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Monday, 4 May 1987
Page: 2507

Mr SMITH(4.05) —The honourable member for Grey (Mr O'Neil) will get on.

Mr O'Neil —I take a point of order. They were sincere remarks from the heart, and they were not flippant comments.

Mr DEPUTY SPEAKER (Mr Mildren) —Order! There is no point of order.

Mr SMITH —I am sure they were sincere. We will wait to see whether it will be known as the Morris package. As the honourable member for Murray (Mr Lloyd) said in outlining the views of this side of the House, we certainly support the Ships (Capital Grants) Bill 1987 as it takes a further step along the path that was started by what is known as the Crawford inquiry, the Committee on Revitalisation of Australian Shipping. The thrust of the legislation is deserving of support, and that is why we are supporting it. We look forward to seeing it go through this House and the other place. That does not mean that there might not be areas for improvement-I think there are. I shall make some suggestions to the Minister for Transport (Mr Peter Morris) in my remarks.

The Ships (Capital Grants) Bill 1987 provides for a 7 per cent taxable grant to shipowners to encourage them to upgrade their fleets with modern and efficient ships, which honourable members from both sides of this House would want. The grant will be dependent upon ships being crewed by 23 or fewer in the case of tankers in the Australian coastal trade and 21 or fewer for tankers trading internationally and ships other than tankers trading in Australian coastal waters. The reasons for the difference are admirably outlined in the speech of the honourable member for Murray so I will not go into them. There is obviously some room for changes.

To be eligible for the grant a shipowner must acquire a new or near-new secondhand ship, and that ship must be crewed by Australians. If the newly acquired ship is secondhand, it must not have been previously registered in Australia and must be no more than five years old at the time of purchase by the Australian shipowner. This is an important new provision in that, there being a world oversupply of tonnage, it enables potential shipowners to tap into that resource of cheaper but good shipping tonnage that is now available. As I said, if a ship is secondhand it must not have previously been registered in Australia. In addition, if an existing Australian ship were to be significantly upgraded-for example, re-engined and upgraded in other areas-and to meet the new crew levels, it would also qualify for the 7 per cent grant for the costs of the qualifying modifications. That, too, is a useful innovation.

Grants under this legislation are subject to a sunset clause. That is particularly important. To be eligible for a grant a new ship must be delivered and registered in Australia between 1 July 1987 and 30 June 1992. Secondhand ships must be delivered and registered in Australia between 1 July 1987 and 30 June 1990. The inclusion of secondhand ships will be particularly attractive, as I have said, as there is a world surplus of ships, and those built in the last five years will be fuel and crew efficient. The important thing is being fuel efficient, as I will point out later.

The typical cost structure for a bulk carrier is as follows: Capital, 47 per cent; fuel, 19 per cent; manning, 14 per cent; port charges, 8 per cent; repairs and maintenance, 3.5 per cent; and other costs, such as insurance, 8.5 per cent. Obviously the most expensive aspect of running a ship is capital, which at 47 per cent is nearly half the cost. A lightening of that burden will certainly promote activity in the industry. Manning is currently an average of 26 or thereabouts on large bulk carriers, and leave and other factors mean that it requires a multiplier of 2.25 to man a ship effectively. That means that in order to have 26 crew members on a ship one needs to employ in the vicinity of 58 or 59 seamen to run the ship 100 per cent of the time. Therein lies part of the problem that we in this country face with our manning levels in shipping.

It is interesting to compare that with a Western European ship, for which the average is 18. In that case the multiplier for leave and other factors is 1.5. The total number employed is 27. Our major trading partners, therefore, are a long way ahead of us. In this Bill we are proposing to give a 7 per cent taxable grant for ships that have a manning level of 21. If we multiply it by 2.25, we still have to employ 46 people to maintain the manning levels. There is a vast disparity between the manning of 46, even under the new proposals with a requirement of 21, and the manning of a Western European ship-say, a Norwegian vessel-on which the manning level is 18. But the multiplying factor for that vessel due to leave entitlements and first class travel and so on-which Australian seamen enjoy-gives a figure of only 27.

In the liner and general cargo trades, stevedoring is a major component. This cost can be as high as 25 per cent. So cost structures and capital costs are calculated on a current five-year depreciation rate with an assumption of a 10 per cent real rate of return being required for an investment to proceed. I mentioned fuel. Declining world fuel costs have not been reflected in Australia. Overseas prices for oil are $80 to $100 per tonne, but in Australia it is $120. Federal Government excises have risen from $23 to more than $40 per tonne. This enormous increase has negated declining world fuel prices. That is something that the Minister could also be working upon. If the Government were really serious about helping shipping in this country it could seek to lower the excise on fuel. By saying that I do not mean that the step taken with this legislation is not something that helps shipping; it certainly does. This Bill recognises the need for the replacement of ships if our shipping industry is to become more competitive and economically viable, and provides the opportunity for shippers to get into more fuel efficient shipping.

