George Christensen (Dawson, National Party) Share this | Link to this | Hansard source

Previously I mentioned the Deloitte Access Economics report, which was prepared on the likely impacts of the new scheme. According to Deloitte, the expected shipping costs that will increase will amount to between 10 per cent and 16 per cent. That report was actually commissioned by a group of dry bulk shipping users. In their submission to the House of Representatives Standing Committee on Infrastructure and Communication shipping reforms inquiry, the group said that they were concerned that this amendment and this bill could have major implications for the competitiveness and that the government was continually dismissing their concerns, and I suppose that that is a very serious charge against the government.

I want to quote from the submission that the Australian Dry Bulk Shipping Users made to the Senate. Under the section referring to the Deloitte Access Economics study they state:

A number of dry bulk shipping users gathered together following the public release of the first draft of the Coastal Trading Bill 2012 in December 2011 as they were sufficiently concerned that the Bill could have major implications for their competitiveness.

…   …   …

The group commissioned Deloitte Access Economics to undertake a general computable equilibrium model analysis of the economic impacts of the reforms using actual data provided by the companies.

The report which examined the impact of the replacement of foreign vessels with domestic vessels on the coast, was made publicly available in March 2012.

Headline findings include:

as it is assumed the labour market will remain buoyant and most of the displaced labour will be absorbed in other sectors.

… in the immediate term, the displacement is considerably higher, with an estimated peak loss of 570 [full-time equivalent] employees.

These job losses will mainly be in regional Australia. Surprise, surprise! That submission showed the aggregate impact on gross domestic product over that period to 2025 being upwards of almost $½ billion and 570 full-time equivalent jobs lost, and as usual regional Australia is forecast to bear the brunt of job losses as a result of this government's policy.

If we really want to look at what effect this legislation will have, I would say let us not focus on the benefits to the MUA—the Maritime Union of Australia—let us look at how this will benefit, or rather not benefit, exporters and industry. Let us look at the impact this is going to have on the nation and its economy. The Business Council of Australia also made a submission to that inquiry. They highlighted their concern:

… that aspects of those reforms could lead to higher costs to users and poorer service quality, thereby harming the competitiveness of shipping users.

While also quoting the Deloitte report about costs increasing by up to 16 per cent and lower employment, the Business Council points out that the government's own regulatory impact finds:

… worsening economic impacts as foreign vessels are replaced with higher-cost Australian ships.

Sugar is a very important industry to my electorate. It is the second biggest after mining and manufacturing relating to the mining industry. Right up and down the coastline, whether it be in Mackay, Proserpine, Ayr or Home Hill, sugar plays an important role in the economy and an important role in creating jobs. So I was very interested to read what Sugar Australia said in their submission to the Senate Economics Legislation Committee, which also included the forecast cost increases reported by Deloitte. Sugar Australia, which is a joint venture between Sucrogen Australia Pty Ltd and Mackay Sugar Ltd, ship about 300 kilotonnes per annum of raw sugar from North Queensland to their refinery in Yarraville, Melbourne. Let us have a look at what Sugar Australia says will happen under this legislation and its associated increased shipping cost. In their submission they state:

As an internationally traded commodity, it is difficult or not possible in the majority of cases to pass on any additional costs within the business.

…   …   …

In this case it is likely that the cheapest supply chain option will be pursued which could involve importing raw sugar from Asia to Melbourne and exporting raws from North Queensland.

But the North Queensland sugar issue is about more than just raw sugar and processed sugar—it is also about molasses and bioethanol. Sucrogen Australia, which also put a submission in, reported on likely impacts to their secondary products in their supply chain, this being molasses and bioethanol. They state that they currently manage the single desk entity, Australian Molasses Trading, and describe the molasses business as 'highly trade exposed'. They say that this bill will have the effect of:

… driving up the cost of coastal shipping—

and it—

will force a potential rethink of where the product is sold. All Australian molasses could be exported into existing global markets in preference to supplying domestic markets. This could cause the Australian market to import molasses in cheaper international vessels. There is no benefit to the shipping industry from this legislation if higher coastal shipping costs encourage a change in trade flows from domestic to international.

They go on to bioethanol and say:

Under recently changed market conditions, Sucrogen Bioethanol will re-start coastal transfers of ethanol from North Queensland to Melbourne displacing imports.

That is a good thing!

The requirements of the trade can vary significantly depending on several market variables, and may revert to imports again.

This bill that we are discussing today actually seals the deal because they will have to apply for temporary licences to move the bioethanol, not knowing whether they will need to use it or not.

The differentials for moving cargo from North Queensland versus imports from Brazil they say are very marginal. In other words, the legislation for these trades is self-defeating. That is their words, 'self-defeating'. In this circumstance there is no point in being forced to apply for a temporary licence, it is just value destroying. I think that if a term sums up this bill that would be it—value destroying. I can tell you what is going to happen for the sugar industry. It will not be the end buyer that pays the price—as the submissions from Sugar Australia and Sucrogen have outlined—because sugar has got pretty much a fixed price in the international market. When you are selling domestically with a refined product you get a higher price. When you have to sell it overseas because the cost impacts are forcing it to go that way, it will not be Sucrogen, it will not be the sugar traders, it will not be the shipping companies that are paying that additional cost, it will be the cane farmers. It will be the cane farmer who is squeezed effect in and it will be his workers—he might have to shed one or two of them—and this is the impact that this Labor bill is having on my electorate.

We are at a point where we are about to have the carbon tax that will slug that industry to the tune of $80 million over the next five years to reach, that figure quantified by cane growers. When we have all these additional price impacts, for the government to be proposing a bill that is going to drive up the cost of shipping, which is going to destroy domestic markets that pay better for the sugar industry, it is certainly not something that I can support in this place. It is something that Labor needs to hang its head in shame on. This industry has been through more than enough. It has suffered corrupt world markets and the introduction of rare diseases known as smut and orange rust, and it has gone on and on, getting clobbered year after year. It remains in existence and is finally doing well now, but these bills set cruel prices and cruel incomes for cane farmers right up and down the Queensland coastline. Again I say that I cannot support these bills in this place.

Mike Symon (Deakin, Australian Labor Party) Share this | Link to this | Hansard source

I speak against the amendments moved by the Leader of the Nationals, but I do speak in support of the Shipping Reform (Tax Incentives) Bill 2012, along with the Shipping Registration Amendment (Australian International Shipping Register) Bill 2012, the Coastal Trading (Revitalising Australian Shipping) Bill 2012, the Coastal Trading (Revitalising Australian Shipping) (Consequential Amendments and Transitional Provisions) Bill 2012 and Tax Laws Amendment (Shipping Reform) Bill as moved by the minister. Together these bills form the government's legislative package, titled Stronger Shipping for a Stronger Economy, which delivers on Labor's 2010 election commitment to revitalise Australia's shipping industry.

These bills are designed to turn around the decline in Australia's shipping fleet by introducing a zero tax rate for Australian shipping companies. In addition to this, there will be accelerated depreciation of vessels, with a 10-year cap on the effective life of those vessels rather than the current 20-year cap. I think that it is interesting to note that the average age of Australia's shipping fleet is now almost 20 years. That should be compared with around 12 years for the rest of the world.

This bill also provides for both rollover relief from income tax if a vessel is sold and an exemption from royalty withholding tax for the lease of ships. There is also a seafarer tax offset for salary, wages and allowances that are paid to Australian resident seafarers who undertake voyages on qualifying vessels, providing that the seafarer is employed on voyages for at least 91 days per year with their company. Importantly, this provision will remove the current disincentives for companies employing Australian workers in the shipping business.

