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Thursday, 2 April 1987
Page: 1938

Mr PETER MORRIS (Minister for Transport and Minister for Aviation)(10.45) —I move:

That the Bill be now read a second time.

The purpose of the Ships (Capital Grants) Bill is to give effect to the shipping industry development package announced by the Government on 22 December 1986. The package consists of shipboard productivity and capital assistance measures. This legislation will assist Australian ship operators to acquire modern, technologically advanced ships which can be operated efficiently at the crewing levels specified in the Bill.

The Government has a firm commitment to the development and expansion of efficient, competitive and reliable Australian flag shipping. We believe that there are opportunities where Australian shipping can compete internationally, on its commercial merits, despite the very difficult market situation shipping faces globally. On the basis of cargo volumes and distance carried, the Australian seaborne transport task ranks fifth in the world. Yet less than 5 per cent of our trade is carried in Australian flag ships. This reliance on foreign shipping places a heavy burden on our balance of payments. In today's tough economic climate we can no longer rely solely on traditional exports to keep our economy buoyant. If we are to enjoy future prosperity we must look to expanding our trade in services, such as exports of efficient Australian shipping services.

The industry development package which this Bill seeks to implement is a major element in the Government's long term strategy of developing an efficient Australian merchant fleet. The package is based on the recommendations of the Maritime Industry Development Committee as set out in its report `Moving Ahead'. The MIDC is a tripartite committee of Australian ship operators and seagoing unions, chaired by an officer of the Federal Department of Transport. It was asked to examine, in detail, shipboard organisation and operational arrangements in Australian shipping and to recommend a workable industry manpower plan appropriate for modern ships. I would like at this point to express the Government's appreciation of the work of the Committee and to pay tribute to the seagoing unions and the ship operators for their enlightened approach to their industry.

The Committee delivered an innovative, forward-looking plan that has four main elements. The first is the introduction of multi-skilled ratings on to Australian trading ships; that is, ratings who will work both in the engine-room and on deck. This integrated approach to ship crewing introduces into the Australian shipping industry the general purpose crew concept being developed by leading maritime nations. The second is the establishment of a new training regime to equip entrants into the industry with the skills demanded by high technology, modern ships. The third is the establishment of a retraining program to provide the opportunity for existing seafarers to upgrade their skills and remain in the industry. The fourth is the introduction of a new social environment on Australian ships, with the emphasis on team work.

The MIDC plan for a new approach on Australian ships is a sound basis on which to take Australian shipping into the next decade. The implementation of this plan has been set by MIDC in a three-point package. First, the unions have agreed to changes which will improve efficiency. Secondly, ship operators have undertaken to invest whenever commercially feasible in the high technology ships that will introduce the new crewing arrangements. Thirdly, the industry has called on the Government to provide financial incentives, which this Bill seeks to do. Each of these elements reinforces the others.

Implementation of the MIDC package will bring immediate benefits. The maximum crew on a new generation bulk carrier operating to the new standards will be 21. That is an improvement of some 20 per cent on the previous crew level on an Australian bulk ship of 26.

However, the importance of the package goes well beyond this aspect. The introduction of multi-skilled, general purpose crewing will provide a method of shipboard organisation that can readily accommodate further improvements to crew productivity, in line with technological developments in the industry. This package constitutes the greatest single step forward for Australian shipping. It represents the most progressive move made in decades. It is an achievement that has been made possible by genuine goodwill, co-operation and consultation involving all parties-seafarers, ship operators and government. The package has been derived by those who know the industry's strengths and weaknesses and how it functions, and who are committed to its improvement. It is a model for other industries to follow.

Over the last few years seafarers have faced a contraction in employment opportunities. Improved shipboard technology has reduced manpower requirements and ships have become significantly larger, one ship often replacing two. Despite these difficulties, Australia's seafarers have adopted an enlightened approach, squarely facing up to the issues and supporting measures which will put Australian shipping on course for a better future. The role of the Government has been to encourage and promote this worthwhile development. It recognises that progress must come from within the industry and cannot be imposed from without. The key to the success of the package is investment in new tonnage. Smaller crews will eventuate only if high technology ships, capable of being operated at the proposed new levels, are introduced into the Australian fleet. New ships mean new job opportunities and a firmer, more secure future for the industry. Both are essential prerequisites for a healthy industrial relations climate.

As the cost of capital is the major cost in ship operation, accounting for up to half total costs, any lightening of capital burdens would be a major step forward in promoting the industry. The financial measures that will be provided by the Bill now before the House will therefore act as a positive incentive for ship operators to invest in the new ships that will make the package work. It is the Government's contribution to the future of a vital national industry. The intention of this Bill is quite clear. The Government will provide grants to encourage the introduction of new ships into the Australian flag fleet, provided those ships are operated at all times at or below specified crew levels. The Bill's purpose is to improve the efficiency of Australian shipping by promoting the shipboard management and work practices, and training programs, developed by the MIDC. The Government is prepared to take this step because it knows that the industry-ship operators, unions and employees-is committed to the success of this industry package.

