Keynote Address: 9th Annual Regional Ports Conference—Supporting regional development, trade and engagement



29 October 2015

Cairns, Queensland

Thank you Captain Abraham (Captain Dilip Abraham, MC for event) for the kind introduction and it's great to be here in Cairns today.

I would like to start by acknowledging:

  • Mr David Anderson, CEO, Ports Australia
  • Chris Boland, CEO, Ports North
  • Councillor Bob Manning, Mayor of Cairns

Congratulations on a most comprehensive conference agenda. It puts the spotlight on the role of regional ports in meeting Australia's current and potential competitiveness.

As per this agenda, the Deputy Prime Minister, Warren Truss was to update you today on the Shipping Legislation Amendment Bill 2015. I am however joined in Cairns today by Minister Josh Frydenberg, who is the new Minister for Energy, Resources and Northern Australia and sends his very best wishes. Josh, like me is from down south. I represent an inland electorate and I'm from Wagga Wagga. So you're probably wondering what someone from Wagga Wagga in new South Wales can tell you about today. But I have to say Wagga Wagga is the only inland city and in fact the only regional city in Australia which has all three arms of Defence—we have an Air Force base, we have an Army base and we have a Navy base.

Warren would like to have been here today and he does send his apologies and his regrets he could not attend today.

Warren initiated the reform process in April last year, as he put it to: “canvass reforms to relieve the shipping industry of costly and cumbersome red tape.”

Since then there has been great progress, and as you may know just two weeks ago the Billpassed the House of Representatives, and is due to be debated in the Senate next month.

I want to take a moment to highlight why so much effort has been put into reforming Australia's shipping industry.

An efficient coastal shipping sector is imperative to lifting the competitiveness of Australian businesses and contributing to a more productive national economy.

Yet, sadly, shipping in Australia is in a downward spiral, and without changes to its regulatory settings, will not be able to deliver the competitive, efficient services that Australian businesses need. 

The fleet of major Australian registered ships over 2,000 dead weight tonnes with coastal licences has plummeted from 30 vessels in 2006–07 to just 15 in 2013–14.

There has been a 63 per cent decline in the carrying capacity of the major Australian-flagged fleet with coastal trading licences from 2012 to 2014.

Between 2000 and 2012, while the volume of freight across Australia grew by 57 per cent, shipping's share of the freight task fell from about 27 per cent to just under 17 per cent.

On top of that, Australia's overall freight task is expected to grow by 80 per cent by 2030 (from 2010 levels), but coastal shipping is only forecast to increase by 15 per cent.

These numbers demonstrate a clear case for reform, and shipping is unashamedly a priority area for the Government's broader reform agenda.

The Rural, Regional and Transport Committee in reviewing the Shipping Legislation Amendment Bill 2015 succinctly summed up the benefits of the Government's Bill.

I quote: “it removes impediments, leverages strengths and reduces costs, and its passage will benefit the economy greatly.”

The Bill's central featureis a single streamlined permit for all ships—Australian or foreign—operating along our coast, to replace the existing three-tiered system.

In being granted a permit, vessels will enjoy unrestricted access to the Australian coast and will be protected from importation under the Customs Act 1901.

This greatly simplified system will reduce costs to business and eliminate unnecessary red tape.

It recognises that shipping operates in a global context and seeks to ensure that Australian businesses can take maximum advantage of the opportunities created by global connectivity.

The Bill also recognises that with domestic freight growing exponentially we must be working towards coastal shipping carrying a more significant share of the growth in long-distance cargo.

Shipping should be regarded as a viable and robust option for all forms of freight, with particular strengths in transporting high-volume and long-distance cargo around the coast.

This Bill is intended to facilitate that outcome. Shippers will have access to more affordable freight costs and a wider choice of ships; and more ships will be available to carry spot cargoes better suited to transport around the coast.

The Coastal Trading Act 2012, the current legislative framework allowing foreign ships to participate in the domestic economy, is inefficient and burdensome on both shippers and the shipping industry.

It was legislated by the previous government as part of a suite of reforms intended to arrest the decline in the Australian shipping industry. 