As I mentioned, almost half of the operating cost of an Australian ship is capital depreciation. This is the major impediment to ship replacement, which in turn determines more efficient manning levels and fuel efficient engines. This was recognised way back in 1982 in the Crawford report, the major adopted recommendations of which were, firstly, the extension of the investment allowance to ships not trading on the Australian coast and, secondly, the allowance of tax depreciation at the rate of 20 per cent per annum on all eligible new Australian owned, manned and operated ships. The Crawford report envisaged a reduction in the high manning levels of Australian ships, from between 33 and 38 down to 26, and we are rapidly getting there now. Of course we now have the Government and the industry recognising the need to reduce these manning levels even further. Returning to the Crawford report and the subsequent implementation of its recommendation with regard to investment allowance, 12 ships were ordered prior to the termination of the investment allowance, which is about 10 per cent of the bulk carrier and 25 per cent of the tanker fleet. Generally these new ships are also larger and the improved crew efficiency is greater than that simply attributable to reduced manning levels. Several Crawford ships, as they have now been termed, are successfully competing within the international trade.

The termination of the investment allowance ended the value of the Crawford package and only three special purpose ships have been ordered since 1 July 1985, but all with the new manning levels. The legislation being debated now follows the Maritime Industry Development Committee's overseas visit to study manning levels and general ship efficiency in comparable Western countries. The Committee, which was made up of shipping and union representatives, acknowledged the need for a further reduction as new ships in Europe generally have a crew of 16 to 18 and, more importantly, flexible manning arrangements which would allow further reductions and increase general shipboard skills. The MIDC recommended a three-year depreciation, including the first year ahead of commissioning, as was the Crawford arrangement. What we have is legislation establishing a 7 per cent taxable grant payable to shippers. It is not as attractive, perhaps, as the depreciation route, but it is, nevertheless, assistance all the same.

The total cost of the whole package was estimated by the Minister in his second reading speech as being in the vicinity of $18m. That will be spread over a five-year period. To my mind, for what we are getting $18m is not terribly expensive, especially when one considers that 97 per cent of the exports, by way of volume, leaving Australia by ship travel on foreign ships. The cost to this country of those exports going out on foreign ships is estimated at $5.8 billion per annum, so $18m is a fairly small price to be paying for a greater chance of penetrating that market. Indeed, it is interesting to look at the latest Australia and New Zealand Banking Group Ltd Business Indicators. I quote from that publication which makes this very clear point:

It appears that business lacks the necessary confidence in the economic outlook and economic policy-making to undertake substantial new capital expenditure. Another major factor inhibiting business investment remains the high level of domestic interest rates. That investment which has been undertaken has tended to be `at the margin' with little of the `greenfields' investment seen as critical for sustained economic expansion.

Indeed, that is a worry; one which I am sure the Treasurer (Mr Keating) is facing. His high interest rate policy has brought that situation about. But relating that back to the shipping industry one can see that there has been a total drought of expenditure on new ships. This might be partly because of the high fuel costs, but there are other factors as well. It certainly is partly due to the cost of borrowing money. If one takes a closer look at the balance of payments figures in this particular bulletin, which looks at the costs to Australia of exports of goods and services-I emphasise the word `services' because freight is a service which is provided by foreign shipping to this country-one sees that the overall figure for the export of goods and services is expected to move from $37.3m in 1985 to a 1988 figure of $47.2m. So the cost to Australia is going up all the time. Anything that we can do to enable us to carry our own goods overseas-taking into account that 97 per cent by volume of that carriage is in foreign ships-has to be of benefit in reducing what is an accelerating balance of payments figure. As we in this House all know, we must all do something to reduce that trend, because it is costing us more and more and more and more the value of those exports goes to meet the costs of the borrowing required to get those goods overseas.

I turn to some of the broader aspects of shipping in this country. Indeed, I guess it is important that a member from Tasmania speak on these particular issues because Tasmania is a net exporter and has been since Federation. We feel the impact of shipping, not just coastal shipping-though we are certainly suffering at present-but also the vagaries of international shipping and the costs associated with it. On a tonne/kilometre basis, Australia is the world's fifth largest shipping nation. One would be entitled to expect that Australia would therefore be at the forefront of new generation shipping, both in skills and in vessels. Sadly this is simply not the case, with just one shining example of how Australian shipping can again become an international force. As honourable members will now be aware, the Australian Maritime College is situated within the city of Launceston, which of course is in my electorate of Bass. Back in October of last year, the MIDC report which I mentioned earlier, entitled `Moving ahead'-and a very good report it is-recommended that all new entrants into the shipping industry undergo a common training course at the AMC for 19 weeks and that the college also offer an intensive 10-week course for those already in the industry. I believe that to be an eminently sensible suggestion. Further expansion of the AMC is obviously one major way in which Australian shippers can become competitive again through improved ship designs and skill levels of those involved in the industry. Raising the education standards and skill levels of everyone in the maritime industry is an obvious key to improving the performance of the industry, but I make this point: It would seem that the academics, as it were, from the Maritime College-many of whom, of course, are former mariners themselves; men of experience-have been excluded to a degree from consultation both with the Minister's Department and, indeed, with the MIDC. In Japan, for example, the academics in the maritime institutions are all involved in providing input.

