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Providing a future for Australian shipping: speech at the Australian Shipowners' Conference - SEA11, Australian Shipping for Today and Tomorrow, Sydney



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Providing a Future for Australian Shipping

29 September 2011 Australian Shipowners' Conference - SEA11 Australian Shipping for Today and Tomorrow Hilton Hotel Sydney

Thank you Noel (Hart, Chairman ASA) for the kind welcome.

Good morning everyone.

I would also like to thank Noel and Teresa for inviting me to join you today to talk more about the shipping reform package, and to celebrate your organisation’s 25th Birthday.

It is a nice alignment that today is also World Maritime Day.

Twenty-five years is a significant milestone and one made sweeter by your participation in shaping the most comprehensive reform of Australian shipping in our history.

I know many of you were at the Maritime Museum on September 9 for the policy announcement “Stronger Shipping for a Stronger Australia”.

It was a proud moment when I released the first details of the shipping reform package - a comprehensive package geared to fulfilling our election commitment to revitalise Australian shipping.

You will have to forgive me if you have heard some of this before.

But with good reason - good news is always worth repeating.

Later this morning, Andrew Wilson will go through some of the detail of the shipping reforms - particularly around licences, the regulatory reform framework, the process and the information that will be needed.

This is an exciting time for Australian shipping.

The Australian Government firmly believes that there are sound economic, environmental and security reasons for revitalising our shipping industry.

We all know that we are in the midst of an unprecedented resources boom.

We also know that our prosperity is closely linked to making the most of the world’s need for our resources.

To date, we have not been positioned to maximise the opportunities that the resources boom Mark Two offers.

Let’s look at some facts - $200 billion worth of cargo is moved annually.

Your industry employs more than 14,000 people either at sea or onshore.

We are the biggest single island nation and the fourth largest shipping task in the world.

Yet there are only 22 Australian registered major trading ships plying our waters today - down from 55 ships in 1995.

Of the remaining ships, only four - all gas tankers - are dedicated solely to international trade.

At the ASA’s genesis in 1986, the Australian merchant fleet comprised around 88 vessels and employed some 5,500 officers and crew.

It is a sad reality that we have lost three quarters of that fleet, more to poor Government policy and decisions than international competition.

The Government, in which I am proud to be the Shipping Minister, is changing all that.

What we are doing is creating an economic and regulatory environment that will revitalise and sustain growth and productivity in our shipping industry.

The reform package is in the best interests of our economy, our environment and our security.

There are four key elements to the package:

• tax reform to encourage investment in new and more efficient ships to enhance the industry’s productivity; • an Australian international shipping register to help grow our international fleet; • a new licensing regime to provide clarity and transparency to enable long-

term planning and set clear boundaries around the necessary role of foreign vessels in our coastal trade; and • the establishment of a Maritime Workforce Development Forum to progress training to help us build a highly skilled maritime workforce.

Tax Reform

I covered the tax reforms in some detail at the launch and I am sure that your accountants have been pouring over the fine print.

The tax reforms we have proposed provide an effective tax rate of zero for shipping companies.

This makes our tax measures equal to the most competitive in the world.

They are designed to encourage you to base your operations here in Australia and to modernise your merchant fleets.

We all know that newer vessels are safer, more energy efficient and better suited to modern shipping.

To help industry upgrade, we have cut the depreciation rate in half - from 20 years to 10 years.

You will also be able to take advantage of a roll over relief scheme so that you can defer your tax liability arising from profit on the sale of old vessels when you replace them with new ships.

These changes will reap multiple benefits.

As you know, the operating costs for a 20 year old bulk carrier are at least 40 per cent more than for a five year old ship.

Newer vessels also incorporate advanced technology making them safer and more environmentally friendly.

There are also employment opportunities in encouraging growth in our shrinking maritime cluster.

To recap, the fiscal incentives include:

• a zero tax rate

• accelerated depreciation arrangements • roll over relief for selected capital assets • tax exemptions for seafarers working overseas on qualifying vessels, and • a royalty withholding tax exemption where vessels are leased by an

Australian company from foreign owners under a demise or bareboat charter.

Without reform there will be no Australian shipping industry in five years time.

No Australian industry in five years.

Time is tight and, if we are to get make these reforms a reality, we need your help.

Information sessions on key aspects will be held along the way so that we get the best information, advice and results.

Teresa will be talking about the Industry Compact after morning tea and I know she will be urging collaboration and cooperation to further promote these reforms.

The Government supports the development of this Compact.

The Government has delivered on our commitment.

Now you - industry and unions - need to deliver in the interests of all who support a revitalised Australian shipping industry.

Workforce Skills and Training

Let’s look now at how we are going to build the necessary workforce.

At the heart of this is the need for a collaborative and cooperative approach by industry and unions.

Everyone in this room knows that a ship is only as good as its crew.

That is why one of the criteria for registration on the Australian International Shipping Register is the requirement to employ a minimum of two Australian crew - preferably the Master and the Chief Engineer.

As I am sure you know, the maritime sector, like many other industries, is feeling the pressures of an ageing workforce with half of our seafarers aged over 45.

To compound the problem, attracting new recruits and building a strong and sustainable skills base has been hampered by the high cost and complexities of existing training structures.

We must attract, train and retain a skilled seafaring workforce.

As a first step, we are going to kick-start the maritime skills base with the establishment of a Maritime Workforce Development Forum.

This Forum will be made up of experienced representatives from the industry, unions, and the education and training sector.

It will directly address the building of our skills base.

This includes developing a workforce plan for the medium term to address the biggest concerns such as the ageing workforce and skills gaps.

My office has already had initial discussions with the proposed National Workforce and Productivity Agency on how the Forum will plug into this Agency.

The expertise and advice from that Agency will be invaluable in helping us develop a robust workforce skills and development plan for the shipping industry.

I also want advice from the Forum about how we can better use existing Government skills programs and funding sources.

The Forum will be in place for no more than five years and I will review its effectiveness within two years.

Finally, I want the Forum to start work from 1 January 2012, six months earlier than the rest of the reform package.

This recognises the urgent need to recruit, retain, train and up-skill a maritime workforce if we are to revitalise this industry.

In the coming weeks I will announce the members of the Forum, including its Chair.

Conclusion

These reforms are critical to revitalising our shipping industry and ensuring Australia’s long term economic prosperity.

In closing, let me emphasise that the reform package is a work in progress.

As we work through drafting the legislation you need to be working on the Compact and on how we can attract and retain more people to your industry.

But that is not all I am asking of you.

It is also up to you to embrace these reforms which offer real incentives to invest in the future of Australian shipping.

Thank you for your time this morning.