There will be additional requirements placed upon shipping companies accessing the income tax exemption. For instance, they will be required to comply with a mandatory training requirement for crews, and I think that is very important in an industry such as the maritime industry where it is not that easy to get in, for a start, and where it is very hard for many people to undertake training. Having some sort of lever there through the tax system is always going to be a great way to make sure that more people do get the opportunity to work in that industry. Companies that access the tax exemption will also have to show a substantial proportion of commercial, technical or strategic operations in addition to the crew management based within Australia.

As has been said, today there are only 21 Australian-flagged vessels left, and only four of those operate internationally. Yet in 1996, when the Howard Liberal government came into office, there were 55 Australian-flagged vessels operating. The Howard government tripled the number of trading permits issued to foreign flag crews from fewer than 1,000 in 1999 to around 3,000 in 2007-08. Whilst other countries around the globe were rebuilding their shipping industries, the Howard Liberal government was abandoning Australia's own shipping industry. By the year 2008, less than one half of one per cent of Australia's export trade was being carried by Australian ships. That is one half of one per cent of the 834 million tonnes of international cargo that came into or left Australia that year in over 4,000 ships and another 52 million tonnes of cargo that was moved between Australian ports.

I found an interesting article from Paddy Crumlin, the MUA National Secretary, published in last year's autumn-winter Maritime Workers' Journal. In it he quotes from a report prepared for the government in 2008 by Meyrick and Associates. It estimated:

… that a 5% increase in the use of Australian-flagged vessels on the main international bulk trades could result in an aggregate Australian fleet increase of some 20 vessels, rising to almost 40 vessels with a 10 per cent share increment and 75 vessels with a 20 per cent increment.

Of course that is a long way from one half of one per cent. Meantime, countries in the rest of the world such as the UK, Germany, the Netherlands, France, Japan and South Korea have embarked on successful programs to build their nations' shipping industries.

As we all know, Australia is an island and we cannot survive without shipping to move our exports for sale and for bringing goods for importers for local consumption. Our ports currently manage around 10 per cent of the world's entire sea trade with a value of $200 million in cargo moved every year. In the next two decades it has been predicted that trade at Australian ports will triple, and there should be no reason that Australian-flagged vessels and Australian seafarers are not part of that staggering growth.

Reducing the costs for Australian ships to operate would increase their competitiveness against foreign-owned ships and these bills help create a level playing field for Australian shipping. That is not only for international trade but also for our domestic shipping where currently 30 per cent of our coastal cargoes are being carried on foreign vessels, comprising some 470 ships at the present time.

The establishment of the Australian International Shipping Register, along with the establishment of a seafarers bargaining unit and the introduction of other important reforms for manning and safety standards, will enable Australian shipping companies to compete on this level playing field internationally by removing the cost disadvantages that I have described Provisions such as mixed manning will require that international registered vessels have a minimum of two Australian crew, preferably the master and the chief engineer, where currently there is no requirement. The Australian International Shipping Register will also implement competitive pay rates and conditions that are consistent with the Maritime Labour Convention including the provision of worker's compensation. Ship owners will have to take out insurance cover for their workers to at least the level provided for in the International Transport Workers Federation Uniform Total Crew Cost Collective Agreement. Conditions such as these will create a safety net for international seafarers employed on ships that are on the register, and, importantly, ships on the general register will not be able to avoid Australian domestic legal liabilities by joining the international register as there is a requirement in the bills that vessels must be predominantly engaged in international trading and that they only have limited access to coastal trading. These bills will also amend the Occupational Health and Safety (Maritime Industry) Act 1993 so that there is no doubt that the act will apply to a vessel engaged in coastal trading, whether that is a vessel with a general licence, a temporary licence issued under the Australian International Shipping Register or an emergency licence issued under either register.

These bills have a long history. They have not been around as bills for all that long, but the issue has certainly been around for a long time and was, indeed, dealt with in the last parliament by the House of Representatives Standing Committee on Infrastructure, Transport, Regional Development and Local Government. That committee is no longer in existence—it is now the House of Representatives Standing Committee on Infrastructure and Communications, and I am a member of it—but it did produce a report called Rebuilding Australia's coastal shipping industry following an inquiry into coastal shipping policy and regulation. That was back in October 2008.

There were many key policy recommendations in that report which, I am very pleased to say, these bills do pick up and address. The policy recommendations such as reform of part VI of the Navigation Act 1912, the Navigation (Coastal Trade) Regulations 2007 and the Ministerial Guidelines for Granting Licences and Permits to Engage in Australia's Domestic Shipping now appear in the legislation before the House. The implementation of a single national approach to maritime safety for commercial vessels was also recommended and, again, that is in this package of legislation. The committee report also recommended the introduction of an optional tonnage tax regime in Australia that is linked to mandatory training requirements. What we see in the bills before us actually goes beyond that: rather than having a tonnage tax, the proposal is for a zero tax rate, which means less red tape and is a world-leading proposition.

The 2008 report also called for the reintroduction of accelerated depreciation arrangements, which most certainly is in these bills. That report also called for the creation of a national port development plan to address current and potential capacity constraints in Australia's ports, and that was done with the release of the National Ports Strategy in January 2011. There was also a recommendation for a review of section 23AG of the Income Tax Assessment Act, which has been dealt with in these bills before the House, and a recommendation for the creation of a reform implementation group to implement any future Commonwealth government reforms, which has been done as part of the consultation on shipping reforms, with the three groups formed focusing on taxation, workforce and regulation.

These bills are very wide-ranging for the industry. They will cover the many people currently working in the industry and the people who I certainly hope come to work in the industry in the future. Although there is much noise from the opposition about many of the points in these bills, I would take anyone back to the October 2008 report to actually compare what was recommended then and what is being introduced now. As I have said during my speech, so many of those recommendations have been picked up and addressed. On that note, I commend the bills to the House.

Paul Fletcher (Bradfield, Liberal Party) Share this | Link to this | Hansard source

I am very pleased to speak on the Coastal Trading (Revitalising Australian Shipping) Bill 2012 and related bills in this package of five bills. This is a package which is full of good intentions. This package is supposedly going to counter a significant decline in the number of Australian-registered vessels. The explanatory memorandum notes that since 1996 the number of Australian-flagged trading vessels has declined from 55 to 22 and that only four Australian-flagged vessels are trading on international routes. The explanatory memorandum makes it clear that it is the government's intention to reverse this trend, and the set of policy measures which the government brings forward to give effect to its lofty objectives is truly comprehensive. I would not say it is good, but I would say that it is comprehensive.

Let us look at the raft of measures which are included in this package. There are some generous tax incentives, giving both the industry and its employees tax advantages which are not available to most Australian industries and workers. There is a detailed, prescriptive, intrusive, microregulating licensing regime for foreign ships—just the kind of thing that this government absolutely loves. It goes on for page after page with all sorts of detailed requirements dreamt up by a set of Canberra based bureaucrats in a frenzy of self-satisfaction that they know better than the industry what is necessary when it comes to shipping. Also, we cannot forget that other little favourite which is slipped into this bill—foreign ships in Australian waters will now be subject to the Fair Work Act.

This is a package which is good news indeed for the government's preferred stakeholders, such as the Maritime Union of Australia. But the measures embodied in these five bills represent a truly terrible deal for users of coastal shipping and a truly terrible deal for all Australians outside the cosy club of beneficiaries of this complex web of new arrangements.

