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Wednesday, 11 November 1959

Mr McEWEN (Murray) (Minister for Trade) . - by leave - The Leader of the Opposition (Dr. Evatt), as well as a considerable number of members of all parties in the Parliament, have evinced a great interest in the level and the determination of overseas shipping freights. I am now able to give the following information to the House: - Shipping discussions were recently concluded in Sydney which dealt with freight arrangements in the AustraliaUnited Kingdom-Continent Shipping Conference. The commodities affected were wool, refrigerated cargoes, fresh fruit, and " general " - that is, packaged - cargoes. Bulk cargoes, for example, wheat, other grains, sugar and ores and concentrates, were not affected by these negotiations.

There were two major results of these negotiations. First, the so-called " formula " arrangement in this trade was revised; and secondly, it was agreed that there would be no variation in freight rates before September-October, 1960, when these freight rates are again due for review. The " formula " provides for the shipowners in this trade to receive a return sufficient to cover their costs and to provide an agreed return on their invested capital.

The original formula, negotiated in 1956, provided for a 12 per cent, return to owners on a capital figure calculated on the original cost of each ship as written down over a 25-year period. The rate of return has now been reduced to 10 per cent, per annum, with special arrangements to reduce the charge on freight rates at a time, such as the present, when, by reason of the post-war replacement programmes, the vessels engaged in the trade are particularly young. The revised formula accordingly provides for the basic rate of 10 per cent, to be applied to a figure determined by adopting what would be the written-down value of each ship after twelve and one-half years' use. A lower rate of return, namely, 6 per cent, per annum, is then applied to the amount by which the actual capital employed, computed by reference to the actual cost and age of each ship, exceeds the figure to which the basic rate of 10 per cent, has been applied.

The other details of the formula - for example, the depreciation provision allowed to owners when costs are being determined - have not been made public, but, of course, they are known to the Australian interests which have been negotiating.

In his statement about the outcome of the negotiations, the Chairman of the Federal Exporters Oversea Transport Committee has mentioned that it has been calculated that, on the new formula, a freight rate increase of about 6 per cent., as compared with an increase of about 12 per cent, under the old formula, would have been warranted. However, as I have already indicated, it has been agreed that there shall be no variation in freight rates before SeptemberOctober, 1960. The new formula will be applied in the two-year period 1960-61 and 1961-62. Its terms will then be reviewed in the light of circumstances ruling in 1962. Shipowners, in return, agree to continue to provide a guaranteed service to shippers.

The entire negotiations were held under the auspices of the Australian Oversea Transport Association. The Federal Exporters Oversea Transport Committee, a body of 26 representatives of major produc ing and exporting interests, conducted the negotiations on behalf of Australian interests. The chairman of this committee has stated that the agreement represents, on the whole, a reasonable basis from the point of view of both shipping companies and shipper interests. Successive governments since 1929 have recognized that the determination of rates of freight in the United KingdomContinent conference should be left, within the framework of the Australian Oversea Transport Association, to the parties directly concerned - namely, the producer-shipper interests and the shipowners. In 1953 and 1955, when negotiations became deadlocked, the Government agreed to fulfil the role of a fact-finding mediator. In 1957, the Federal Exporters Oversea Transport Committee was reorganized in order to widen its representation and give a better voice to producer interests. The Government's assistance was sought in connexion with that re-organization, and was given.

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