Don Randall (Canning, Liberal Party, Shadow Parliamentary Secretary for Local Government) Share this | Hansard source

I am pleased to speak to the cognate debate on the Shipping Reform (Tax Incentives) Bill 2012 and other bills. Australia's shipping industry must play a more important role in our freight network. Australia has the fourth largest shipping task in the world, and sea transport carries over 99 per cent of international cargo by weight and about 75 per cent by value. Coastal shipping carries around one-quarter of interstate trade, and it is true that there has been a decline in the number of Australian registered ships over the last decade. Currently there are only 22 Australian registered ships.

With our freight task set to double by 2020 and treble along the eastern seaboard, coastal shipping must play a greater role. To that point I will mention an example. In Perth there has been an additional problem of overcrowding in the Fremantle port. At any one time between two and 13 ships might be waiting to enter the port. Those ships have to pay demurrage for the time spent waiting. For example, it cost a major Perth construction company, BGC, almost $1.5 million last year in demurrage. Fremantle port is also one of the most expensive for off-loading cargo. Again, for example, it charges $16 a tonne to off-load gypsum, which goes to make plasterboard, when the same work could be done for $8 a tonne at the Esperance port, $5 a tonne in Flinders in South Australia, and the international comparison is SGD$1.50 a tonne in Singapore.

These bills comprise the shipping reform package and they are designed to provide a regulatory framework for coastal trading in Australia, which will stimulate growth in the number of Australian ships on the coast and maximise the use of the Australian flagged vessels. That is its intention. The package attempts to achieve these objectives by introducing a variety of financial incentives for Australian flagged ships including company and income tax changes and accelerated depreciation for these ships. It is also creating a second register of Australian ships to be known as the Australian International Shipping Register. This is available to ships which meet the eligibility criteria, which include the requirement to have two senior Australian officers on board. Finally, the package abolishes part 4 of the Navigation Act 1912 and in doing so replaces the current permit and licence system with a new three-tiered licence system.

It should be noted that the bills do not address the serious problem of the cost and availability of ports that is also pushing up the cost of goods, as I said, in ports like Fremantle in Western Australia. The Minister for Infrastructure and Transport, Anthony Albanese, in announcing this package in September last year, said:

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

I understand the coalition members of the House were not convinced that the bills before this House would revitalise the Australian shipping industry. I heard the member from Swan who outlined that very well. Many industry participants are also not convinced. The first objective listed in clause 3(1) of the Coastal Trading Bill is that the regulatory framework promotes a viable shipping industry that contributes to the broader Australian economy. In its submission to the House, Shipping Australia say, 'Some of the provisions, at least, in the Coastal Trading Bill, 2012 are confusing and, in our view, require substantial amendment to meet the effects of the bill.' Tom Pinder from Australian Coastal Shipping, which is involved in the east-west containerised coastal trading, says:

The proposed legislation, as it relates to coastal container shipping, can only exacerbate this situation and will not result in any Australian flagged/registered ships valiantly taking up the challenge of carrying containers on the principal coast route, namely, east coast to west coast.

That has been confirmed, which the member for Swan also referred to, in an article, which is headed 'Cabotage concerns leave WWL with dilemma'. The 30 May article, in Lloyd's List Australia, goes on:

Ro-ro operator Wallenius Wilhelmsen Logistics says it will not commit to carrying coastal cargo until new cabotage laws are finalised.

And further, 'Until this is finalised and the confusion taken away, it is going to be carefully considering its coastal shipping operations around Australia.' That is very concerning. Tom Pinder said, 'A continuation down the path of a one-size-fits-all policy would result eventually in all of the current east-west freight task being diverted to the inadequate infrastructure of road and rail with hugely increased costs and a totally detrimental effect on the carbon footprint of this country.'

The Dry Bulk Shipping Users, which represent 60 per cent of the customers of coastal trade, are worried about the impact that the shipping reform package will have on the Australian manufacturing industry. The department has done no modelling on how many ships will become Australian flagged as a result of the reform package. The department states:

Given the range of consideration that the shipping investors and companies may have regard to in assessing where vessels will be registered or entered into service it is not appropriate for the Department to speculate on the number of vessels that may take the opportunities afforded by the new investment platform.

A number of submissions to the House and Senate committee inquiries requested that a Productivity Commission inquiry be held to determine what impact this complex regulatory change will have on the Australian coastal shipping industry, the cost of freight and the costs to coastal shipping customers. As we know, the government do not like Productivity Commission inquiries. We saw that with the NBN and a whole range of other issues where, when they just want to ram something through, they do it at their own behest and will not go anywhere near a Productivity Commission inquiry in case it comes up with results they do not like.

