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Monday, 28 May 2012
Page: 5726

Mrs PRENTICE (Ryan) (16:29): I rise today to speak on the Shipping Reform (Tax Incentives) Bill 2012 and associated bills and to support the member for Wide Bay's four amendments which seek to decline a second reading of these bills. The coalition does not support the passage of these bills through parliament for two primary reasons. Firstly, these measures will not achieve their stated aims of revitalising the domestic shipping industry, but rather they will achieve their unexpressed aims of responding to union vested interests. These measures are yet another example of this Labor government using the long arm of governmental bureaucracy to intervene in and overregulate an industry to the detriment of the Australian economy. Secondly, these measures have been introduced prematurely before the Productivity Commission has had the opportunity to assess the package and before important discussions between the shipping industry and unions have been finalised.

The coastal shipping industry is an extremely important component of bulk freight movement for both domestic travel between Australian cities and internationally. Currently over 99 per cent of international cargo by weight and approximately 75 per cent by value is carried by sea transport. Coastal shipping carries around one quarter of interstate trade. Due to Australia's geographical isolation and the lack of land borders, we have the fourth largest shipping task in the world. In 2007-08, Australian ports received 27,434 calls: 7,161 of which were by containerships, 14,439 by bulk carriers, 3,633 by general cargo vessels and 2,201 by other vessels. This highlights the very important role that, as a service industry, coastal shipping plays to many of Australia's trade exposed export industries.

Traditionally our shipping industry has always been an uncompetitive one internationally. This is not just because of our geographic isolation or the onerous labour conditions of Australian workers, but also due to wharf delays. The 1950 report of the Liverpool Steamship Owners' Association commented:

Australia is an example of the gross occurrence of shipping delays—


… must inevitably be reflected in their cost of living.

The Institute of Public Affairs expressed the concerns succinctly when they said that the pocket of every Australian is being affected by the slow turnaround of shipping'. These concerns about the possible effects on the wider Australian economy remain true today.

The Economist in 2008 reported that Australia's transport cost advantage over Brazil for iron ore to China had decreased from a high of US$40 per tonne to only US$12 per tonne, which decreased the attractiveness of Australian iron ore to China. The resource boom is inextricably linked to the coastal shipping industry, and with the Deloitte Access Economics report estimating a 16 per cent increase in the cost of freight rates as a result of these bills, the package today could continue to threaten the resource boom and the Australian economy.

More recently, there has been a decline in the number of Australian registered ships, declining from 55 major vessels in 1995 to—as the minister quoted earlier today—21. This is a development which troubles me. It is why all members of the House Standing Committee on Infrastructure and Communications, which I am a member of, applied themselves diligently, in the very short time they had, to assessing these proposed reforms. I do note, however, that 70 per cent of Australian coastal shipping is still undertaken by domestic vessels. Into the future, however, it is estimated that the overall freight task will double by 2020 and treble along the eastern seaboard. If Australian flagged vessels do not have the capacity to efficiently take up that increase in freight, then we will have to rely on foreign flagged vessels to absorb the surplus without risking economic disadvantage. Therefore, it is vital that the Gillard government devise apposite legislation which will support coastal shipping, both for domestic vessels and access by foreign flagged vessels.

CSR Ltd, in their submission, expressed the view:

The welfare of the coastal shipping industry should not be at the expense of the industries it is there to serve … in its current form, the legislation is value destroying - the more successful the policy is, the worse off Australia will be.

These bills today do not support that future. Instead they provide an intrusive regulatory framework that could see decreased competition, which would serve only to harm the wider Australian economy.

There are five bills in today's package, with many wide-ranging and complex measures, only some of which I am afforded the time to discuss today. The intent of the bills is, according to the minister, to create an:

economic and regulatory environment that will revitalise and sustain growth and productivity in our shipping industry.

In trying to achieve that aim, the bills include measures ranging from tax incentives and other taxation changes for Australia shipping businesses to the creation of the Australian International Shipping Register and alteration of eligibility criteria to be on such a register. The bills also include provisions to abolish part VI of the Navigation Act 1912 and, in doing so, create a new three-tiered licence system.

These bills are merely new protectionist measures which do not recognise the important contribution that foreign companies and foreign flagged vessels make to Australia. We must acknowledge that Australians cannot do everything. We do not necessarily have the skill base, least of all the will, to provide an industry with all Australian owned businesses or Australian workers, just as we must acknowledge that Australia cannot manufacture everything.

We may not have a comparative advantage, owing to our tightly regulated labour market or our ability to raise capital in an increasingly competitive and mobile international capital market. As such, what this industry requires—and what every industry which utilises coastal shipping requires—is flexibility, flexibility to adapt to changing global conditions and markets.