In the brief time I have available this afternoon I will make three points. The first point is that this package of measures is likely to very significantly increase costs to users of coastal shipping and that that cost burden, in turn, will be passed through our economy. The second point is that the claimed benefits of this package depend critically upon a compact with unions, including the Maritime Union of Australia. Where is that compact? It has not been concluded. It has not been provided to the House. The third point is that there is very little reason to believe that the government's lofty objectives in bringing forward this package of bills—that is, the objectives of revitalising the Australian shipping industry—are likely to be met. There is very little reason to believe that at all.

I turn firstly to the question of the impact of this package of measures on the costs that are paid by the users of coastal shipping. We first need to understand what lies at the core of this public policy scheme. At the core of this scheme is a new licensing regime for coastal shipping in Australia. Today there is a system by which non-Australian registered ships can be granted permits to operate both single and continuous voyages in Australian waters. Once the bills before the House pass into law, the existing regime will be replaced with a new regime under which Australian-flagged vessels have unrestricted access to coastal trade and foreign vessels can be granted a year-long temporary licence to operate in Australian coastal waters. What is the likely impact of this set of measures? In answering that question, we must first recognise that today foreign vessels operating on single and continuous voyage permits comprise around 30 per cent of domestic coastal shipping in Australia. Accordingly, if there are onerous new restrictions imposed which make it harder for foreign registered ships to operate in Australian coastal waters—which make it harder for such ships to carry freight for Australian customers between one Australian port and another—it is very likely that shipping costs are going to increase.

As a number of members on this side of the House have pointed out, Deloitte Access Economics has prepared a very insightful report on the likely impact of these changes to the shipping licensing regime. The report was prepared on behalf of the Cement Industry Federation and a range of other industries which rely on bulk sea freight. It is instructive to note that these include a range of agricultural and resource industries—industries in which Australia has a competitive advantage, a competitive advantage which is going to be put at risk if a major cost input, the cost of freight, is increased. The report from Deloitte Access Economics predicts that shipping costs and freight rates will increase by up to 16 per cent as a result of the set of measures the House is considering this afternoon. That is a view which has also been expressed by the Australian Industry Group and by CSR Ltd. We have similarly had concerns expressed by the National Bulk Commodities Group and the Cement Industry Federation.

What is going on here is pretty simple. This is a set of measures which is going to restrict competition in Australian shipping. The consequence of that, in turn, will inevitably be an increase in prices to customers seeking to purchase shipping services to have bulk goods shipped between Australian ports. Already it is cheaper to ship between Asian ports and Australia than it is to ship between two typical Australian ports, and these new arrangements are only likely to make the situation worse.

Let us just examine why the new arrangements are going to reduce competition and make it harder for foreign ships to operate in the Australian coastal shipping market. There are detailed, prescriptive, onerous new rules. These require parties that want to obtain a temporary licence to carry out a minimum of five voyages in the year. So the owner of a ship wishing to carry out a smaller number of voyages in Australian coastal waters is now, by law, prevented from doing that.

The new arrangements for temporary licences are hopelessly complex, extraordinarily bureaucratic and, in practical terms, very close to unworkable. Those who seek a temporary licence are required to give details about their planned voyages in advance, and the details required include the number of voyages, the volume of cargo and the ports to be visited. There is very little flexibility permitted in complying with these requirements and, as we have seen, because of the minimum requirement of five voyages a year, smaller operators will be precluded. Of course, those who are considering complying with this detailed new set of requirements do not yet know what fees they will be required to pay for these temporary licences.

These are all issues which inhibit the competitiveness of foreign ships operating in the Australian coastal shipping market and, in turn, are likely to substantially increase domestic shipping costs. Why is this happening? It is a protectionist measure which is going to reduce competition. It serves the interests of certain stakeholders, including the Maritime Union of Australia, but it is not in the interests of customers—of those who use coastal shipping services to freight bulk goods between one port and another—and the extra cost burden that customers will face will be passed throughout the industry.

That brings me to the second point I want to make. Where is the compact between the unions and the industry which we are told is going to guarantee the productivity benefits inherent in this package? If there were a prize for mug of the year, it would surely have to go to a government which handed out generous wage increases to a notoriously militant union like the Maritime Union of Australia but did not require in advance the details of those productivity gains to be negotiated, finalised and signed. But that is what this government has done. It claims that there will be productivity agreements delivered. Indeed, the minister said in his second reading speech:

We are committed to aligning Australian productivity practices with the best in the world.

To do this, we will need a compact between industry and unions.

Well, Minister, if you believe you are going to get a productivity benefit here, then I've got a Harbour Bridge I'd like to sell you, because the track record of the Maritime Union of Australia when it comes to productivity improvements is absolutely hopeless.

The Maritime Union of Australia is amongst the main authors of Australia's appalling position on waterfront productivity—the very appalling performance that led to the dispute between Patrick Stevedores and the MUA in the late 1990s and, more recently, the MUA have been up to their old tricks. In the last reporting period to June 2011, there has been a significant decline in productivity and, coincidentally, there have been ongoing negotiations between the MUA and stevedoring companies over a new industrial agreement and, as part of the MUA's negotiating techniques, it seems that there were some unofficial limits imposed on crane rates during this period.

The minister might be a mug, but there is no reason for the parliament, on behalf of the people of Australia, to be mugs as well. When we are being asked to approve these bills, under which generous financial benefits will go to the Maritime Union of Australia and its members, and there is no deal in place, locked in, to secure the promised productivity benefits, then on this side of the House we say, 'This is a bad deal; come back to us when you've got the deal signed but, before that, don't waste our time.' Let me come to the last point I want to make in the brief time that is available to me, which is: what degree of confidence can we have that the lofty objective of the government in bringing forward this package of bills is likely to be met? That objective is to revitalise the Australian shipping industry, but the government has given very little evidence about how that revitalisation is actually to be achieved. In their comments on the bills some of the key stakeholders have expressed significant doubts about the way the bills are framed. Shipping Australia had this to say:

… some of the provisions, at least in the Coastal Trading Bill, 2012 are confusing and, in our view, require substantial amendment to meet what we understand to be the objects of the Bill.

That is a rather politely phrased way of expressing a substantial degree of scepticism that the measures contained in this package are going to achieve the stated objectives. Only the credulous or the economically illiterate would think that the way to boost an industry's performance is to impose detailed new regulatory restrictions and to force operators to pay generous wage increases in disregard of competitive conditions.

This is not a package of measures the primary objective of which is to stimulate the shipping industry; this is a package of measures which is essentially protectionist. It is troubling that there is very little indeed, in the explanatory material associated with this package that the government has brought before the House, which talks about the likely impact of this set of measures on customers—those companies which are using Australian coastal shipping services and seeking to have their bulk freight carried by a shipping company between one port and another in Australia. It is very hard to avoid the conclusion that the most likely outcome of this package of measures will be higher prices and poorer service for customers. To a significant extent, product which is today carried by ship will be forced onto alternative modes of carriage, including rail and road, and higher costs will flow throughout the broader industry.

We often hear beneficiaries of protectionist legislation justify it as something which boosts domestic industry. In reality, experience teaches us that protectionist measures deliver higher costs, lower productivity and an inefficient industry, and that is what these measures are very likely to do.

Kelvin Thomson (Wills, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Shipping Reform (Tax Incentives) Bill 2012 and associated bills in support of the Australian government's Stronger Shipping for a Stronger Economy legislative package. The government's Stronger Shipping for a Stronger Economy legislative package delivers on the government's 2010 election commitment to revitalise Australia's shipping industry. In the past decade the Australian fleet has gone from 55 ships to 21 ships, with only four operating on international routes. In a country where 99.9 per cent of our trade is moved by ships, there will soon be no fleet to revitalise. We need to act now or we will not have an industry left at all.

