Martin Ferguson (Batman, Australian Labor Party, Shadow Minister for Transport, Roads and Tourism) Share this | Hansard source

I welcome the opportunity to make some comments on the Trade Practices Legislation Amendment Bill (No. 1) 2007 and to challenge the government where I think it has been weak on reform in Australia. As the opposition has stated in this debate, it is good to see the Treasurer finally doing some work with respect to this important issue. It has taken him a long time, but I suppose it is a bit like his football team: eventually they might win a premiership. At least he has got to the goal line on this occasion.

As previous speakers have noted, in 2004 the Senate Economics References Committee produced a report on the effectiveness of the Trade Practices Act. The majority report, to which the government senators were not party, made recommendations for far-reaching reform in Australia on the trade practices front. Unfortunately, here we are three years later debating a bill that does very little to implement that reform and, in doing so, to rectify the weaknesses in the Trade Practices Act that have long been identified. Nevertheless, I join with my colleagues today in supporting this bill if for no better reason than it will do no harm and it may do a little good.

I want to raise a very important area of reform on the trade practices issue that is completely missing in this bill. I refer to one of the major challenges to Australia at the moment that involves the working of the Trade Practices Act, and that goes to infrastructure bottlenecks in Australia’s major export supply chains, principally coal and iron ore, and the failure by the Treasurer to take reform in this vital area seriously. This is not just the view of the opposition; it is also the view of major mining companies in Australia such as BHP and Rio Tinto. They are crying out for reform and they are sick and tired of the tardiness of the Treasurer and the Howard government with respect to this area of reform. The end result is that we have lost out on the export front and on jobs, and the nation’s slice of the economic cake is smaller than it should be because of the lack of commitment by the Treasurer to the task before him.

The failure to reform is caused in large part by Australia’s regulatory regime, and I refer specifically to the Trade Practices Act. At the moment, the current operation of the act is dampening investment that is needed to keep Australia’s coal and iron ore exports growing. Even today there has been reference not only to the potential in China but also to the growing potential out of India. This is not a minor issue. It is a major issue that goes to the heart of Australia’s continued economic growth. The failure of the Treasurer to take this issue seriously is now undermining Australia’s reputation with our coal and iron ore customers to such an extent that Japanese coal buyers visited Australia just a few weeks ago to convey their concern about export bottlenecks.

As we appreciate, coal is Australia’s biggest export industry. It is worth $23 billion a year. Japan has historically been our most important trading partner, yet the Treasurer and the Howard government have had their eyes off the ball when it comes to investing in critical rail and port infrastructure that actually gets coal to market. The record shows that over the last decade supply chains from the Hunter Valley and Bowen Basin have been fragmented and bogged down in regulatory disputes, many of which have unfortunately centred around competition law and have proven to be a barrier to investment and efficiency in operation. With multiple infrastructure owners, operators and regulators, there has been insufficient alignment of these objectives and their objectives and a lack of incentive to invest. This has come at substantial cost to Australia.

Inefficiency and underinvestment in the coal supply chains—rail and port alone—have cost Australia more than $1 billion in export income over the last two years. That is not an insignificant amount of export income. Moreover, it is not only our reputation with customers that is at risk. The global trade in thermal coal jumped by almost 20 per cent over the last two years, but the record shows that unfortunately, despite that growth, Australia was only able to respond with 3.8 per cent growth in exports over that period. Over the same period—and this is interesting—Indonesia has overtaken Australia to become, for the first time, the world’s largest coal exporter. That might not mean much to the Treasurer, but it does mean a lot in terms of the size of Australia’s economic cake. It is also about positioning us over the next decade or two with respect to these key export markets.

In that context, we should not forget that there were serious problems in the 1980s when Japanese buyers became concerned about the reliability of iron ore supplies from Australia. We live in a global market, and buyers will shop around to guarantee security of supply. That is what they did in the 1980s; that is how the giant Brazilian iron ore industry was born. One would have thought that the Treasurer would have learned from those experiences. Having said that, I am pleased that cooperation is now winning the day in both Queensland and New South Wales. But there remains an absence of national leadership from the Australian government or any apparent will by the Treasurer and the Howard government to address the impediments to investment and regulatory issues for the long term. I can assure the House that this $23 billion export industry and the rail and port infrastructure that supports it will be a national priority for a federal Labor government.

