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Monday, 28 May 2012
Page: 5713


Mr FLETCHER (Bradfield) (15:32): I am very pleased to speak on the Coastal Trading (Revitalising Australian Shipping) Bill 2012 and related bills in this package of five bills. This is a package which is full of good intentions. This package is supposedly going to counter a significant decline in the number of Australian-registered vessels. The explanatory memorandum notes that since 1996 the number of Australian-flagged trading vessels has declined from 55 to 22 and that only four Australian-flagged vessels are trading on international routes. The explanatory memorandum makes it clear that it is the government's intention to reverse this trend, and the set of policy measures which the government brings forward to give effect to its lofty objectives is truly comprehensive. I would not say it is good, but I would say that it is comprehensive.

Let us look at the raft of measures which are included in this package. There are some generous tax incentives, giving both the industry and its employees tax advantages which are not available to most Australian industries and workers. There is a detailed, prescriptive, intrusive, microregulating licensing regime for foreign ships—just the kind of thing that this government absolutely loves. It goes on for page after page with all sorts of detailed requirements dreamt up by a set of Canberra based bureaucrats in a frenzy of self-satisfaction that they know better than the industry what is necessary when it comes to shipping. Also, we cannot forget that other little favourite which is slipped into this bill—foreign ships in Australian waters will now be subject to the Fair Work Act.

This is a package which is good news indeed for the government's preferred stakeholders, such as the Maritime Union of Australia. But the measures embodied in these five bills represent a truly terrible deal for users of coastal shipping and a truly terrible deal for all Australians outside the cosy club of beneficiaries of this complex web of new arrangements.

In the brief time I have available this afternoon I will make three points. The first point is that this package of measures is likely to very significantly increase costs to users of coastal shipping and that that cost burden, in turn, will be passed through our economy. The second point is that the claimed benefits of this package depend critically upon a compact with unions, including the Maritime Union of Australia. Where is that compact? It has not been concluded. It has not been provided to the House. The third point is that there is very little reason to believe that the government's lofty objectives in bringing forward this package of bills—that is, the objectives of revitalising the Australian shipping industry—are likely to be met. There is very little reason to believe that at all.

I turn firstly to the question of the impact of this package of measures on the costs that are paid by the users of coastal shipping. We first need to understand what lies at the core of this public policy scheme. At the core of this scheme is a new licensing regime for coastal shipping in Australia. Today there is a system by which non-Australian registered ships can be granted permits to operate both single and continuous voyages in Australian waters. Once the bills before the House pass into law, the existing regime will be replaced with a new regime under which Australian-flagged vessels have unrestricted access to coastal trade and foreign vessels can be granted a year-long temporary licence to operate in Australian coastal waters. What is the likely impact of this set of measures? In answering that question, we must first recognise that today foreign vessels operating on single and continuous voyage permits comprise around 30 per cent of domestic coastal shipping in Australia. Accordingly, if there are onerous new restrictions imposed which make it harder for foreign registered ships to operate in Australian coastal waters—which make it harder for such ships to carry freight for Australian customers between one Australian port and another—it is very likely that shipping costs are going to increase.

As a number of members on this side of the House have pointed out, Deloitte Access Economics has prepared a very insightful report on the likely impact of these changes to the shipping licensing regime. The report was prepared on behalf of the Cement Industry Federation and a range of other industries which rely on bulk sea freight. It is instructive to note that these include a range of agricultural and resource industries—industries in which Australia has a competitive advantage, a competitive advantage which is going to be put at risk if a major cost input, the cost of freight, is increased. The report from Deloitte Access Economics predicts that shipping costs and freight rates will increase by up to 16 per cent as a result of the set of measures the House is considering this afternoon. That is a view which has also been expressed by the Australian Industry Group and by CSR Ltd. We have similarly had concerns expressed by the National Bulk Commodities Group and the Cement Industry Federation.

What is going on here is pretty simple. This is a set of measures which is going to restrict competition in Australian shipping. The consequence of that, in turn, will inevitably be an increase in prices to customers seeking to purchase shipping services to have bulk goods shipped between Australian ports. Already it is cheaper to ship between Asian ports and Australia than it is to ship between two typical Australian ports, and these new arrangements are only likely to make the situation worse.