The taxation elements of this reform package are aimed at revitalising the industry by making it more globally competitive and attractive to investors by providing a zero tax rate for Australian shipping companies, provisions for accelerated depreciation of vessels via a cap of 10 years on the effective life of those vessels, rollover relief from income tax on the sale of a vessel, an employer refundable tax offset in relation to seafarers, and an exemption from royalty withholding tax for payments made for the lease of shipping vessels. The objective of the coastal trading bills is to provide transitional arrangements and promote a viable shipping industry that contributes to the broader Australian economy, to facilitate the long-term growth of the Australian shipping industry and to enhance the efficiency and reliability of Australian shipping as part of the national transport system.

Within the context of these shipping reform bills, I would like to express some concern over the recent decision in the Federal Court relating to the Allseas Construction SA v Minister for Immigration and Citizenship case. That decision determined that workers on pipe-laying vessels operating in the Australian exclusive economic zone do not have to obtain immigration visas or permits. The conclusion of the court was that the Migration Act is concerned with the entry into Australia of persons on board resource installations rather than with the entry of the vessels per se. This is reflected in the act, which provides that any person on board a resources installation shall be deemed to have entered Australia at the time at which the installation is attached to the Australian seabed. But the workers on the Lorelay and Solitaire are not on board the pipeline; they are on board the vessels, which are not resources installations and therefore not part of the migration zone.

Essentially, what the shipping company has succeeded in doing is taking advantage of the Howard government legislation which excised offshore areas from Australia's legal jurisdiction. The consequence is that vessel operators could utilise foreign personnel on many, if not all, of the vessels operating in the oil and gas sector. This is a very serious threat and it seems to me that additional amendments to the proposed Shipping Registration Amendment (Australian International Shipping Register) Bill 2012—either in this suite of bills or further on down the road—may be necessary to address the ramifications of this Federal Court decision.

The bill provides for the establishment of a new Australian International Shipping Register, its operation, administration and seafarer employment conditions. The objectives of the Australian International Shipping Register are to facilitate Australian participation in international trade, provide an internationally competitive register to facilitate the long-term growth of the Australian shipping industry and promote the enhancement and viability of the Australian maritime skills base and the Australian shipping industry.

Australia's rapidly expanding commodity trade is driving an increase in the shipping task. Our sea transport task is now the fourth largest in the world. Over the last 20 years the Australian maritime industry has undergone a radical transformation. The home-grown, Australian owned industry has changed into an industry featuring a large proportion of foreign based maritime players. Reflecting the globalisation in many other sectors of the economy, the Australian maritime industry is now largely foreign owned. Australian involvement in our international trades is miniscule and foreign groups are in control of the remaining Australian manned vessels. The creation of this register will enable Australian shipping companies to compete on a level playing field internationally by removing the cost disadvantages experienced by Australian registered ships when competing in the global market.

Key elements of the register are mixed manning; international registered vessels must employ a minimum of two Australian crew, preferably the master and the chief engineer; international employment terms and conditions including workers compensation, internationally competitive pay rates and conditions, consistent with the Maritime Labour Convention and other international labour treaties; access to tax exemption and other tax incentives; the same environmental safety and O&HS standards will apply to AISR vessels as apply to first register vessels; and that a seafarers bargaining unit must be formed for the purposes of negotiating terms and conditions for seafarers on international voyages; and provision that those collective agreements must form part of and cannot be limited by seafarers' individual work agreements.

These reforms have been through a long and thorough process of consultation and review. Over the last four years there has been extensive consultation including a bipartisan parliamentary inquiry, which made unanimous recommendations in favour of reform. There has also been a discussion paper, three industry roundtables and two exposure drafts of the proposed legislation have been released for comment.

One of the objectives stated in the bill is that the Australian International Shipping Register aims to promote the enhancement of the Australian maritime skills base. The special provisions in the bill relating to the Australian International Shipping Register will require that there must be two Australian nationals or residents in senior officer positions on the ship. There is, however, no requirement that the vessels carry any trainees. I believe that an additional condition should be added, inserting a training obligation similar to the training obligations on vessels under the general register. This trainee requirement should specify officer trainees as a condition of the Australian International Shipping Register, as Australia's maritime skills shortages are greatest in the area of officers, marine engineer officers and deck officers.

Under the Shipping Registration Amendment (Australian International Shipping Register) Bill 2012 there is an obligation to register Australian owned ships. However, foreign owned ships are not required to register in Australia. The recent Federal Court decision shows that foreign flag vessels operating in Australia's exclusive economic zone are beyond many of Australia's laws. These vessels could exploit the Allseas decision of the Federal Court, to which I referred earlier in my remarks.

I understand that some operators of vessels in the offshore oil and gas sector already take the view that they can use foreign workers on these foreign flag vessels without any requirement to obtain anything more than a holiday visa or transfer through an Australian airport. That is to say, that they can work without even having a subclass 457 visa. We should seriously consider the idea that vessels which operate in Australia's exclusive economic zone for periods greater than 30 days should be required to register with the Australian general registry under the shipping registration bill. That is not unlike motor vehicles in Australia, which can be registered in one state but which are not required to register in another state if they are passing through or are there for a holiday. But if they go there for an extensive period and the owners of the motor vehicles are relocating to another state it is expected that they register in the new state. We could achieve this by inserting a new section for foreign ships operating continuously in Australian waters. This amendment would not apply to ships transiting Australian waters either on international trading voyages or on innocent passage.

A large number of foreign vessels are operating in Australian waters which are not engaged in international trading voyages nor engaged in interstate trading voyages. The clearest example of this category of vessels is the offshore oil and gas industry fleet. In this booming sector a large majority of vessels are already foreign flag vessels. At any time there are up to 200 vessels servicing the offshore oil and gas industry in Australia's exclusive economic zone. The majority of these vessels—over two-thirds, according to the Australian Institute of Marine and Power Engineers—are foreign flag vessels. These vessels spend the majority of their time in Australia's exclusive economic zone. Indeed, some of them have spent years in Australian waters.

The Australian Institute of Marine and Power Engineers has made a number of submissions to the federal government over the last five years urging reregulation of the Australian maritime industry. I note some people will call this protectionist, but that is too bad. We should be about ensuring that Australian standards are maintained within the Australian economy. It gets down to the simple proposition that, whilst operating in Australia, foreign companies should comply with Australian laws. Current legal structures applying to the Australian maritime industry do not deliver this objective. In the maritime industry the concept of the flag of a vessel is a barrier to the effective application of Australian law. Foreign flag vessels can avoid some of the laws that apply to Australian flag vessels. That is why the Australian Institute of Marine and Power Engineers continues to object to foreign flag ships operating continually in Australia's exclusive economic zone. That is why the Australian Institute of Marine and Power Engineers has called for all vessels operating continuously in Australia's exclusive economic zone to be required to be Australian flagged.

I strongly support the bills before the House. I share the concerns of the Institute of Marine and Power Engineers. I support their recommendations to strengthen these laws to cover foreign operators who may now be exploiting a loophole, created by the Howard government's 2005 exclusion zone legislation.