I also say to the House that we cannot allow the inefficiency and capacity constraints in the coal supply chains to be extended to one of the most efficient export ore chains in the world—namely, the Australian iron ore industry. The iron ore supply chain today is highly efficient; it is a world leader; it is best practice. The system is vertically integrated rather than fragmented, and this is the source of the high level of efficiency. Growth of Australia’s iron ore exports is so far keeping pace, thankfully, with global growth in iron ore trade. However, the application by Fortescue Metals for access to BHP Billiton’s Pilbara rail tracks remains unresolved after three years because of the Treasurer’s monumental failure last year to make a considered decision on the future of the Newman railway. He unfortunately went missing in action. Instead of doing the right thing and clearly articulating the national interest case, the Treasurer went missing in action. That has seriously upset major international iron ore mining companies. I believe this was the clearest demonstration of why the Treasurer is no leader and no potential Prime Minister, because when it comes to doing the hard yards he ducks for cover.

No-one would argue against an efficient and effective access regime for all rail haulage for all Pilbara iron ore producers. But the unwillingness of both BHP Billiton and Rio Tinto to make further vital infrastructure investments in rail because of the risk posed by future third-party access arrangements that could limit their ability to recoup the investment or operate their facilities at maximum efficiency is equally understandable. According to a report by Port Jackson Partners in 2006, Australia stands to lose approximately $43 billion in export income and $13 billion in capital investment over the next 20 years if an access regime is imposed on Pilbara railway infrastructure under part IIIA of the Trade Practices Act. This part of the act is crying out for reform. Historically, part IIIA was one of the Hilmer reforms and initially was well intended. The purpose of regulated access was to prevent owners of monopoly infrastructure refusing, and correctly so, to supply competitors subject to certain limits. These were, firstly, that there needs to be spare capacity, otherwise access obligations will create a disincentive for expansion where new investment is clearly needed; secondly, that there needs to be an improvement of competition—for example, if an owner uses a facility to supply export markets, access will not improve competition but will weaken the owner-exporter; and, thirdly and finally, that access has to be necessary, not merely convenient, otherwise a third party will always prefer to use someone else’s facilities to avoid the cost and risk of investment in their own facilities.

Hilmer recognised these principles, but over the last decade some of these caveats have been lost. The net effect is that the application of competition law now favours access seekers over the operation of existing owners who have borne the huge risk of investment, who maintain the infrastructure at best practice and who operate sophisticated, integrated logistic chains to supply their export markets to the benefit of Australia at large. Consequently, the view of many in the industry is that part IIIA now effectively creates a disincentive to new investment. On these critical regulatory issues for infrastructure investment the Prime Minister and the Treasurer have been missing in action for more than a decade, and the costs to the nation speak for themselves.

I raise these issues because I think this reform is required now. Australia is losing out because of the government’s failure to address these important issues. More importantly, if we do not make these decisions then investment will start going elsewhere, just as occurred with iron ore in Brazil and is now occurring with coal in Indonesia. Our responsibility is to make sure we have an investment regime in place which enables us to chase medium- to long-term investment in Australia. The issues I raise today represent a serious barrier to success in chasing that investment. If we as a nation do not provide investment certainty for coal and iron ore companies, if we cannot guarantee that they can recoup their investments, get their products to market and meet their contractual commitments with customers such as Japan, then they will take their money and go elsewhere in the world. That is the truth of the matter, and we saw that in the eighties with respect to the development of the iron ore industry in Brazil. I simply say on behalf of the opposition that it is time for the Treasurer to seriously consider an amendment to part IIIA to provide a discretionary power to exempt export facilities from the scope of part IIIA, subject to a public or national interest test which would include a requirement to take into account export infrastructure efficiency.

It is not a big ask; it is fundamental to securing investment for Australia’s future and being able to say to our important customers such as Japan, China and India that we can supply on time and meet our contractual obligations. It is also about grabbing the growth potential out there with respect to exports of important minerals such as iron ore and coal. Such a change would implement recommendations of the 2001 Productivity Commission report and of the government’s Exports and Infrastructure Taskforce report of 2005. Both those reports identified the need to reduce regulatory risk to encourage new investment, which is urgently needed in export infrastructure.

I raise these issues today because this is an important debate. I also seek to send a signal to government that its tardiness on reform of part IIIA is now a clear problem to Australian industry. We cannot allow it to go on and I think that it is the responsibility of the Treasurer to apply his mind to this area of urgently needed reform.

The bill obviously seeks to clarify the operation of section 46 of the Trade Practices Act and the abuse of market power. It also amends part IVA of the act, which deals with unconscionable conduct. This is a commendable amendment from the opposition’s point of view, and previous speakers, including the member for Rankin, made detailed comments on those key issues. I would simply say in conclusion that, while we have some reform, it is a drop in the ocean compared to the more far-reaching reform that I have raised in my speech to the House this afternoon. I commend the bill to the House but I ask the Treasurer to have a hard look at this issue. That is the view not just of the opposition but of key export investors in Australia such as BHP and Rio Tinto.

See this speech in context