Industries relying on shipping and who operate under this legislation say it is a barrier to competition and market entry by foreign ships.

Evidence supplied by shippers shows this Act has increased the price of coastal shipping services, hitting Australian businesses hard and adding regulatory burden without improving the viability of Australian Shipping or the quality of shipping services.

Bell Bay Aluminium reports a 63 per cent increase in shipping freight rates from Tasmania to Queensland in just the first year of Labor's regime—from $18.20 a tonne in 2011 to $29.70 a tonne.

We know that the cost of shipping dry food powder from Melbourne to Brisbane is the same as shipping the same product from Melbourne to Singapore. Clearly, that's ridiculous.

And it is cheaper to ship sugar from Thailand to Australia than it is to ship Australian sugar around our own coastline.

Again, that's crazy and self-defeating for the shipping industry, let alone our sugar industry and local manufacturers.

The current Act imposes unnecessary costs on business.

The Department of Infrastructure advised of a case just last week where a container ship had to apply to carry two containers under a temporary licence, even though there were no Australian container ships.

And then, when the number of containers increased from two to three, they had to apply for a variation of the approved voyage. This is clearly nonsensical.

The extra cost for Australian businesses using an Australian vessel is outlandish and unsustainable at some $5 million a year more than using a foreign vessel.

Many of the 87 submissions received and the 103 stakeholders that the Government engaged with during the 2014 consultation process tell a similar story.

Reform is required to simplify the rules and reduce the cost to business.

The Port of Townsville's submission is particularly relevant for this audience. Their submission commented on the disproportionate burden of high-cost shipping for regional ports.

This would no doubt be shared by other members of the regional ports sector.

Their submission also made the important point that removing the stifling regulations currently in place would ensure greater resilience in the supply chain following natural disasters and significant rain events when highways are frequently cut.

Reform to the shipping industry will have a significant positive impact on freight movement for Queensland's manufacturing, mining and agriculture sectors and for its ports as part of the supply chain.

Australia's regional ports rank among our most essential national infrastructure assets.

They drive innovation and economic growth for the regions and they are a critical component of effective supply chains.

Regional ports perform approximately 85 per cent of the national freight task, and they have immense strategic potential for regional development.

In less than 20 years the value of international trade flowing through Queensland's regional ports has grown nearly fivefold to an extraordinary $41 billion in 2012–13.

Overall, cheaper shipping costs will make Queensland products more competitive in the global market.

Freight services at more competitive prices will boost the profitability and stability and may encourage additional investment.

Mining companies will have access to more affordable freight rates to move dry bulk commodities as well as important mining equipment by sea. This will improve the cost effectiveness and connectivity of operations, such as those in Gladstone and Weipa.

Competitive and reliable sea freight options for shipping agricultural products such as grain crops and cattle will allow farmers greater access to domestic and international markets.

As well, given the perishable nature of many agricultural goods, reliable sea freight options are crucial to meeting consumer demand.

If our farmers are more competitive, it stands to reason regional employment is likely to grow.

Currently there are many opportunities which translate to increased demand on our freight networks. Whether it's the recent trade agreements established with South Korea, Japan and China or the Trans Pacific Partnership Agreement; let's not also forget the opportunities and potential which lie within the Agricultural Competitiveness White Paper and the Northern Australia White Paper which will only drive further growth and development for regional Australia and regional Queensland.

The advantages for regional ports arising from greater use of the coast by industry are clear.

The Bill's coverage will be for the first time extended to include ships engaged in the carriage of petroleum products from our offshore facilities to the mainland and ships engaged in dry-docking.

This will translate to more business for Australian dry docks and repair facilities and it will ensure our growing fleet of cruise vessels can stay in Australia for repairs, rather than going to Singapore or elsewhere for routine maintenance.

It will also mean that petroleum products can be transported from our offshore facilities to the mainland for processing without the ships being subject to importation by Customs.

One of the counterintuitive consequences of the existing framework is that processing of petroleum from Australian offshore facilities is happening overseas and then fuel is being shipped back to Australia because offshore facilities are outside the scope of the licencing system.

