Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard   

Previous Fragment    Next Fragment
Wednesday, 8 May 1985
Page: 1877

Mr PETER MORRIS (Minister for Transport and Minister for Aviation)(6.05) —I move:

That the Bill be now read a second time.

The purpose of this Bill is to provide the Australian Shipping Commission with additional capital of $70,541,000. This additional capital is required to provide the Commission with a capital structure appropriate for a commercial enterprise and marks a further step in the Government's program of revitalising Australia's shipping industry. The Government's objective is to provide a sound base for the development of an efficient, competitive Australian shipping industry. Within this broad framework the Government is committed to ensuring the long term viability of its own shipping organisation. An efficient, profitable, commercially oriented Australian National Line is necessary to the overall effectiveness of the Australian shipping industry.

When this Government came to office in 1983, ANL was in a desperate situation. Not only was the Line financially bankrupt, with millions of dollars owed to its creditors, but also management was ineffective, the organisation was inefficient and its industrial relations record was poor. The previous Government had starved it of capital funds and had not given it sufficient freedom to operate as a commercial organisation. The ANL management structure needed overhaul. The Government responded to these problems in a positive, co-ordinated way. In 1983 we provided ANL with an emergency capital injection of $90m to meet its immediate financial crisis. This injection consisted of $30m in cash and $60m for the conversion of outstanding Treasury loans. We also agreed to roll over remaining domestic Treasury loans totalling $50.5m as they fell due. We amended the Australian Shipping Commission Act to give ANL greater commercial freedom and to enable the top management to be strengthened. We created new positions of part time Chairman and Managing Director, and appointed to them people with extensive commercial experience. We took important steps to improve industrial relations in ANL and the shipping industry generally.

The new ANL management has taken up the challenge set by the Government. It has rigorously overhauled and rationalised its organisational structure. It has critically reviewed all its commercial operations. In the light of this review some unprofitable services have been terminated. A program of disposing of uneconomic vessels and terminals has commenced. Steps are being taken to improve the productivity and profitability of its vessels and terminals. The effects of these tough decisions are now appearing, as clear evidence that the Government's policies are working. The ANL declared an operating profit of $3.3m in 1983-84 compared with an operating loss of $18.8m in 1982-83. I freely acknowledge and appreciate the contribution that the unions have made to achieve this result. But much more remains to be done before ANL can free itself from the legacy of past mismanagement. Continuing support and co-operation from the unions is needed to achieve this in what are tough market conditions for the shipping industry.

The extent of this task is revealed by its 1983-84 annual report. Past management had masked its actions by adopting accounting practices that over-valued the Line's assets and did not record the lease liabilities it had incurred. Those practices occurred under a so-called free enterprise private sector government. In fact they were endorsed by that government. Abnormal adjustments were necessary to correct this and reveal a truer asset situation. The result was a declared accumulated loss of $129.5m as at 30 June 1984. This meant that its accumulated losses had exceeded its capital and reserves by $3.7m. ANL was still technically bankrupt.

The Government determined last year that ANL's capital structure should be examined in greater detail to enable responsible decision to be taken on its longer term financial viability. A committee of officials was instructed to carry out this examination. It included representatives from the Departments of Transport, Finance and the Treasury and the ANL. The committee's report, the most comprehensive ever undertaken on the Line's finances, makes it clear that ANL operates in a very competitive environment both internationally and domestically. It has very high debt servicing charges, a legacy of past government policies, and its margin of revenues over costs is low. In 1983-84 this margin was less than 1 per cent. ANL is thus particularly susceptible to downturns in trading conditions, exchange rate movements and losses from industrial disputes. In the light of this report the Government decided to tackle ANL's financial problems at their source.

The Line's high indebtedness, the result of the past Government's approach to financing ANL's expansion into overseas trades, was the key problem that had to be solved. The $70.5m capital injection the Government decided on does this in two ways. First, it allows $50.5m of existing Treasury loans to be converted to capital. This, by reducing interest payments, provides a significant contribution to ANL's cash position. Secondly, the remaining $20m will be used to repay a Treasury on-lent loan falling due on 1 June 1985. This cash injection will help ANL get over a projected cash deficiency in 1985-86 and 1986-87. At the same time ANL's capital base has been re-established on a properly commercial basis.

The Government now believes that the $70.5m that this Bill will provide when enacted will put ANL into a position where it has the flexibility and incentive necessary to pursue improved commercial performance, to continue to restructure its activities and to seek out profitable new business opportunities. In saying this it should be made clear that ANL has not been given a feather-bedded path to future prosperity. The international shipping industry remains severely depressed with fierce competition coming from foreign shipowners in a very depressed market at least in the short run. On the Australian coast, competition is also increasing, for example, as new services start across the Bass Strait. There can be no doubt that ANL and its employees have a difficult task ahead of them.

In short, the Government has made what it considers to be a major effort to revitalise ANL. It has remedied the undercapitalisation that past governments should never have allowed to occur. It is now up to ANL management, its employees and the unions. It has been made clear to each that the Government expects continuing improvements in ANL's performance to generate and provide the cash required for investment in new ships and equipment and to pay dividends.

The Government is confident that this legislation provides the basis for a commercially viable national shipping line that will benefit all ANL customers, the Australian economy, and Australians generally. I commend the Bill to the House.

Debate (on motion by Mr Lloyd) Adjourned.