Shipping Australia Luncheon



20 May 2015

Sydney Harbour Marriott Hotel

Ladies and gentlemen, eight months ago I spoke to you about the need for coastal shipping reform in Australia.

For an island nation like Australia, with vast distances between most of our major cities, all of which are by the sea, it makes sense for coastal shipping to play a vital role in our transport network.

Yet as we have seen, coastal shipping volumes have continued to decline and the number of Australian flagged vessels continues to slip with only 15 major trading vessels remaining with a general licence to undertake coastal trading.  Ships in Australia on transitional licences are leaving too. When the current system started there were 16, now there are just eight.

The case for reform is crystal clear.

So, today I want to talk to you about the next steps the Government plans to take to address these problems and fix Labor's failed coastal shipping legislation.

What I am announcing today is a substantial deregulation of coastal shipping, with built-in protections to maintain Australian skills and to ensure the payment of appropriate wages and conditions for seafarers on foreign ships operating primarily in the Australian coasting trade.

Importantly, all ships will still have to meet Australia's strict maritime safety and environmental provisions, which are rigorously enforced by the Australian Maritime Safety Authority.

It goes without saying that maintaining our high standards of safety at sea and the protection of our sea environment, particularly the Great Barrier Reef in my home state of Queensland, are essential.

It is time to recognise that shipping operates as part of a global network with global connections, and it is time to embrace the opportunities that these global connections make possible.

Labor's tinkering has failed. The unions have had their try. The previous Government gave the unions what they asked for and it has predictably failed. It has cost Australian jobs on the water and on land—and if we continue down the current path, it is likely to put a lot more jobs at risk.

Jobs in our manufacturing industries, jobs in aluminium and mineral processing, gypsum, cement and sugar…to name just a few.

Australia's economic health depends on its competitive efficiency in a tough global marketplace, which is only getting tougher.

It does not help our national cause or our national interests when coastal shipping is bound by regulations that are designed to fail, like having a minimum waiting period before an application can be approved of up to two business days—even when there are no Australian licensed ships that are suitable to carry the cargo.

Nor does it help anyone when a piece of oversized, heavy machinery cannot be moved by ship and must go by road—all because this would constitute a single voyage, and you cannot get a Temporary Licence for a single voyage.

Shipping is, unashamedly, a priority area for this Government's broader reform agenda.

Without reforms to our economic and regulatory settings, Australia risks falling behind in the world market.

We must look more closely at the micro economic reforms and deregulation, which are needed to underpin productivity growth. 

However, changes have to be well thought through, balanced and capable of being sustainable over the long-term if we are going to encourage a buoyant coastal shipping industry.

As I told a recent ALC conference, the national story is not all about road and rail…in a vast country, girt by sea and at such great distances from major global hubs, sea freight movements are a critical part of the national and international supply chain.

As you are more than well aware, our major sea ports are also our international trade gateways and we rely on maritime transport for 99 per cent of our exports.

I put it to you that, the ships are here…so why don't we make better use of the shipping routes lapping our coast?

A substantial proportion of our domestic freight also depends on coastal shipping but as things currently stand, the coastal trading sector is at a crucial way-point.

In 2012–13, Australian ports managed more than $400 billion worth of international cargo and saw over 4,900 overseas cargo ships make around 14,000 port calls.  

Clearly, coastal voyages by international and domestic ships should be growing and to do that we need to overhaul the current arrangements. 

Our policy is all about utilisation of resources in the most efficient way possible.

Although some specialised ships have joined the fleet to service niche markets, the heavy carriage side of the industry has seen nothing but ship retirements.

The fleet of major Australian registered ships with coastal licences has been declining over decades and in the past decade alone, from 30 in 2006–07 to just 15 in 2013–14. 

And what that means is that there aren't enough ships to move our cargo and for some cargoes there aren't any Australian ships at all. 

You have told the Government that you prefer ships under 15-years-old because they are more fuel efficient, break down less and cost less to insure.

In 2013, 49 per cent of the ships in the world fleet were under 15-years-old and 79 per cent of the world's gross tonnage was under 15-years-old. 

In contrast, the average age of an Australian ship in the major trading fleet and operating under a general licence is 23 years. 

The introduction of the Coastal Trading (Revitalising Australian Shipping) Act 2012 (Coastal Trading Act) has not revitalised Australian shipping. In fact, it has gone a long way to sinking the industry.

Indeed, over the first two years of the Coastal Trading Act the total deadweight tonnage of major Australian flagged vessels with a coastal trading licence sunk by 63 per cent.

As a government, we see great opportunities for growth and expansion and the opportunity to take a good proportion of long-distance cargo off the rail networks and the highways and onto coastal shipping once we get the regulatory monkey off the industry's back.

Work has progressed on a raft of issues to allow this to happen, including returning the Protection of the Sea Levy back to its original level of 11.25 cents per net registered tonne.

And we have saved the industry millions more each year with the abolition of the carbon tax on the fuel used in domestic shipping.

Today, I am pleased to announce that we have taken a further, and very important, step towards putting in place a regulatory framework which strips back the red tape. 

The new framework is outlined in the paper that will be circulated to you.