On this very crucial point of training and raising skills, a suggestion that the MIDC has made is that more use could be made of the facilities of the Maritime College. If you will allow me to stray, Mr Deputy Speaker, I was pleased some time ago when the Minister for Defence (Mr Beazley) came into this House and said that the Department of Defence was going to start utilising the facilities of the Maritime College. So I think there is a broadening recognition of the benefits that that institution can bring to shipping of all forms, and I think that is something that the Minister should take up. It always amazes me that the Minister for Transport does not have more involvement with the Maritime College in a ministerial sense and that the responsibility rests with the Minister for Education (Senator Ryan). I would have thought that the Transport Ministry is far more pertinent to what is going on in that particular institution. Indeed, this particular Minister-and I give him credit-has shown a keen personal interest in that college and I hope that he will maintain that interest.

The world-wide trend to smaller crews will, of course, need to be followed in Australia. The smaller crews have not been achieved overseas simply by reducing numbers. Instead, the skills of seafarers have been upgraded and crews have been organised to work more effectively as a unit. Indeed, multi-skilling on shipping is something that the MIDC addressed. It is something that we need. The arrangements for crews and onboard maintenance during ship voyages is also something that needs to be addressed.

The general thrust of this legislation is to improve productivity by linking it to the major cost of shipping-that is, the capital depreciation. If we are to look at productivity perhaps we ought to be looking not only at a reduction in manning levels but also at the overall cost of employment. We ought to be looking far more closely at things such as the leave arrangements, the first class air travel that most seamen enjoy and, of course, shipboard maintenance. It is interesting that only this weekend I read that the new efficiency scrutiny unit of the Government has identified a $50m saving by a reduction in the air travel of bureaucrats. If it is good enough for the air travel of bureaucrats to come under scrutiny I think air travel and leave entitlement arrangements for seamen might also warrant some investigation. At the end of the day the Australian taxpayer and the Australian population in general will certainly benefit from a far more efficient shipping industry.

With the breaking down of the social and industrial barriers between seafarers, further reductions in the number of maritime unions are anticipated-that cannot come too soon-allowing further changes in work practices and job structures to be addressed at the same time. There are many examples of the stupidity that takes place on the waterfront. Some people who talk about the waterfront get a little confused about where the real problems are. Many of the problems relate to the activities that take place in the shore-based unions, not always necessarily in the crew-based unions. The report of the industry task force on shore-based shipping costs-the Webber report-identified the real problems in this area. I am sure that the Minister will say that a lot of those problems cannot be addressed solely by the Federal Government because the States, through the port authorities, have jurisdictions in those areas. But that does not lessen the need for the Minister to be making noises and applying pressure, where pressure can be applied, for those shore-based unions to start showing far more responsibility. A ludicrous situation arose last week on Webb dock where ships to and from Tasmania have been tied up because a member of the Waterside Workers Federation of Australia refused to be searched by a Federal Customs officer.

Mr Peter Morris —Painters and dockers.

Mr SMITH —I thank the Minister. A member of the Federated Ship Painters and Dockers Union, a rather well known union for all sorts of reasons, said that he would not submit himself to a search. When he was told that he had to submit himself to a search he stripped himself there and then on the spot. That led to a strike and nearly saw Tasmania held to ransom again by the painters and dockers because the Australian National Line feared that it would not be able to load and offload cargoes. That sort of activity, the rorts that have gone on at the waterfront, simply have to stop. If we continue to allow these sorts of things to happen all of us in this place, irrespective of which side of the chamber we sit on, will be doing a deep disservice to the nation. It is about time that some of those unionists started to show a little bit of responsibility and realised the very important position they play in ensuring that goods move into and out of this country and from State to State more quickly.

There are enormous problems on the waterfront and within the shipping industry and it really would be foolish to pretend otherwise. The fairly recent establishment of the Australian National Maritime Association gives some heart. For the first time, Australian shipping is finally getting its act together in forming this organisation. I was pleased to be present with the honourable member for Murray and the Minister when it was launched in Melbourne this year. I might say that the Minister spoke quite well at the launching. The Minister should not think that because I am giving him a few credits I agree with everything he says, but he did do quite a good job last year. The point that ANMA makes in its recent brochure is this:

Australia as a nation can no longer afford to ignore the foreign exchange problems posed by the carriage of our external trade in foreign vessels.

There is, however, more to be gained than an easing of the foreign exchange problem, important as this is.

The development of an expanded, competitive Australian merchant shipping industry would provide the following benefits to Australia:

a vital resource in times of national emergency;

increased employment of Australians skilled in handling increasingly sophisticated technologies;

extension of Australia's international marketing endeavours by promotion of this country wherever the flag is carried throughout the world.

I applaud those sentiments. It is certainly a good sign to see the Australian shipping industry moving ahead. Having had some personal interest in shipping over many years through the activities of my family's company I certainly believe it is time that we saw some changes made. It gives me pleasure to support this Bill because I think it is a method by which we can see some greater efficiencies brought to bear in the shipping industry which would build on what Crawford did. I think all of us in this chamber and in this country ought to recognise the importance of shipping and what this Bill does.

Mr DEPUTY SPEAKER (Mr Mildren) —Order! The honourable member's time has expired.