I also want to make some comments in support of those of the member for Reid, John Murphy, which he made on 9 May, about standards of training for Australian marine engineers. The member for Reid is a very courageous MP, who is not afraid to say what he thinks. I always find he has something of consequence to say. He pointed out to the House concerns that had been raised with him and, indeed, these concerns have been raised with me about the reduction of standards that have been proposed in draft Marine Orders Part 3, circulated in late 2011. One effect of the proposed changes is that the training time for marine engineers will be reduced from the current 36 months to 12 months—that is, from three years to one year. There are serious concerns that this period is inadequate to produce a highly skilled technical officer with the understanding and expertise to deal with the complex systems of modern vessels. He referred to another concern regarding draft Marine Orders Part 3:

… entry into the marine engineering training courses would be open to persons who do not possess the prerequisites currently required for new entrants. These prerequisites are either HSC-level passes in English, mathematics and physics or relevant trade qualifications. In the area of theoretical knowledge, of particular importance to marine engineers are, of course, the subjects of mathematics and science, including electrotechnology and perhaps steam propulsion systems.

The third concern that he noted related to the proposed deletion of the current mandatory requirement to demonstrate practical proficiency by successfully completing an oral examination, conducted by a qualified examiner of marine engineers. He said:

Deletion of the oral examination would be a retrograde step, as it could allow a reduction of the training process to end in the granting of a certificate of competency to a person who may not actually be competent as a marine engineer in any practical sense. Therefore, there should be no weakening of the current regulation that a certificate will not be issued until the applicant has passed an oral examination conducted by an AMSA examiner.

I want to place on record my support for those remarks.

Finally, I note that the opposition are opposing these bills, and I am really disappointed—although, in some respects, not surprised about their doing this. When the House inquiry reported on these bills, the member for Hinkler stated:

… the Liberal and National parties are keen to support the Australian shipping industry. It must play an increasing role in our domestic freight task.

Yet they oppose these bills—bills which will significantly reduce the cost of Australian shipping. These bills do not provide a subsidy to Australian shipping. They do not close the coast to foreign ships. What these bills do is reduce the costs for Australian ships to operate and in turn increase their competitiveness against foreign ships. They go a long way towards creating a level playing field for Australian ships to compete against foreign ships.

The opposition seem to be determined to oppose the chance for Australian ships with Australian workers competing on a level playing field against foreign ships to carry Australian goods on the Australian coast. The opposition would appear to be in favour of flag of convenience ships with crews from Third World countries carrying Australian goods through some of our most treasured marine environments. If this is standing up for Australian jobs and being proud to be Australian, it sure is a funny way to show it! I commend the bills to the House.

Alan Tudge (Aston, Liberal Party) Share this | Link to this | Hansard source

I rise to speak against these shipping reform bills, the Shipping Reform (Tax Incentives) Bill 2012 and related bills. I do so because they are fundamentally protectionist in nature and will increase the cost of shipping, which will then flow through to almost every product in our society. It is important that we take a very close look at these five bills in front of us which together comprise the shipping reform bills. It is important because sea transport is a large and rapidly growing industry. It carries over 99 per cent of international cargo by weight and about 75 per cent by value, and about a quarter of Australia's interstate trade is done via ships. This is supposed to grow exponentially. Indeed, it is due to double by 2020 and treble by 2050. It is also important because coastal shipping flows through to everything we consume and nearly every business transaction that we have on an island continent.

Australia has the fourth largest shipping task in the world and it impacts nearly every residence across Australia. So this is an important piece of legislation not just for those who are directly impacted by shipping and use shipping but for every Australian, because ultimately the costs of shipping flow through to Australians. At its heart, are changes to the way foreign carriers apply for and are granted permission to carry coastal cargo around Australia. In essence, it creates a new licensing regime. Today there is a system in which non-Australian registered ships can be granted permits to operate single and continuous voyages in Australian coastal waters. This is to be replaced with a new regime under which Australian flagged vessels will have unrestricted access to coastal trade and foreign vessels can be granted a year-long temporary licence to operate.

The intent of the legislation is to stimulate growth in the number of Australian ships on our coast and to maximise the use of Australian flagged vessels. We have no concern about trying to support the Australian shipping industry but we believe that it should not be done at the cost of efficiency and not where it brings extra impost to Australian businesses, which are already struggling against international competition.

My key issue with this legislation comes from its central objective, which I believe is the wrong objective for these shipping reforms. The Minister for Infrastructure and Transport in announcing the package in September outlined the core objectives of these reforms. He said, 'What we are doing is creating an economic and regulatory environment that will revitalise and sustain growth and productivity' in our shipping industry. As I said, we of course support our shipping industry, but the objective should be broader than just sustaining and growing the Australian shipping industry. Rather, the reforms should be governed by the goal of raising the efficiency of the sector overall and ensuring globally competitive costs of transporting Australian goods by ship. That should be the goal. It is a critical distinction. The goal of the government is all about the Australian shipping industry alone and ensuring its growth; whereas, we are concerned about the efficiency of the overall Australian economy and therefore ensuring that there is an efficient shipping industry overall where there is fierce competition between Australian providers and international providers.

By the government taking this narrower objective for these bills, they have essentially made them protectionist. What this protectionism does—as it nearly always does—is lead to higher costs. They do this by adding huge complexity and compliance when using foreign shipping companies. For example, the new scheme requires international parties who are seeking a temporary licence to carry out a minimum of five voyages in the year. This excludes from the market suppliers wishing to carry out, for example, a single coastal voyage—perhaps as part of a longer voyage from a foreign country to Australia and back. It also imposes a significant compliance burden as it requires those seeking a temporary licence to give details about their planned voyages well in advance. This will mean that businesses will become less likely to use international ships, because of the uncertainty of the compliance regime and because the additional costs are too great.

It may well be that the Australian shipping industry will get additional business as a result of this legislation. But it will be at the expense of all the customers who use the shipping industry, and all of their customers. The government did not try to quantify the cost of this reform package to Australian businesses who use shipping, but the Australian dry-bulk shipping users did try to quantify it. Indeed, they commissioned Deloitte consulting firm to examine the impact of these bills from a cost perspective. What they found, as a number of coalition members have said previously, is that these reforms will lead to an increase in the cost of coastal shipping of 16 per cent. They suggest that this cost will be borne by the users of coastal freight. They found that the impact on our GDP over the period to 2025 will be between negative-$242 million and negative-$466 million. It is a very clear negative on our GDP. Of course, if you increase the costs of shipping you also increase the costs of transport, and that flows through to every businesses and every family who uses the products that use shipping. According to Deloitte, it will also cause the loss of 570 workers across Australia, due to the increased costs of this shipping.

This will flow through to the entire economy, as I said. If you increase transportation costs—whether it be road transportation costs by putting a tax on diesel or whether it be shipping transportation costs through the protectionist measures which are inherent in these bills—then those costs will flow through to the entire economy. It will particularly hit our manufacturers, and they will be hit at a time when they can least afford it. I have a manufacturer in my electorate, a very successful one to date, who is extremely concerned about the impact of these shipping reforms. The manufacturer is Veyance Belting Pty Ltd, which manufactures huge conveyor belts which are used in all sorts of industrial applications, including in the mining industry. They employ about 145 workers directly and about 300 workers indirectly. Their major production site is in my electorate in Bayswater. Mr David Stone, who is the General Manager of Veyance Belting, says that these changes could put his entire business in jeopardy. He says:

… the proposed changes in legislation which will threaten our new press project and future viability for manufacturing in Victoria. This change will force Veyance to road freight all of our rolls of conveyor belting to the Pilbara Iron Ore region which will dramatically (40% +) increase our freight bills. This increase could tip us over the edge in maintaining our competitive advantage from overseas manufacturers.