These changes are essential to ensure Australian shippers are able to move goods with greater efficiency and more effectively.

For members of the cruise shipping industry here today, the Bill's benefits aren't limited to freight.

A recent study commissioned by Cruise Down Under estimates that in 2012–13, Australia's cruise shipping industry's total output was $2 billion and total expenditure by cruise passengers alone was $574 million.

This represents an increase of almost 30 per cent on the previous financial year.

Collectively Government and industry must do everything possible to ensure this kind of growth isn't jeopardised.

The new legislation will enable large cruise ships to obtain a permit to carry passengers on domestic voyages regardless of the vessel's flag.

This will ensure Customs importation requirements are not triggered, including when carrying out scheduled maintenance. 

It will also mean cruise ship passengers have access to a greater range of cruise ship services around the coast. This will boost local tourism industries not just in our major capitals; it will also bring more visitors to our regional coastal cities and towns.

Additionally, the legislation will facilitate more visits to Australia from the burgeoning super yacht sector.

And let me reiterate these reforms will not come at the expense of maritime safety or the marine environment.

Foreign ships carrying coastal cargo or passengers will continue to be subject to the State Port Control regime. This regime, which is administered by the Australian Maritime Safety Authority, is second to none in world terms.

Building and protecting Australian jobs are critical goals in the proposed legislation.

The Bill contains built-in protections for Australian workers and for the wages and conditions for all seafarers on foreign ships operating primarily in the Australian coastal trade.

These protections recognise that foreign ships engaged primarily in domestic trade should be subject to domestic workplace relations arrangements.

In particular, we need to ensure that careers in the maritime industry are viable and they are encouraged.

That is why the Government has included measures to ensure ships trading predominantly in Australia have Australians undertaking the key skilled positions on board.

The Bill provides for any vessel that undertakes more than 183 days of coastal trading within a permit period to have two senior Australian crew on board.

The seemingly unending decline of the fleet of Australian trading vessels is the single biggest threat to the careers of Australian seafarers.

Before I close I would like to discuss land side initiatives and the privatisation of our ports.

The Deputy Prime Minister said recently that a focal point for Australia's freight growth pressures will be its ports.

A key finding in the recent Infrastructure Audit shows that container movements through Australia's ports are projected to grow by 165 per cent between 2011 and 2031, while non-containerised trade is projected to grow by 138 per cent over the same period.

The Deputy Prime Minister went on to say there is a vested interest to ensure that the long term capacities of our transport corridors—both road and rail—are aligned with that of our ports, and for each part of the supply chain to be as effective as it can be.

And developing better port-land freight connections demands national long-term planning and commitment.

The Transport and Infrastructure Council of COAG, which the Deputy Prime Minister chairs, applauds the port industry for leading the development of national guidelines and urges ports to implement the industry-wide undertaking to put these plans in place by December 2016.

Finally, some remarks about privatisation.

As you know, Melbourne, Fremantle and Darwin ports are currently being considered for privatisation by their respective state and territory governments. 

This partly reflects the introduction of the Australian Government's Asset Recycling Initiative which offers incentives for governments to dispose of mature infrastructure and develop new assets.

The Government is urging the state and territory governments to make sensible decisions regarding port privatisation because of the risks around the potential misuse of market power following privatisation.

In saying that, Australia's competition framework and laws are up to dealing with that risk.

In wrapping up, sustaining an economic path geared towards productivity is absolutely in the national interest.

The Coalition Government is intent on creating a stronger shipping industry that will be well-equipped to contribute to our nation's growing freight task and in doing so contributes to the growth of Australia's regional ports.

The Shipping Legislation Amendment Bill 2015, through well targeted and effective regulation, has the power to substantially generate economic benefits and operational efficiencies that will be enjoyed by us all.

Our work to date has seen the Bill pass through the House.

While this is encouraging, we know there are many more discussions yet to be had to see a favourable passage through the Senate and to become law.

We look forward to advising you of a positive outcome—one that will considerably benefit Australia's regional ports sector.

I wish you a successful conference.

Thank you.