other Western nations with standards of living similar to those in Australia have manning rates or crewing levels which are much lower than Australia's were prior to Crawford-levels in the mid-twenties compared with our mid to high thirties in pre-Crawford times. Their improvements inefficiency have continued since the Crawford period. It is now common for countries that have comparable standards of living and comparable attitudes as to what are reasonable requirements for crew members to have crewing rates of 16 to 18. Some of them are now even allowing non-residents to be crew on their flag vessels.

In the light of this the Minister established the Maritime Industry Development Committee comprising representatives of the Department, shipowners and unions. It studied the manning levels of the other Western nations in 1985 and reported in 1986 in the document entitled `Moving Ahead'. This report made certain recommendations to the Minister. That is the basis on which we now have this legislation, with only one significant exception, as I see it. It recommended a depreciation rate of 33 1/3 per cent per year for three years, including the first year ahead of commission. In its place, the Minister is legislating for a taxable grant, together with retaining the 20 per cent depreciation on new ships only in the pre-commissioning year. I acknowledge the point that for secondhand ships that is not a great problem because money is not outlaid as an advance payment ahead of the ship being available.

Ship owners have said that what the Government is providing is not as generous as what `Moving Ahead' or the MIDC report recommended and that, in turn, even those recommendations are not as generous as those of Crawford, initiated by the previous coalition Government and instituted by the present Government. However, the industry strongly supports the legislation. I acknowledge its strong support for the legislation and can understand that support. The industry is particularly supportive of the inclusion of secondhand ships and the provision for extensive modifications. That is very important. There is a surplus of up to date secondhand shipping around the world. Obviously, there is a saving both in capital outlay and time if someone purchases a replacement ship.

Most of the shipping that will be purchased as a result of this legislation will be secondhand rather than new shipping. I would like to quote from a letter I have just received from Dennis Woods, who is Manager, Government Relations of Caltex Oil (Australia) Pty Ltd. He sent to me, as I presume he did to many other members of parliament, a brochure on Australia Star-the new Caltex Oil tanker. I wrote back to him with a variety of questions concerning the applicability of Crawford and this legislation and general movements in crewing efficiency. He has given me his approval to quote from the letter which puts into perspective the application of the various incentives to a particular ship over the last few years. He said:

The overriding motivation in acquiring a new generation crude oil carrier, was for Caltex to become more cost competitive in an industry which has clearly demonstrated over the years intense, and at time fierce competition, a benefit which all consumers of petroleum products have enjoyed.

A substantial reduction in manning levels, together with other operational efficiencies characteristic to the `Australia Star' will enable Caltex to reduce its marine operating costs.

There is no doubt that the taxation incentives available under the Crawford package also provided considerable incentive to commission the `Australia Star'.

In respect of specific questions I raised, he said the following:

The difference between crewing levels of 29 for coastal voyages and 27 for overseas is the provision of one extra mate and one extra SUA.

We should remember that we have the continuing provision with this legislation of allowing for two extra crew when a tanker is operating domestically rather than internationally. The letter continued:

The logic is that cargo duties are more intensive due to the close proximity of ports. Extended stands on cargo watch, followed by departure duties, then a normal sea watch cycle, can lead to delays if additional people are not available.

It is to be noted that the previous generation of Australia crude vessels-

that was, pre-Crawford-

had manning levels of 34 overseas and 37 on the coast whereas the new MIDC proposition is for 21 overseas and 23 on the coast.

Caltex received Crawford benefits for the `Australia Star' after extensive consultations between the Department of Transport and the unions involved. The level of 25 referred to relates to a desired manning level for dry cargo vessels-

that was Crawford's idea-

whereas for liquid cargoes (crude carriers) an extra crew is an acceptable addition for safety (hazardous cargo) and operational reasons . . .

It has also been acknowledged by all parties to the manning committee that a training of skills factor be recognised in the crew levels of these new generation vessels.

In the next generation of ships, it is likely that Officers/crew will share common mess and recreation facilities, eliminating current duplication. A manning level in the vicinity of 21/23 is ultimately expected.