I turn now to the details of the Ships (Capital Grants) Bill. The draft Bill provides for a tax- able grant of 7 per cent of the purchase price of eligible new or secondhand trading ships, or, in certain circumstances, 7 per cent of the modification cost of an existing trading ship. As clause 8 sets out, grants will be available only to ships which are: Crewed with Australian residents, at a level no more than that specified for the appropriate ship category; engaged in the carriage of passengers and/or cargoes; and owned and registered in Australia. No ship will be able to qualify for a grant more than once under this scheme. For income tax purposes, the grant will be treated as income in the year of receipt.

A shipowner in receipt of a grant will be required to operate the relevant ship in accordance with its certificate of ship category issued by the Secretary to the Department of Transport. Clause 6 of the Bill specifies the categories. That clause also allows for new categories of ships to be created by regulation, where warranted. It is expected that this will occur only rarely-for instance, in the case of small ships, or ships engaged on short coastal voyages where a three watch system need not apply. In this case a maximum crew level of well below 21 would be determined.

Clause 7 specifies maximum crew levels for ships benefiting under this Bill. These are 21 for tankers in the international trades and for other types of ships-for example, bulk carriers and container ships. Tankers engaged in the coastal trades will have a maximum crew of 23. I should stress that these are maximum crew levels, arrived at after consultation with the MIDC. Nothing in the legislation will prevent ships from being operated with lower crew levels, provided that can be done with safety. To ensure the maximum impact of the grant scheme, it is subject to a sunset clause. The scheme commences on 1 July 1987 and cuts out for new ships on 30 June 1992, and for second-hand ships on 30 June 1990.

To allow maximum operational flexibility, provision is made in clause 12 for a ship to be issued with a certificate stipulating more than one category. For instance, a tanker engaged in both coastal and overseas trading would be able to be crewed according to the voyage actually being undertaken. If required, ship operators can apply under clause 14 for a variation to a ship category certificate when a ship changes its operations or trade. Provision is made in clause 22 for the Secretary to the Department of Transport to permit, where circumstances warrant it, additional persons to be carried for a limited period. This provides the flexibility to cover the case of a new ship experiencing teething problems that require the temporary carriage of specialised technicians.

Provision is also made in clause 23 for the Secretary to permit the ship to be operated with trainees in addition to the crew without jeopardising eligibility for grants. This will allow essential sea experience in practical ship operation through the temporary creation of training berths on appropriate ships in the fleet. A ship operator who fails to maintain the crew at or below the appropriate level or knowingly breaches other conditions-for example, crews a ship with non-Australian residents-will be required to repay the grant as set out in clause 26. That clause also requires a ship operator who disposes of a ship in under five years after receipt of a grant to repay that grant, on a pro rata basis.

As I announced on 22 December last, these arrangements replace the depreciation concessions and manning notice requirements set out in section 57am of the Income Tax Assessment Act. However, for new ships which are eligible for the grant the Government has decided to retain the entitlement under that section to depreciation in the pre-commissioning year. Eli- gible new ships would therefore qualify for 20 per cent depreciation in the pre-commissioning year and each of the four subsequent years. In the case of second-hand ships the usual taxation rules will apply, which would allow five year depreciation commencing from the date the ship is first used by the owner. Those depreciation rules will also apply to modifications. Appropriate amendments will be made to the Income Tax Assessment Act as soon as practicable.

Australia is an important trading nation almost totally dependent on overseas-owned or controlled shipping to get its goods to distant markets. The MIDC package will promote a more efficient, competitive and reliable Australian flag fleet. Australia will be less dependent on overseas shipping and will retain a greater share of the external freight bill. The package will also mean lower coastal sea freight costs.

The scheme is estimated to cost $18m, after tax is paid on the grants, spread over five years. For this net outlay, a foreign exchange contribution of $40m to $50m a year could be achieved under the MIDC package. A saving of up to $40m a year is also in prospect from the use of more efficient tonnage on the coast. These savings will increase profits and create jobs. The resultant boost to tax receipts will further reduce, and should eliminate, the net budgetary cost of the grant scheme. Moreover, these benefits are permanent additions to national wealth that will long outlive the transitory cost of grants. This package replaces the Crawford plan, established in 1984. Under that plan, some 10 per cent of the Australian flag fleet was renewed with crew reductions of between 20 and 30 per cent achieved.

I acknowledge the part played by my predecessor, the honourable member for Gwydir (Mr Hunt), who recognised the need to bring the parties together so that the industry could develop on a realistic and commercial basis. He had our support for his initiative in commissioning Sir John Crawford to work with ship operators and sea-going unions to promote Australian shipping.

This Bill represents a watershed for the Australian shipping industry. It will cement into place an industry plan which has evolved after much hard work over the last three years. That plan is the path to the future for the industry because it provides for an ongoing system of crewing that has the flexibility to adjust to the competitive pressures that will continue to emerge in shipping. The industry will have to work hard to secure its future, to continue to improve its efficiency. It will require considerable co-operation between all elements of the industry. I am, however, confident that we have the right framework for success, a success that will benefit Australia as a whole. The Ships (Capital Grants) Bill is an important contribution to this process. I commend the Bill to the House. I table the explanatory memorandum to the Bill.

Debate (on motion by Mr Carlton) adjourned.