Coastal Shipping Needs New Wave of Reform

Opinion Piece

WTO-002/2014

18 September 2014

The Australian

Australia began, and naturally evolved, as a maritime nation. Our geography demands it.

The importance of shipping to modern trade and our economy means keeping the industry afloat is a must.

While the ocean provides a natural highway that carries the vast majority of Australia’s international trade by volume, we need to use it more.

In 2012-13, Australian ports managed over $400 billion worth of international cargo and saw some 4,900 overseas cargo ships make almost 14,000 port calls.

At first glance, that may sound impressive but this is an industry sinking under the dead weight of red tape and uncompetitive costs.

Under Labor’s flawed, bureaucratic and protectionist permit system there were almost 1,000 fewer coastal voyages and almost two million fewer tonnes of freight moved by foreign vessels in 2012-13.

Figures released today in the Australian Sea Freight 2012-13 Report show that 49 million tonnes of coastal freight was loaded in 2012-13, but that five years earlier (2007-08) it was over 59 million tonnes. This represents an average 2.4% decline each year in the total weight of coastal freight on Labor’s watch.

Meanwhile, the Australian trading fleet continued its downward trend with the number of major Australian registered ships with coastal licences declining from 30 in 2006-07 to just 13 by 2012-13.

While the number of vessels has marginally risen since the period of the Report, deadweight tonnage has plummeted by 64% over the two years of Labor’s failed changes to domestic shipping arrangements.

Ill-considered knee-jerk protectionist dogma masquerading as Labor reforms did not save Australian jobs on the water and has cost Australian jobs on land.

Clearly, coastal voyages by international and domestic ships should be growing, not shrinking. These figures demonstrate two points.

Firstly, Labor’s policies have failed the industry, its employees and our economic growth and that, secondly, with the right policies, there is huge potential and upside for coastal trading unconstrained by needless red tape.

Between 2000 and 2012 shipping’s share of national freight plummeted from 27% to less than 17%. Making that tale of the sea even worse, over the same time the volume of Australian freight actually grew by 57%.

This will not get better by itself. Projections over 2010 to 2030 will see Australia’s national freight task grow by a massive 80%. While the national road and rail tasks are expected to double, coastal shipping movements will grow a mere 15%.

Higher freight rates and the loss of market share from shipping businesses to road and rail increase commercial pressures on Australian shipping. They also increase congestion and add financial pressures on our land freight infrastructure.

Operating costs, particularly labour arrangements, are uncompetitive when compared with operating costs for foreign ships. For example, Cristal Mining has submitted that the difference between using Australian and foreign ships costs their business an additional $5 million every year.

We need to fix all of this to build a competitive shipping industry.

Labor’s sop to the maritime union is costing jobs and has the potential to cost a lot more jobs in our manufacturing industries, aluminium and mineral sands processing, gypsum, cement and sugar to name a few.

It does not help our national cause when coastal shipping is bound by regulations where a ship has to wait idle in port for a day before loading can commence. Submissions to the Government’s Options Paper, including from Bell Bay Aluminium, tell us that this delay can cost foreign vessels around $10,000 a day—and more than $20,000 a day for Australian ships.

Bell Bay Aluminium saw a 63% increase in their shipping freight rate from Tasmania to Queensland in the first year of operation of Labor’s Coastal Trading Act—an increase from $18.20 a tonne in 2011 to $29.70 a tonne in 2012.

Compare that with freight rates offered by foreign vessels, which sat at $17.50 a tonne in 2012.

The Business Council of Australia estimates that Labor’s system has inflicted over 1,000 extra administration hours per year on the industry to comply with the new system.

Shippers tell me that container rates from Melbourne to Brisbane are almost twice the cost of those from Singapore to Melbourne; that bulk freight rates on the east-west route have reportedly doubled in the past year and that transporting sugar from Thailand is cheaper than shipping it from Queensland.

Why can’t half-loaded international vessels carry containers between Australian ports without incurring punitive wage cost penalties?

Enough is enough. It just doesn’t make sense.

Australia’s coastal trading sector is at a crucial way-point. There are problems, but, as a government, we also see great opportunities for growth and expansion once we get the regulatory monkey off the industry’s back.