That, of course, is reflected in the legislation. The letter continued:

Major changes will occur in SUA ranks where the introduction of a new integrated rating position will reduce manning. No change is expected in Officer ranks (with the possible exception of Radio Officer or Electrician).

Beyond this-

and that is beyond the immediate introduction of the MIDC manning levels as proposed in this legislation-

we would expect to achieve levels of 18 with elimination of the Radio Officer and Electrician and merging of catering staff into a single category.

All this cannot be done at once as hand in hand with these efforts must go changes to Union structures, including the amalgamation of existing unions into only two (one for all Officers and one for all the crew and catering staff).

That was the end of the letter. It made the point very well about progress pre-Crawford, through Crawford, to this legislation and, what is equally important, beyond this legislation. Obviously, the 21-23 figure cannot be final because other Western nations already have lower levels. Caltex acknowledges that it is possible to get the number down to 18, within the context of ships that are ordered or commissioned under these new procedures.

There are still many other problems associated with Australian shipping in its drive, which I support, to be internationally cost competitive. I have made the point already that we still are behind other countries in the numbers of people required on our ships. If this new incentive enables a further 25 per cent, and I hope it will be a higher percentage, of Australian ships to be replaced, by 1992 we could still have 25 per cent of our coastal shipping-if one considers what has happened with Crawford's ideas and these measures-with crew numbers still in their middle and high 30s, as well as crew numbers in the mid-20s and low 20s. Meanwhile, most of our competitors already have most, or a good percentage, of their crews in the low 20s or below 20.

There is a further problem in relation to manning levels for Australian ships; that is, the excessive leave entitlement for Australian crews compared with those in other Western nations. I am not interested in comparisons with Third World countries because that is not relevant. The Minister was quite right in selecting comparable countries which a group of people went overseas to look at. In looking at comparable countries, I refer to the point made in `Moving Ahead' that every Australian ship requires 2.25 crews. Therefore, if a ship has a crew of 21 and that number is multiplied by 2.25 we come up with a total requirement of 46 crew members per ship. Let us consider a west European ship. The ratio is 1.5 : 1 per ship. If the crew number is 18 and we multiply 18 by 1.5, we come up with a figure of 27.

Mr Millar —Well done!

Mr LLOYD —Thank you. With that sort of authority I can now say confidently that we still have a great disparity; that is, 46 crew for an Australian ship and 27 for a west European ship which has the more common manning ratio. So there will still be a dramatic disparity in ship manning levels between Australia and our major competitors when this legislation is implemented.

On-board maintenance is also a problem. I believe, from my discussions with Australian ship owners, that progress is being made in coming to more sensible arrangements so that on-board maintenance, which can sensibly be done during the voyage or at other times available to the crew, is being done more now than it has been in the past, but it still remains a problem. Of course, there are problems not only on ships, but in relation to shipping generally. There are many problems on our waterfront which need to be solved to allow our shipping to be internationally competitive. One of the unfortunate burdens that Australian shipping has to carry in its comparisons of coastal shipping and international shipping is that everything that is carried on the coast has to go through our waterfront twice. That adds immeasurably to the final cost of goods and gives rise to some of the comparisons which are made from time to time-and they are correct-of the cost of transferring goods around the Australian coast and the cost of transporting them from Australia to Japan or anywhere else.

There are problems relating to the efficiency of coastal shipping but there is also the problem of goods going through the Australian waterfront twice. It seems to me that better progress is being made with the maritime unions and management than with the waterfront unions and management. I include both groups in our problems on the waterfront. The Minister has a series of committees working on aspects of the waterfront, but at this stage there has not been the progress which has been made-which I acknowledge and which is included in this legislation-with the maritime unions. Unless there is considerable improvement in the waterfront situation as a result of the consensus approach of those committees, by the time there is a change of government the next coalition government will have to use public exposure far more than this Government is using it. I believe that this Government is holding the public exposure threat in reserve at present in relation to the work and management practices which presently inhibit the management of the waterfront generally.