Let us just examine why the new arrangements are going to reduce competition and make it harder for foreign ships to operate in the Australian coastal shipping market. There are detailed, prescriptive, onerous new rules. These require parties that want to obtain a temporary licence to carry out a minimum of five voyages in the year. So the owner of a ship wishing to carry out a smaller number of voyages in Australian coastal waters is now, by law, prevented from doing that.

The new arrangements for temporary licences are hopelessly complex, extraordinarily bureaucratic and, in practical terms, very close to unworkable. Those who seek a temporary licence are required to give details about their planned voyages in advance, and the details required include the number of voyages, the volume of cargo and the ports to be visited. There is very little flexibility permitted in complying with these requirements and, as we have seen, because of the minimum requirement of five voyages a year, smaller operators will be precluded. Of course, those who are considering complying with this detailed new set of requirements do not yet know what fees they will be required to pay for these temporary licences.

These are all issues which inhibit the competitiveness of foreign ships operating in the Australian coastal shipping market and, in turn, are likely to substantially increase domestic shipping costs. Why is this happening? It is a protectionist measure which is going to reduce competition. It serves the interests of certain stakeholders, including the Maritime Union of Australia, but it is not in the interests of customers—of those who use coastal shipping services to freight bulk goods between one port and another—and the extra cost burden that customers will face will be passed throughout the industry.

That brings me to the second point I want to make. Where is the compact between the unions and the industry which we are told is going to guarantee the productivity benefits inherent in this package? If there were a prize for mug of the year, it would surely have to go to a government which handed out generous wage increases to a notoriously militant union like the Maritime Union of Australia but did not require in advance the details of those productivity gains to be negotiated, finalised and signed. But that is what this government has done. It claims that there will be productivity agreements delivered. Indeed, the minister said in his second reading speech:

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.

Well, Minister, if you believe you are going to get a productivity benefit here, then I've got a Harbour Bridge I'd like to sell you, because the track record of the Maritime Union of Australia when it comes to productivity improvements is absolutely hopeless.

The Maritime Union of Australia is amongst the main authors of Australia's appalling position on waterfront productivity—the very appalling performance that led to the dispute between Patrick Stevedores and the MUA in the late 1990s and, more recently, the MUA have been up to their old tricks. In the last reporting period to June 2011, there has been a significant decline in productivity and, coincidentally, there have been ongoing negotiations between the MUA and stevedoring companies over a new industrial agreement and, as part of the MUA's negotiating techniques, it seems that there were some unofficial limits imposed on crane rates during this period.

The minister might be a mug, but there is no reason for the parliament, on behalf of the people of Australia, to be mugs as well. When we are being asked to approve these bills, under which generous financial benefits will go to the Maritime Union of Australia and its members, and there is no deal in place, locked in, to secure the promised productivity benefits, then on this side of the House we say, 'This is a bad deal; come back to us when you've got the deal signed but, before that, don't waste our time.' Let me come to the last point I want to make in the brief time that is available to me, which is: what degree of confidence can we have that the lofty objective of the government in bringing forward this package of bills is likely to be met? That objective is to revitalise the Australian shipping industry, but the government has given very little evidence about how that revitalisation is actually to be achieved. In their comments on the bills some of the key stakeholders have expressed significant doubts about the way the bills are framed. Shipping Australia had this to say:

… some of the provisions, at least in the Coastal Trading Bill, 2012 are confusing and, in our view, require substantial amendment to meet what we understand to be the objects of the Bill.

That is a rather politely phrased way of expressing a substantial degree of scepticism that the measures contained in this package are going to achieve the stated objectives. Only the credulous or the economically illiterate would think that the way to boost an industry's performance is to impose detailed new regulatory restrictions and to force operators to pay generous wage increases in disregard of competitive conditions.

This is not a package of measures the primary objective of which is to stimulate the shipping industry; this is a package of measures which is essentially protectionist. It is troubling that there is very little indeed, in the explanatory material associated with this package that the government has brought before the House, which talks about the likely impact of this set of measures on customers—those companies which are using Australian coastal shipping services and seeking to have their bulk freight carried by a shipping company between one port and another in Australia. It is very hard to avoid the conclusion that the most likely outcome of this package of measures will be higher prices and poorer service for customers. To a significant extent, product which is today carried by ship will be forced onto alternative modes of carriage, including rail and road, and higher costs will flow throughout the broader industry.

We often hear beneficiaries of protectionist legislation justify it as something which boosts domestic industry. In reality, experience teaches us that protectionist measures deliver higher costs, lower productivity and an inefficient industry, and that is what these measures are very likely to do.