The Department of Infrastructure and Transport maintains that these bills are not aimed at reducing competitiveness or flexibility. The department's supplementary submission to the committee stated that the new legislation is not aimed at reducing competition but rather 'to make transparent the role of foreign-flagged vessels in the coastal trade'. If the intention is to make the activities of foreign vessels more transparent, then the department itself should be more transparent about the fact that the intent to aid Australian companies to compete more effectively means limiting the access of foreign vessels to our waters in the first place. This is achieved through the complicated changes to the licensing regime, where there will be a three-tiered system: (1)A general licence with unrestricted access for Australian registered vessels, crewed by Australians, permanent residents or foreigners with appropriate work visas, to engage in coastal trading in Australian waters for a maximum of five years; (2) a temporary licence, which provides limited access to engage in coastal trading for foreign flagged vessels or Australian International Shipping Register vessels for a 12-month period for specifically identified voyages; and, finally, (3) an emergency licence which provides extremely limited access in identified emergency situations such as natural disasters.

The problem with this system lies primarily with the very prescriptive nature of the temporary licence structure. The government has tried to claim that the move from a three-month to 12-month duration of the permits creates greater certainty. However, this is not the case as, before companies are granted a temporary licence, they must provide very detailed information about exact dates, which loading and discharge ports will be used and what the cargo type and volumes will be on the voyage.

It is ludicrous to suggest that industry will be able to provide such extensive and detailed information 12 months in advance, when they do not even have the assurances that they will receive a licence. In order to get a licence, a company must have a minimum of five voyages, and there are no exceptions to this rule. The government originally proposed an arbitrary minimum of 10 planned voyages per year and then recanted and reduced this prescription to five. However, the reasons behind the drop from 10 to five are the same reasons that would lend support to a complete reduction from a minimum of five to zero. Otherwise, these bills will effectively block out any smaller coastal shipper or even a larger coastal shipper who may be experiencing a temporary downturn.

In the case where a company seeks only four voyages in Australian waters in one year, the arbitrary minimum acts as an incentive for that company to provide spurious voyages in order to meet the threshold. This is not an ideal situation, and I recommend that the government revisit this narrow licence eligibility criterion. This is not flexibility; this is isolationist protectionism masquerading as a call for transparency.

Furthermore, if conditions change and the information submitted to the department must be modified, then a variation request must include an amendment to, or addition of, a minimum of five voyages. As Shipping Australia noted, if a company originally planned for five voyages but wishes to add just one more, they are not able to apply for a variation in their temporary licence conditions. Of course, any company requesting a variation must pay a fee each time it applies. This stifling, prescriptive regulation creates an unnecessary compliance burden and reduces competition in the industry. Caltex Australia noted in their submission to the inquiry:

The shipping reform package … will increase red tape at a time when the Commonwealth and state governments, together with business, are seeking ways to reduce it. The Bill contains clear examples of unnecessary and unproductive regulatory requirements …

I support the Leader of the Nationals' four amendments that would decline a second reading of these bills until such time that the Productivity Commission is able to provide a report on the economic impacts of increasing regulation in coastal shipping services. I would also encourage the minister to delay debate on these bills so that the discussions and negotiations of a compact between the industry and unions can be finalised.

I understand that many within the industry are concerned that, failing an expeditious response from parliament, we could see a further curtailing of the domestic industry before the compact is announced. However, the complexities of the industry are so large, and the possible unforeseen and unintended consequences of these bills so complex, that the parliament must be confident that these measures will achieve their expressed aims. There is no point passing bills that serve only to help the myopic interests of unions and shipowners to the long-term detriment of other industries. If this Labor government, as it has frequently expressed, wants Australia to 'make things' and have a thriving manufacturing export industry, well, you do not then turn around and say: 'We're going to make it more costly for you to export; we're going to decrease your international competitiveness by lumping you with a carbon tax. But don't worry; we'll bail you out too when the disastrous economic consequences of our policy agenda are realised.'

Moreover, I note that the first inquiry about this issue occurred in 2008 and then followed the creation of the Shipping Policy Advisory Group in February 2009, a government initiated discussion paper in December 2010 and, more recently, proposed exposure drafts, regulatory impact statements and of course the House standing committee process. I did hope that, after this exhaustive legislative process, the government would be able to devise a balanced and positive piece of legislation. Unfortunately, the specific details—often confusing details—of this bill were released only in a poorly prepared exposure draft in December 2011, after which there was only limited opportunity for the House committee to fully assess the 30 submissions provided by industry participants and what many regard to be the deficiencies of the bills. Many of those 30 submissions support a referral to the Productivity Commission and further investigation into the financial implications of the package on the cost of moving freight. To date, there has been no real attempt by the government to put an accurate figure on these costs, and it would fail all tests of credibility to pass these bills in their current form without knowing what impact they will have.

The coalition supports not just the coastal shipping industry in Australia; we support the entire Australian economy. We do not bow to vested interests like the Labor government has done by introducing these bills to parliament. The coalition knows that because coastal shipping is so integral to the future of Australia's export industries and our economy these bills must not pass.