That is the impact that this legislation will have on the ground for manufacturers across our communities. The additional cost for Veyance Belting and all of the other manufacturers who rely on the shipping industry comes on top of everything else which this government is doing to make it harder for manufacturing. Of course we know about the carbon tax, which is coming our way on 1 July, which operates like a reverse tariff. It will make it more expensive for our manufacturers to produce goods but it will not make the products of their international competitors more expensive when they import them into our country. We know about the extra regulations which this government have put on businesses. And of course we know that they have made the industrial relations regime less flexible for businesses. Increasing the cost of shipping transport is just another nail in the coffin for our manufacturing industry.

We should be doing everything we can for our manufacturers and for other businesses at this moment—not adding to their costs. Of course, if the costs to a business or a manufacturer increase, then those costs will flow on to its products and therefore to consumers. So this bill is also going to add to cost-of-living pressures at a time when consumers and families across Australia can least afford them. They know that electricity prices have gone up by 66 per cent over the last five years. They know that water prices have been going up astronomically. They know that the costs of gas and child care have been going up way in excess of the rate of inflation. The last thing they need is additional cost-of-living pressures put on them through this legislation.

These are bad bills. They are protectionist in nature. They are a sop to the MUA, which is the major beneficiary of these bills. They will increase costs to all the businesses in Australia who use shipping transportation, and they will increase costs to Australian families. They should be firmly rejected. At the very least, these bills should be put to the Productivity Commission so that their impact can be examined before they are taken any further.

Amanda Rishworth (Kingston, Australian Labor Party) Share this | Link to this | Hansard source

I am very pleased to rise today to support the Shipping Reform (Tax Incentives) Bill 2012 and the other four bills that make up the government's Stronger Shipping for a Stronger Economy legislative package to revitalise Australia's shipping industry, and also to deliver on our 2010 election commitments. These reforms have been long awaited by industry as they will help the Australian shipping industry to become more competitive and will open up a lot more opportunity. Importantly, they will encourage the development of a vibrant Australian maritime industry.

The previous speaker talked about how this package was pro-union. This is not pro-union, and it is not pro-business; this is pro-Australian. It is pro-Australian to encourage Australian workers and Australian industry. I am really at a loss to understand why the previous members would not be pro-Australian jobs and pro-Australian industry.

Australia is an island continent surrounded by sea, with most of the population centres plotted along the sea line, which makes it no surprise that it is dependent upon sea trade. We are a trading nation. Indeed, 99.9 per cent of our trade is moved by ships. However, the involvement of Australian companies and Australian workers in this shipping trade has been in decline. In the past decade, the Australian fleet has gone from 55 ships to 21 ships, with only three operating internationally.

The increasing trend for foreign vessels to be employed to carry our goods around the Australian coast and internationally is to the detriment of the Australian coastal shipping industry. There is a broadly shared view amongst many seafarers in the Australian maritime industry that the Australian coastal shipping sector needs to be revived from the clutches of this downturn and that it needs to be expanded. As the minister said in question time today: if we do not act soon, it may be too late and we may not have a maritime industry at all.

We know that when those on the other side of the House were in government, they ignored Australian jobs and the Australian shipping industry. They abandoned capital grants assistance, and they abandoned accelerated depreciation and the PAYE rebate scheme. At the same time, they tripled the number of trading permits to foreign flag crews. At the same time as other countries around the world—developed countries around the world—were acting to strengthen their shipping industries, the Howard government was abandoning ours. Germany, the UK, the Netherlands, Japan and South Korea all embarked on extensive and very successful programs to rebuild their shipping industries. These countries, unlike Australia under the Howard government, understood that a healthy, competitive shipping industry sector brings great economic, strategic and environmental benefits.

The House of Representatives Standing Committee on Infrastructure, Transport, Regional Development and Local Government also recognised the importance of this sector in 2008, in their conclusion of the unanimously supported inquiry into coastal shipping policy and regulation in Australia. This inquiry undertook an extensive consultation with stakeholders about the various issues impeding the industry. The legislation before the House is entirely consistent with that unanimous report by the committee and its recommendations. So I do find it strange that those on the other side have decided to say no to this. Of course, in 2008 the coalition was under a different leadership. Perhaps with the current Leader of the Opposition, the impetus to just say no has really taken off. Here, despite the unanimous report in 2008, they now just say no.

After that report by the House of Representatives standing committee, the minister established a Shipping Policy Advisory Group with representatives from Australian shipowners, maritime unions and key users of shipping, to assist in preparing the response to this issue. The group and the key industry stakeholders were consulted closely and a lot of analysis was undertaken. They were for the most part supportive of the positive action the government was taking, and they supported us in our efforts to revitalise the maritime industry.

The strongest argument for revitalising Australia's coastal shipping industry is an economic one. A strong domestic shipping industry can assist in the alleviation of land transport bottlenecks, infrastructure constraints and environmental impacts, as well as provide economic benefits derived from the creation of local employment and the growth of maritime services. What we are really talking about here is Australian industries and Australian jobs. We should take this very seriously. In addition, Australian defence, maritime safety and security will also benefit from an expanded coastal Australian shipping sector. The package will provide a response to a substantial portion of the issues raised by a range of stakeholders and by the parliamentary inquiry.

We heard the previous speaker, the member for Aston, talk about the Deloitte Access Economics report. Quite frankly, there were some flaws in that report. The report is factually incorrect in regard to the operation of the new licensing system, which leads to a range of incorrect assumptions about the likely economic impacts. Of course, if the members on the other side of the House had actually listened—this has been outlined by a number of speakers—they might not rely so closely on the report. As most people would know, if the assumptions in economic modelling are wrong, then it is likely the results of that economic modelling are also wrong.

The modelling is based on the assumption that all temporary licences will be phased out in five years, and that all coastal cargo will be carried on Australian licensed vessels. This has never been suggested by the government. There are no plans to restrict the number of foreign vessels in Australian waters. The reforms are simply about providing a level playing field for Australian ships so they can compete better. Foreign ships operating on the Australian coast already have to pay Australian wages. The government's shipping reforms do not change this. All sides of the House should be very clear on and very supportive of the fact that, no matter what country you come from, if you are in Australian waters you should have the benefit of Australian workplace relations laws and the safety net of employment conditions. That is certainly supported on this side of the House and I hope, although I would not necessarily expect it, on the other side of the House.

The Stronger Shipping for a Stronger Economy initiative delivers a reform package that positions the Australian shipping industry to take advantage of the opportunities provided by our huge and increasing export market. Our increased domestic transport task creates a platform for rejuvenation, with all those potential new jobs, opportunities and prosperity.

The revitalisation of Australian shipping is one of the three elements of the government's broader reform of maritime policy and regulation. The other two elements are the reform of the Navigation Act, and the COAG initiative for the creation of a single national jurisdiction for the regulation of commercial maritime matters. The announced shipping reform package is conditional on a compact between industry and unions to deliver better productivity and efficiency reforms to better align practices in the Australian shipping industry with international best practice. The shipping package comprises four key elements: tax reforms to remove barriers to investment in Australian shipping and to foster the global competitiveness of the shipping industry; a strengthened and simplified regulatory framework with a transparent licensing regime supported by clearly stated objectives; the establishment of an Australian International Shipping Register to encourage Australian companies to participate in international trade; and the establishment of a Maritime Workforce Development Forum to progress key maritime skills and priorities.

The Shipping Reform (Tax Incentives) Bill will provide for conditions for vessels to access the tax exemption and other concessions; establish eligibility criteria for access to the taxation concessions by defining 'eligible company' and 'eligible vessel'; provide a framework for the Department of Infrastructure and Transport to issue applicants with a notice and, later, a certificate confirming they have satisfied the department's requirements for certification; and provide for the department to collect and collate data in relation to these reforms.