Minister Albanese has not been able to put a figure on how much more it will cost to ship freight around our coastline under this new regime. But according to Deloitte these changes will inflict a $466 million burden on our economy over the next decade, with freight charges to soar to 16 per cent and with 570 full-time Australian jobs tossed overboard. We heard the previous speaker discrediting the Deloitte contribution because he did not like what it said.

Getting back to the Western Australian coastal shipping exercise, given that this bill is unlikely to meet any of its objectives we should take time to consider alternatives that might revitalise our shipping industry and its ability to ply its trade. A good example is the proposed James Point Port, a private port to be established in Perth around Kwinana under an agreement signed in 2000 by the state Liberal government under Richard Court. This private port would be established by James Point Pty Ltd at no cost to the taxpayer, as it would be built and maintained wholly by the private sector. It will provide an alternative point of entry and thus address the problem of the overcrowded Fremantle port where, at any one time, more than 10 ships can be waiting to enter and, as I said earlier, reducing demurrage costs for those shipping goods into Perth via this port. The private port could also offload cargo at a cheaper rate than the expensive rate of Fremantle port, as has already been said, and the cost of unloading cargo in Fremantle is significantly higher than at a number of other ports around Australia and in South-East Asia.

The Fremantle Port Authority has reportedly expressed concern about the impact that a private port would have on its profitability. But looking at its charge structure—as I said, $16 a tonne for gypsum, compared to $8 in other WA ports—it is clear it has some room to move to adjust its prices. Competition would benefit customers overall. Why is the Fremantle Port Authority concerned about competition? We know that competition ultimately brings down prices. The Fremantle Port has been the site of extensive industrial action over the years. Two strikes have occurred in the last six months alone, one in December 2011 and another in March 2012. The strike last December affected around 34 shipping movements. Hold-ups such as these strikes disrupt the operations of the port and worsen the existing problems related to overcrowding. About $26 billion worth of trade goes through Fremantle port every year, which equates to $3 million worth of trade every hour of the day. This puts into context the very significant impacts of even a one-day stoppage.

There is also a flow-on effect from any disruption to work at this port. Ports Australia have said:

… there will be flow on impacts for the whole of the transport chain and the backlog resulting from the delays to shipping movements which in turn adversely affects the ability of shipping lines to meet schedules in other Australian and international ports. Such disruption will also further erode our international reputation as a reliable supplier.

When costs for hold-ups are related to strikes and demurrage costs, and high offloading costs are incurred, these are passed on directly to WA consumers in the form of more expensive goods. This affects everything from the cost of clothing to construction, as well as the price of an average Japanese produced car, for example, which is offloaded at the port. The James Point Port would be a much-needed alternative to entering via Fremantle. It would take the pressure off this crowded port. It would offer competition, as I have said, and would go some way towards reducing offloading costs, and it would help reduce the impact of strikes and disruptions to the transport chain.

However, the WA government is yet to follow through on its agreement, as it has not even facilitated the sale of the land and adjacent land by LandCorp. I consider this to be an excellent example of the type of measure that will need to be taken to improve the shipping industry within Australia. To me, it beggars belief that the Western Australian Premier, Colin Barnett, who I think is doing a good job, is intransigent and seems to have a mental block on this issue, because he actively obstructs the BGC company in its willingness to build this alternative port. As part of this package of legislation, the tax incentives bill that our government will introduce a zero tax rate for Australian shipping companies. We are introducing provisions for: accelerated depreciation of vessels through a cap of 10 years, down from 20 years, to the effective life of the ship; roll-over tax relief on the sale of shipping vessels; employer refundable tax offsets in relation to seafarers; and exemptions from royalty withholding tax for payments made for the lease of shipping vessels. We are also introducing a generous income tax exemption for core shipping activities, allowing flexibility and increased competitiveness on the global stage.

As the Australian Financial Review noted on 8 March 2012, the opposition were initially behind our recommended tax changes in 2008, but in 2012 have turned their backs on this important measure. It is a shame that the opposition do not support these tax incentives; it really does seem that there is not a tax cut that they would not say no to.

The Australian Shipowners Association has welcomed these bills, saying that the legislation will level the playing field. The association, which represents BlueScope Steel, Caltex Australia, Rio Tinto Marine, BP Shipping, Newcastle Port Corporation, Toll Marine Logistics and ANL Container Lines, has estimated that these tax changes could trigger up to $4 billion worth of investment as local shipowners look to add to the 21 Australian operated ships. This is investment into Australia, investment into local industry and investment into local job creation. With almost 800,000 jobs created by this federal Labor government, we know that to continue this employment growth we must keep introducing the necessary reforms to sustain our competitiveness, sustain our local industry and retain the capacity to build diversity in our economy.

