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Cruise operator says senior bureaucrat advised him to replace Australian workers with a foreign crew -

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ELEANOR HALL: The Prime Minister today dismissed claims made by an Australian cruise ship operator that a senior Federal Government bureaucrat advised the company to hire a cheaper foreign crew, at the expense of 40 Australian jobs.

Tony Abbott says it's "not true" that the advice was offered.

The Kimberley cruise business, North Star Cruises Australia, operates luxury adventure cruises in Australia's north.

In a submission to a Senate inquiry into changing the nation's shipping laws, the company's managers said the senior bureaucrat advised them to consider taking their ships off the Australian shipping register, and to re-register in a foreign country.

Will Ockenden has the latest.

WILL OCKENDEN: North Star Cruises Australia runs luxury cruises around the Australian coastline, and includes destinations like the remote Kimberley region.

BILL MILBY: We are an Australian company; we've been operating in Australia for 27.5 years.

WILL OCKENDEN: Bill Milby is a representative of the company.

BILL MILBY: We built this business around our Australian ships, which are all built in Australia when we replaced them, and we have brought up our crew as Australian; we've trained them; quite often they're all young people.

WILL OCKENDEN: In May, the Deputy Prime Minister and Transport Minister Warren Truss announced the Federal Government would deregulate the shipping industry, removing much of the existing "red tape".

Bill Milby says he was at that announcement, and asked what that would mean for businesses like North Star Cruises Australia, which happily operate with an Australian crew.

He said he was worried the legislative changes would mean foreign companies would be able to undercut local businesses with their cheaper foreign crews.

Mr Milby says he was advised, by a senior Federal Government bureaucrat to replace his Australian workers with a foreign crew if the company wanted to remain competitive.

BILL MILBY: She said to me, there and then, well we are in an international environment, so we have to learn to compete on the international market.

Maybe you should look at de-registering as an Australian ship - in other words taking it off the shipping register - and perhaps put on a foreign flag, which will allow you to put on foreign crew, which will reduce your wages costs.

WILL OCKENDEN: He says he was shocked.

BILL MILBY: I was staggered, I was really surprised that it was somebody from Canberra representing this department, telling me that. And I told her at that particular time, I said I cannot believe what I'm hearing.

WILL OCKENDEN: This morning, a spokesperson from the Department of Infrastructure and Regional Development said "the Department did not provide this advice."

The Prime Minister Tony Abbott was also asked about the submission, and said this:

TONY ABBOTT: Well it's just not true. It's just not true.

WILL OCKENDEN: Bill Milby has told The World Today, "I do not tell lies". He says he was in the meeting and knows what he was told.

He also says there was also another meeting with the same bureaucrat, and a colleague.

BILL MILBY: Both of them went down the same line. If you want to remain, if you want to be competitive in the international market place then we should look at all of our options and that was an option that we should look at.

WILL OCKENDEN: How do you think that sits with the Federal Government's line on Australian jobs and small business being the cornerstone of the economy?

BILL MILBY: Well I asked them that very question. I said look, I cannot understand what you're staying here. It contradicts what Prime Minister Abbott and Treasurer Hockey said in their budget speech, which was only, I don't know, it was about month prior before this.

They're saying that they're all for Australian small business, all for job creation, I said, but you're telling me the exact opposite.

WILL OCKENDEN: He says while he has no problem with competition, but it has to be on a level playing field.

BILL MILBY: We have an issue with the allegedly proposed amendment bill. We think it is wrong; we think that in trying to reduce red tape the Government, the Department has just gone too far and not really considered the consequences of the new rules of regulations that are going to put in place.

I don't have an issue with the people I spoke with from the Department at all. I think they were probably being honest with me. But the legislation, or the proposed legislation amendment bill, is wrong.

WILL OCKENDEN: North Star Cruises submission was seized by Opposition transport spokesman Anthony Albanese, who is strongly against the Government's deregulation plans.

ANTHONY ALBANESE: This is about Work Choices on water, this is about undermining the Australian national interest by bringing in legislation that will simply mean the Australian shipping industry can't compete and can't survive.

WILL OCKENDEN: But the Prime Minister Tony Abbott disagrees, saying it was changes Labor made to the shipping laws which destroyed jobs.

TONY ABBOTT: Labor were absolutely catastrophic for coastal shipping and for jobs in coastal shipping. What this Government wants to do is to restore the situation which operated under the Howard government and end Labor's job-destroying, cost inflating coastal shipping regime.

ELEANOR HALL: That's the Prime Minister Tony Abbott, ending that report from Will Ockenden.