In addition the Tax Laws Amendment (Shipping Reform) Bill amends the Income Tax Assessment Act to give effect to the tax exemptions and other tax concessions. These tax incentives will breathe life back into our shipping and maritime ministry. The taxation element will provide for a zero tax rate for shipping companies; accelerated depreciation of vessels via a cap of 10 years effective life for those vessels; rollover relief for income tax to an employer refundable tax offset in relation to seafarers; and an exemption from royalty withholding tax payments made for the lease of shipping vessels. These bills will encourage and support capital investment and ensure we have taxation arrangements that are internationally competitive. The changes will also encourage the employment of Australian seafarers on international trade routes.

For those on the other side of the House who might be slow to recognise this, what we are talking about here is tax cuts for this industry. We know that those opposite have changed their colours recently. They used to be the party of reducing tax but then they opposed the reduction of the corporate tax rate—which, of course, we on this side of the House found quite surprising. We are seeing those on the other side opposing these tax cuts, so it is hard to get your head around what they stand for. They used to talk about tax cuts, but that is right off their radar now and they just seem to oppose anything that has the term 'tax cut' in it.

The Shipping Registration Amendment (Australian International Shipping Register) Bill will establish a new Australian International Shipping Register and provide for its operation, administration and employment conditions. The creation of this register will enable Australian shipping companies to compete on a level playing field internationally by removing cost disadvantages experienced by Australian registered ships when competing in the global market. These registers have been embraced by many advanced economies and it is time our country did the same. The crewing and labour provisions are key elements of this bill and go to its core competitiveness.

The other bills associated with these changes include the Coastal Trading (Revitalising Australian Shipping) Bill, which will provide a new regulatory framework and licensing system for vessels engaging in coastal trading in Australian waters, and also the Coastal Trading (Revitalising Australian Shipping) (Consequential Amendments and Transitional Provisions) Bill 2012 and the Tax Laws Amendment (Shipping Reform) Bill 2012. These are all very important.

As I said, it is not really surprising that the Liberal Party will not be supporting this legislation. I am not surprised, because they seem to say no to everything. But what I am surprised about is that the National Party are saying no to this. In the Labor Party's platform there is a clear policy outlined. Indeed, we took this policy to the election, so I am pleased to be supporting it. But the National Party also supported that. The National Party policy platform for 2011-12 says that the National Party will introduce the means to allow Australian shipping to compete effectively against other transport modes and internationally while maintaining our national shipping identity. Well, that is what this bill is doing. The National Party platform also says the Nationals will introduce a tonnage tax to replace a company tax on an opt-in basis linked to mandatory training arrangements. Well, we did propose that but, after a lot of consultation with industry, it has become apparent that a zero tax rate is better. So obviously in light of this I would encourage the National Party to change their position and support this.

The National Party also wanted to examine ways to reduce the income tax disadvantage suffered by Australian seafarers operating outside of Australian waters compared with seafarers from other nations. This bill does this. It starts to create a national playing field. Once again, that is in the National Party platform. Also, the National Party says it will establish Australia's second shipping register. Of course, the Australian International Shipping Register is a very important part of this legislation and it seems to be supported in the Nationals policy platform. So, while I do understand that the Liberal Party have changed and are no longer the party of lower taxes but are in fact the party of saying no to tax cuts, it is strange that the Nationals clearly state that they see this as an important issue yet have failed to act on their national platform. That is very disappointing. I would call on those in the National Party to keep their identity as a distinct political party, uphold their national platform and vote with the government when this bill comes to a vote.

The Labor Party went to the last election clearly stating that we wanted a vibrant Australian shipping industry. We should be ensuring that as many industries as possible benefit from our mining boom, and this includes the Australian maritime industry. We should not just be digging up minerals; we should be processing them, we should be adding value and we should be responsible for transporting them around the world. After many years of inaction by the Howard government, this government is putting Australian industry and Australian jobs first. I commend the bill to the House.

Jane Prentice (Ryan, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak on the Shipping Reform (Tax Incentives) Bill 2012 and associated bills and to support the member for Wide Bay's four amendments which seek to decline a second reading of these bills. The coalition does not support the passage of these bills through parliament for two primary reasons. Firstly, these measures will not achieve their stated aims of revitalising the domestic shipping industry, but rather they will achieve their unexpressed aims of responding to union vested interests. These measures are yet another example of this Labor government using the long arm of governmental bureaucracy to intervene in and overregulate an industry to the detriment of the Australian economy. Secondly, these measures have been introduced prematurely before the Productivity Commission has had the opportunity to assess the package and before important discussions between the shipping industry and unions have been finalised.

The coastal shipping industry is an extremely important component of bulk freight movement for both domestic travel between Australian cities and internationally. Currently over 99 per cent of international cargo by weight and approximately 75 per cent by value is carried by sea transport. Coastal shipping carries around one quarter of interstate trade. Due to Australia's geographical isolation and the lack of land borders, we have the fourth largest shipping task in the world. In 2007-08, Australian ports received 27,434 calls: 7,161 of which were by containerships, 14,439 by bulk carriers, 3,633 by general cargo vessels and 2,201 by other vessels. This highlights the very important role that, as a service industry, coastal shipping plays to many of Australia's trade exposed export industries.

Traditionally our shipping industry has always been an uncompetitive one internationally. This is not just because of our geographic isolation or the onerous labour conditions of Australian workers, but also due to wharf delays. The 1950 report of the Liverpool Steamship Owners' Association commented:

Australia is an example of the gross occurrence of shipping delays—

which—

… must inevitably be reflected in their cost of living.

The Institute of Public Affairs expressed the concerns succinctly when they said that the pocket of every Australian is being affected by the slow turnaround of shipping'. These concerns about the possible effects on the wider Australian economy remain true today.

The Economist in 2008 reported that Australia's transport cost advantage over Brazil for iron ore to China had decreased from a high of US$40 per tonne to only US$12 per tonne, which decreased the attractiveness of Australian iron ore to China. The resource boom is inextricably linked to the coastal shipping industry, and with the Deloitte Access Economics report estimating a 16 per cent increase in the cost of freight rates as a result of these bills, the package today could continue to threaten the resource boom and the Australian economy.

More recently, there has been a decline in the number of Australian registered ships, declining from 55 major vessels in 1995 to—as the minister quoted earlier today—21. This is a development which troubles me. It is why all members of the House Standing Committee on Infrastructure and Communications, which I am a member of, applied themselves diligently, in the very short time they had, to assessing these proposed reforms. I do note, however, that 70 per cent of Australian coastal shipping is still undertaken by domestic vessels. Into the future, however, it is estimated that the overall freight task will double by 2020 and treble along the eastern seaboard. If Australian flagged vessels do not have the capacity to efficiently take up that increase in freight, then we will have to rely on foreign flagged vessels to absorb the surplus without risking economic disadvantage. Therefore, it is vital that the Gillard government devise apposite legislation which will support coastal shipping, both for domestic vessels and access by foreign flagged vessels.

CSR Ltd, in their submission, expressed the view:

The welfare of the coastal shipping industry should not be at the expense of the industries it is there to serve … in its current form, the legislation is value destroying - the more successful the policy is, the worse off Australia will be.

These bills today do not support that future. Instead they provide an intrusive regulatory framework that could see decreased competition, which would serve only to harm the wider Australian economy.