Other measures in these bills include the shipping registration amendment component, which will establish a new Australian International Shipping Register and Australian General Shipping Register. The bill sets out the operation, administration and associated employment conditions. This new national body will oversee our participation in international trade, facilitate growth within the local industry and promote the viability and enhancement of our maritime skills base. Importantly, the bill will provide employment terms and conditions that are consistent with the ILO's Maritime Labour Convention. The bill will set employment conditions in accordance with the Maritime Labour Convention and other relevant ILO treaties to which Australia is a signatory. I welcome that measure.

In April this year, the vessel MCP Kopenhagen was floating off the coast of Newcastle, temporarily storing 3,000 tonnes of ammonium nitrate for chemical company Orica to service the region's mines. By all accounts, the conditions for the Filipino seafarers aboard were abysmal. I have boarded flag of convenience ships in the port of Newcastle in the past, with Dean Summers from the ITF, and on several occasions I expressed my concerns regarding the management of dangerous cargoes as well as conditions on ships. I know that when our local MUA judges a ship or the welfare of its crew to be substandard then action does have to be taken. I am pleased that in this case the shipowners came through and signed an agreement with the International Transport Workers Federation, ensuring the workers' pay rise and that their wellbeing would be maintained on board.

But we must ask: why does it always have to come to a point where an inspector has to intervene and board a ship? Quality standards and conditions should be made a priority around the clock, but what we continue to see is a quest to keep prices down by neglecting responsibilities to crews, to safe practice and to the maintenance of an acceptable condition of ships. The stronger shipping bills will certainly go a long way towards addressing these concerns, concerns that the MUA has had the integrity to keep raising with governments for many years.

I cannot mention 'ships of shame' without acknowledging the former member for Shortland and minister for transport under the Hawke government, the Hon. Peter Morris, who, I am pleased to report to the House, was awarded an Order of Australia Medal this year. Peter chaired the International Commission on Shipping and headed the Ships of shame inquiry in the 1990s, an inquiry that found significant problems occurring within the maritime industry—from unseaworthy ships to ships being operated by seafarers with false qualifications. It was a very well deserved award. Peter is also the President of the Newcastle Maritime Centre, which this year commemorates the 70th anniversary of the Newcastle submarine attack, which saw a Japanese assault on merchant ships within the port, as well as the anniversary of the sinking of the Iron Chieftain on 3 June 1942, killing 12 crew members. The Iron Chieftain was one of the big iron ships of BHP, sailing from Newcastle to Whyalla. BHP's second ship, the Iron Crown, was also attacked the following day, with only five of the ship's 43 crew surviving. Those were the days when Australian merchant mariners prevailed, and they worked hard for our nation during times of peace and times of conflict. Sadly, you can count the iron fleet on one hand today.

I would also like to mention to the House that the Merchant Mariners Memorial Service will be held in Newcastle's foreshore park on 2 June, this coming weekend, to commemorate the most invaluable contributions made by our merchant mariners and the waterside workers who supported them.

Other measures in the bill include the three-tier licensing system which will increase efficiency within our national shipping system. A general licence for general register vessels will provide unrestricted access to engage in coastal trading within our waters. A temporary licence will provide access to coastal trading, limited in time and voyages, authorised by this licence. Emergency licences will also provide access to Australian waters for coastal trading purposes, with such licences granted within three business days for emergency situations such as natural disasters. We also recognise that change cannot happen overnight, and this legislation puts in place transitional arrangements through a transitional general licence, which will authorise foreign flagged ships operating under existing licences to continue their operations for up to five years. It is fair legislation and it certainly carries through on our belief that if you are working in Australian waters, you should have Australian regulation on your side.

The MUA's Paddy Crumlin says these changes will be a vital economic boost, stating in the Financial Review on 10 September 2011: 'It will be massive.' Citing London as an example of a successful shipping industry, he said: 'It's got 500 ships on its register. It's got no iron ore, no coal, no LNG.' And that is very true. He is absolutely correct. Why shouldn't Australia take advantage of its resources, of its capacity, of it strengths, to support our local industry and our primary resource industries with local ships, local jobs and fair working conditions? This is a Labor package that has been developed with no half measures. It will bring good news for our local shipping, keep our local industry afloat and deliver prosperity in Australia's maritime sector for many years to come. In conclusion, I note the AMWU's video 'Aussie Shipbuilders' Message to Clive Palmer'. I recommend that everyone has a look at it. It is certainly doing the rounds online and in my city. It features Newcastle's Forgacs, who, of course, build ships. We still do build ships, Mr Palmer, and now we have a real change to make sure we can build the shipping industry of the future. I commend the bills to the House.

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