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Monday, 28 May 2012
Page: 5708


Mr CHRISTENSEN (Dawson) (15:12): Previously I mentioned the Deloitte Access Economics report, which was prepared on the likely impacts of the new scheme. According to Deloitte, the expected shipping costs that will increase will amount to between 10 per cent and 16 per cent. That report was actually commissioned by a group of dry bulk shipping users. In their submission to the House of Representatives Standing Committee on Infrastructure and Communication shipping reforms inquiry, the group said that they were concerned that this amendment and this bill could have major implications for the competitiveness and that the government was continually dismissing their concerns, and I suppose that that is a very serious charge against the government.

I want to quote from the submission that the Australian Dry Bulk Shipping Users made to the Senate. Under the section referring to the Deloitte Access Economics study they state:

A number of dry bulk shipping users gathered together following the public release of the first draft of the Coastal Trading Bill 2012 in December 2011 as they were sufficiently concerned that the Bill could have major implications for their competitiveness.

…   …   …

The group commissioned Deloitte Access Economics to undertake a general computable equilibrium model analysis of the economic impacts of the reforms using actual data provided by the companies.

The report which examined the impact of the replacement of foreign vessels with domestic vessels on the coast, was made publicly available in March 2012.

Headline findings include:

That changed licensing arrangements proposed will lead to an increase in the cost of coastal shipping and, by extension, freight rates of up to 16% if domestic vessels replace foreign vessels.

A variety of factors, such as the competitiveness of downstream industries and the scope for import competition, suggest that these cost increases are likely to be borne predominantly by the users of coastal sea freight. Not only will this diminish competitiveness, it will also impact negatively and potentially significantly on future investment decisions.

The precise magnitude of the long term economic impacts is difficult to determine given the myriad of factors at play. However, the modelling undertaken here suggests that, in net present value terms, the aggregate impact on gross domestic product over the period to 2025 will be between -$242 million and -$466 million. The associated loss of employment over the long term is, in net terms … 200 full time equivalent employees—

as it is assumed the labour market will remain buoyant and most of the displaced labour will be absorbed in other sectors.

… in the immediate term, the displacement is considerably higher, with an estimated peak loss of 570 [full-time equivalent] employees.

These job losses will mainly be in regional Australia. Surprise, surprise! That submission showed the aggregate impact on gross domestic product over that period to 2025 being upwards of almost $½ billion and 570 full-time equivalent jobs lost, and as usual regional Australia is forecast to bear the brunt of job losses as a result of this government's policy.

If we really want to look at what effect this legislation will have, I would say let us not focus on the benefits to the MUA—the Maritime Union of Australia—let us look at how this will benefit, or rather not benefit, exporters and industry. Let us look at the impact this is going to have on the nation and its economy. The Business Council of Australia also made a submission to that inquiry. They highlighted their concern:

… that aspects of those reforms could lead to higher costs to users and poorer service quality, thereby harming the competitiveness of shipping users.

While also quoting the Deloitte report about costs increasing by up to 16 per cent and lower employment, the Business Council points out that the government's own regulatory impact finds:

… worsening economic impacts as foreign vessels are replaced with higher-cost Australian ships.

Sugar is a very important industry to my electorate. It is the second biggest after mining and manufacturing relating to the mining industry. Right up and down the coastline, whether it be in Mackay, Proserpine, Ayr or Home Hill, sugar plays an important role in the economy and an important role in creating jobs. So I was very interested to read what Sugar Australia said in their submission to the Senate Economics Legislation Committee, which also included the forecast cost increases reported by Deloitte. Sugar Australia, which is a joint venture between Sucrogen Australia Pty Ltd and Mackay Sugar Ltd, ship about 300 kilotonnes per annum of raw sugar from North Queensland to their refinery in Yarraville, Melbourne. Let us have a look at what Sugar Australia says will happen under this legislation and its associated increased shipping cost. In their submission they state:

As an internationally traded commodity, it is difficult or not possible in the majority of cases to pass on any additional costs within the business.

…   …   …

In this case it is likely that the cheapest supply chain option will be pursued which could involve importing raw sugar from Asia to Melbourne and exporting raws from North Queensland.

But the North Queensland sugar issue is about more than just raw sugar and processed sugar—it is also about molasses and bioethanol. Sucrogen Australia, which also put a submission in, reported on likely impacts to their secondary products in their supply chain, this being molasses and bioethanol. They state that they currently manage the single desk entity, Australian Molasses Trading, and describe the molasses business as 'highly trade exposed'. They say that this bill will have the effect of:

… driving up the cost of coastal shipping—

and it—

will force a potential rethink of where the product is sold. All Australian molasses could be exported into existing global markets in preference to supplying domestic markets. This could cause the Australian market to import molasses in cheaper international vessels. There is no benefit to the shipping industry from this legislation if higher coastal shipping costs encourage a change in trade flows from domestic to international.

They go on to bioethanol and say:

Under recently changed market conditions, Sucrogen Bioethanol will re-start coastal transfers of ethanol from North Queensland to Melbourne displacing imports.

That is a good thing!

The requirements of the trade can vary significantly depending on several market variables, and may revert to imports again.

This bill that we are discussing today actually seals the deal because they will have to apply for temporary licences to move the bioethanol, not knowing whether they will need to use it or not.

The differentials for moving cargo from North Queensland versus imports from Brazil they say are very marginal. In other words, the legislation for these trades is self-defeating. That is their words, 'self-defeating'. In this circumstance there is no point in being forced to apply for a temporary licence, it is just value destroying. I think that if a term sums up this bill that would be it—value destroying. I can tell you what is going to happen for the sugar industry. It will not be the end buyer that pays the price—as the submissions from Sugar Australia and Sucrogen have outlined—because sugar has got pretty much a fixed price in the international market. When you are selling domestically with a refined product you get a higher price. When you have to sell it overseas because the cost impacts are forcing it to go that way, it will not be Sucrogen, it will not be the sugar traders, it will not be the shipping companies that are paying that additional cost, it will be the cane farmers. It will be the cane farmer who is squeezed effect in and it will be his workers—he might have to shed one or two of them—and this is the impact that this Labor bill is having on my electorate.

We are at a point where we are about to have the carbon tax that will slug that industry to the tune of $80 million over the next five years to reach, that figure quantified by cane growers. When we have all these additional price impacts, for the government to be proposing a bill that is going to drive up the cost of shipping, which is going to destroy domestic markets that pay better for the sugar industry, it is certainly not something that I can support in this place. It is something that Labor needs to hang its head in shame on. This industry has been through more than enough. It has suffered corrupt world markets and the introduction of rare diseases known as smut and orange rust, and it has gone on and on, getting clobbered year after year. It remains in existence and is finally doing well now, but these bills set cruel prices and cruel incomes for cane farmers right up and down the Queensland coastline. Again I say that I cannot support these bills in this place.