This is a framework that fosters an environment where industry that can make the most of domestic and international opportunities, and be responsive to changing patterns of demand.

We will introduce a single, streamlined permit for all ships—Australian and foreign—operating along our coast.

The new permit will replace the complicated licensing system we have at the moment.

This permit will allow Australian and foreign ships to carry goods and passengers on unlimited domestic voyages during the 12 months of the permit.

There will be no requirement to nominate voyages upfront for approval and, as a result, there will be no need to seek variations to cargo type or volumes carried or the dates voyages are undertaken. 

Reporting on activities will instead be done twice a year, halfway in, and then at the end of the permit period. 

This is much simpler than applying for a voyage that is likely to happen, reporting on what you think you'll do beforehand, and then reporting again on what you've actually done after the voyage is over.

Vessels operating under a permit will be protected from importation requirements by Customs, including when carrying out scheduled maintenance. 

This will mean more business for Australian dry-docks and repair facilities.

The large cruise industry, whom are currently exempted from the operation of the Coastal Trading Act, will also be included within the operation of the permit system.

This means that cruise ships can stay for repairs rather than going to Singapore or elsewhere, and it will help keep cruise ship visitation figures up.

The Government is also fixing some of the issues with the coverage of the existing framework. 

The new permit system will allow the carriage of petroleum products from our offshore facilities to the mainland for processing. Currently the processing is happening overseas and the fuel is being shipped back because offshore facilities are outside the confines of the current legislation.

Because the Government genuinely cares about seafarer welfare, ships trading here for more than 183 days in a permit period will be required to pay all their crew an Australian wage set out in law.

Labor's Fair Work Act and Part B safety net will apply if a vessel engages in more than 183 days of coastal trading in a permit year.

If a vessel spends most of its time trading in Australian waters, you will have to pay Australian wages and meet Australian conditions.

Additionally, ships trading for more than 183 days will be required to employ a Master or Chief Mate and a Chief Engineer or First Engineer who is an Australian or who has Australian work rights.

We recognise that Australian skilled seafarers are renowned for their expertise throughout the world.  We need to maintain these key maritime skills in Australia and ensure we are training the engineers, masters and pilots of tomorrow.

Australia's strong environmental and safety laws will continue to apply to all ships operating in Australian waters.

As you are aware, foreign ships operating in Australian waters are subject to Australia's port state control regime, administered by the Australian Maritime Safety Authority. 

Our port state control regime is second to none in world terms. 

And if you do the wrong thing, regardless of the flag your ship carries, AMSA will detain your ship until it is fixed, and if you still don't get the message they can direct you out of Australian ports and not to come back.

The Government also plans to amend the Australian International Shipping Register to remove the requirement for a collective agreement between the owner of a vessel and the Seafarers' Bargaining Unit and the requirement for a vessel to be predominantly engaged in international trading.

Similarly to vessels predominantly engaged in domestic trading, vessels wishing to be on Australia' second register will have to have two senior Australian crew on board.

Shipping in Australia has been in a long-term downward spiral.

We need to turn that around. The common sense reforms we are implementing will do just that.

Cheaper freight costs will help the viability of manufacturers and primary producers and, as these industries grow, so will their demand for shipping services.

Greater choice between shipping companies will lead to better services being provided to customers.

Easy access with simplified rules for moving cargo will show the global marketplace that Australian waters are once again “open for business”.

More services for shippers and less regulation means it will be easier for businesses to arrange spot transport of cargoes and for more ships to service Australia.

Moving containers from road or rail to the sea will free up road infrastructure for the transport of more valuable or time-critical cargo and that means less congestion on roads and rail.

Cheaper freight rates and more efficient services will make Australian products more competitive in both international and domestic markets, saving current jobs in industries that use shipping and creating new ones. 

Increased shipping volumes means more landside maritime jobs. 

And, importantly, critical maritime skills will be preserved, with key positions on ships working predominantly in Australia reserved for people with Australian work rights.

The reforms I have outlined today have been undertaken after comprehensive consultation with all parties concerned with the Australian shipping industry and I thank everyone, including Shipping Australia, for their participation and frankness.

Legislation is currently being drafted with a view to its introduction before the end of the current Winter sittings. 

Once the drafting process has concluded, the Bill will be the subject of full public scrutiny through Parliamentary committee processes.

This will allow all stakeholders to comment on the detail of the measures I have outlined today.

However, I firmly believe that if we could better utilise just a fraction of the capacity on the foreign ships that visit our shores, it could make a major difference to the efficiency of Australia's sea freight movements.

That's what this policy is about. 

It's simple economics—if you have an underutilised resource, you should maximise its utility. 

This government recognises it, shippers recognise it and it's a change the industry needs to accommodate.

The measures I've announced today are a substantial change to the existing framework and will deliver advantages across the economy. 

Without change, we will just have more of the same. 

More delays, more inflexibility and more uncertainty about how ships can be used to meet Australia's freight transport needs. 

This framework will repair the existing mess and will set Australia on the right path to meet its future transport needs.

I'm sure that you will have a number of questions and I am happy to answer them.

Thank you.