Another problem of the waterfront is reliability. We need industrial relations legislation to address that problem more specifically. That will be a necessity for the next coalition government. For its own benefit as a trading nation and to provide employment opportunities for maritime people, Australia should have internationally competitive shipping. However, it must be genuinely competitive and operate at the same level of efficiency whether it be in domestic or international trade. Since the Crawford recommendations were implemented by the Broken Hill Proprietary Co. Ltd with its bulk carriers, in those ships at least Australia has had almost genuinely competitive international capacity. The particular contractual arrangements have been a help in that case, yet we must still acknowledge that that is a good example of a step in the right direction.

We must also realise that competitiveness is not static, it is dynamic. We may talk today about progress being made by certain legislation, but we cannot say that that must be the end of it. The momentum must be maintained and, unless it is, not only will we keep tailing the field in the measurement of efficiency compared with other Western nations, but we will also fall further behind. That competitiveness must be achieved by a genuine efficiency and not by flag reservation.

I know that cabotage, or flag reservation, is a vexed issue for the coastal trade. I believe that a coalition government would look at the progress of improvement in efficiency in our coastal trade and I personally would support an Industries Assistance Commission inquiry into the best way to improve our coastal shipping efficiency from that point. I believe that that would be a positive move. There can be no justification for flag reservation for Australia's international shipping. That applies particularly to the trans-Tasman situation where there is an unjustified extension of Australian cabotage which turns the Tasman into a very expensive Australian and New Zealand lake.

As part of the closer economic relations review a study of trans-Tasman shipping is at present underway. In my discussions with the Labor Government in New Zealand before Christmas I gained the impression that if that review recommended the removal, either in whole or part, of the present restrictions on the Tasman, it would support the lifting of those restrictions. I know that there are various options around including allowing the cross traders to make more efficient use of container space between Australia and New Zealand on their way to some third port. I must say that a coalition government would support the lifting of the present unjustified restrictions on the Tasman to just Australian and New Zealand shipping.

The phosphate rock carriage to Australia has been another scandalous situation. It costs up to $15 a tonne more to ship rock from Christmas Island to Australia than from Florida to Australia. There has been criticism of the Australian National Line but I do not support that criticism because ANL took over a contract which locked it into a high price situation. I understand that the Government has arranged a far more efficient and competitive new contract and if the Minister likes to comment on that I will be pleased to hear what he has to say. I understand that the new arrangements, which have just come into place, are far better from an internationally competitive point of view.

The Opposition is concerned by this type of legislation. It is not unique, as there are industry-specific plans supported by legislation and by government incentives in the automotive manufacturing, heavy engineering, steel and textile industries. I believe that the shipping industry is probably the most specifically productivity linked. In other words, one can see a far more direct relationship between an expenditure of taxpayers' money and improvements in efficiency. However, in general-though I am not referring in particular to this legislation at this stage-the Opposition is concerned that industry is not taking the lead in making the adjustments that it should be making in a commercially competitive environment. It waits for, or goes to government expecting, what I call a bribe. What it should be doing naturally itself is becoming a case of plan after plan after plan. There is this belief that industry should go to the Government and work out a deal. I believe that it would be a very bad precedent for industry in this country to accept generally or have an expectation that, when it should be adjusting naturally to make Australia more internationally competitive, it can go to government and ask what sort of deal can be worked out.

By 1992 when this plan sensibly expires-and I believe it is a good feature to have a sunset clause in the Bill-enough of the Australian fleet will have been converted to more efficient crewing and other arrangements with the ability to continue that efficiency to put the pressure naturally on the rest of the Australian fleet to do what should be done without any need for any more special industry plans. In other words, the time must come when the Government says `Enough is enough; you have a good percentage of the fleet replaced so that the position is better for your own survival. If you did not or could not take advantage of the special deal, do not wait for another one. You should get on with it and do it yourself to stay in business'. In general terms that is the reaction to the legislation. The Opposition will not oppose it.

Mr DEPUTY SPEAKER (Mr Ruddock) —Order! It being of the hour of 12.45 p.m., the debate is interrupted in accordance with sessional order 101a. The debate may be resumed at a later hour this day.

Sitting suspended from 12.44 to 2 p.m.