There are five bills in today's package, with many wide-ranging and complex measures, only some of which I am afforded the time to discuss today. The intent of the bills is, according to the minister, to create an:

economic and regulatory environment that will revitalise and sustain growth and productivity in our shipping industry.

In trying to achieve that aim, the bills include measures ranging from tax incentives and other taxation changes for Australia shipping businesses to the creation of the Australian International Shipping Register and alteration of eligibility criteria to be on such a register. The bills also include provisions to abolish part VI of the Navigation Act 1912 and, in doing so, create a new three-tiered licence system.

These bills are merely new protectionist measures which do not recognise the important contribution that foreign companies and foreign flagged vessels make to Australia. We must acknowledge that Australians cannot do everything. We do not necessarily have the skill base, least of all the will, to provide an industry with all Australian owned businesses or Australian workers, just as we must acknowledge that Australia cannot manufacture everything.

We may not have a comparative advantage, owing to our tightly regulated labour market or our ability to raise capital in an increasingly competitive and mobile international capital market. As such, what this industry requires—and what every industry which utilises coastal shipping requires—is flexibility, flexibility to adapt to changing global conditions and markets.

The Department of Infrastructure and Transport maintains that these bills are not aimed at reducing competitiveness or flexibility. The department's supplementary submission to the committee stated that the new legislation is not aimed at reducing competition but rather 'to make transparent the role of foreign-flagged vessels in the coastal trade'. If the intention is to make the activities of foreign vessels more transparent, then the department itself should be more transparent about the fact that the intent to aid Australian companies to compete more effectively means limiting the access of foreign vessels to our waters in the first place. This is achieved through the complicated changes to the licensing regime, where there will be a three-tiered system: (1)A general licence with unrestricted access for Australian registered vessels, crewed by Australians, permanent residents or foreigners with appropriate work visas, to engage in coastal trading in Australian waters for a maximum of five years; (2) a temporary licence, which provides limited access to engage in coastal trading for foreign flagged vessels or Australian International Shipping Register vessels for a 12-month period for specifically identified voyages; and, finally, (3) an emergency licence which provides extremely limited access in identified emergency situations such as natural disasters.

The problem with this system lies primarily with the very prescriptive nature of the temporary licence structure. The government has tried to claim that the move from a three-month to 12-month duration of the permits creates greater certainty. However, this is not the case as, before companies are granted a temporary licence, they must provide very detailed information about exact dates, which loading and discharge ports will be used and what the cargo type and volumes will be on the voyage.

It is ludicrous to suggest that industry will be able to provide such extensive and detailed information 12 months in advance, when they do not even have the assurances that they will receive a licence. In order to get a licence, a company must have a minimum of five voyages, and there are no exceptions to this rule. The government originally proposed an arbitrary minimum of 10 planned voyages per year and then recanted and reduced this prescription to five. However, the reasons behind the drop from 10 to five are the same reasons that would lend support to a complete reduction from a minimum of five to zero. Otherwise, these bills will effectively block out any smaller coastal shipper or even a larger coastal shipper who may be experiencing a temporary downturn.

In the case where a company seeks only four voyages in Australian waters in one year, the arbitrary minimum acts as an incentive for that company to provide spurious voyages in order to meet the threshold. This is not an ideal situation, and I recommend that the government revisit this narrow licence eligibility criterion. This is not flexibility; this is isolationist protectionism masquerading as a call for transparency.

Furthermore, if conditions change and the information submitted to the department must be modified, then a variation request must include an amendment to, or addition of, a minimum of five voyages. As Shipping Australia noted, if a company originally planned for five voyages but wishes to add just one more, they are not able to apply for a variation in their temporary licence conditions. Of course, any company requesting a variation must pay a fee each time it applies. This stifling, prescriptive regulation creates an unnecessary compliance burden and reduces competition in the industry. Caltex Australia noted in their submission to the inquiry:

The shipping reform package … will increase red tape at a time when the Commonwealth and state governments, together with business, are seeking ways to reduce it. The Bill contains clear examples of unnecessary and unproductive regulatory requirements …

I support the Leader of the Nationals' four amendments that would decline a second reading of these bills until such time that the Productivity Commission is able to provide a report on the economic impacts of increasing regulation in coastal shipping services. I would also encourage the minister to delay debate on these bills so that the discussions and negotiations of a compact between the industry and unions can be finalised.

I understand that many within the industry are concerned that, failing an expeditious response from parliament, we could see a further curtailing of the domestic industry before the compact is announced. However, the complexities of the industry are so large, and the possible unforeseen and unintended consequences of these bills so complex, that the parliament must be confident that these measures will achieve their expressed aims. There is no point passing bills that serve only to help the myopic interests of unions and shipowners to the long-term detriment of other industries. If this Labor government, as it has frequently expressed, wants Australia to 'make things' and have a thriving manufacturing export industry, well, you do not then turn around and say: 'We're going to make it more costly for you to export; we're going to decrease your international competitiveness by lumping you with a carbon tax. But don't worry; we'll bail you out too when the disastrous economic consequences of our policy agenda are realised.'

Moreover, I note that the first inquiry about this issue occurred in 2008 and then followed the creation of the Shipping Policy Advisory Group in February 2009, a government initiated discussion paper in December 2010 and, more recently, proposed exposure drafts, regulatory impact statements and of course the House standing committee process. I did hope that, after this exhaustive legislative process, the government would be able to devise a balanced and positive piece of legislation. Unfortunately, the specific details—often confusing details—of this bill were released only in a poorly prepared exposure draft in December 2011, after which there was only limited opportunity for the House committee to fully assess the 30 submissions provided by industry participants and what many regard to be the deficiencies of the bills. Many of those 30 submissions support a referral to the Productivity Commission and further investigation into the financial implications of the package on the cost of moving freight. To date, there has been no real attempt by the government to put an accurate figure on these costs, and it would fail all tests of credibility to pass these bills in their current form without knowing what impact they will have.

The coalition supports not just the coastal shipping industry in Australia; we support the entire Australian economy. We do not bow to vested interests like the Labor government has done by introducing these bills to parliament. The coalition knows that because coastal shipping is so integral to the future of Australia's export industries and our economy these bills must not pass.

Nick Champion (Wakefield, Australian Labor Party) Share this | Link to this | Hansard source

It is very interesting hearing those opposite talk about consultation, about having more time and about not enough people getting to have their say and that perhaps we should refer it to yet another committee. I find it very strange. In 1992 when I was a young and eager member of Young Labor, I remember reading the Ships of shame report, which was a report of the House of Representatives Standing Committee on Transport, Communications and Infrastructure. It had some very famous people on it: Peter Morris, who was a former minister; John Anderson, who was a future Deputy Prime Minister; and a number of other people whose names have unfortunately passed out of this House and into the history books.

The Ships of shame inquiry first examined this issue of coastal trade and cabotage and some of the issues that the world and this country as an island nation and shipping nation had to confront. Of course, that inquiry in its preface talks about how it was told of the operation of unseaworthy ships; the use of poorly trained crews with false qualification papers; crews unable to communicate with each other or with Australian pilots; classification societies providing inaccurate information on certificates; flag states failing to carry out their responsibilities under international maritime conventions; careless commercial practices by maritime insurers; inadequate, deficient and poorly maintained safety and rescue equipment; classification societies that readily class ships rejected by more reputable societies; the beating of sailors by ship's officers; the sexual abuse of young sailors; crews being starved of food; crew members being forced to sign dummy pay books indicating they had been paid much more than they had actually received; sailors forced to work long overtime hours for which pay was refused; crew members being denied telephone contact when family members had passed away; sailors not being paid for several months or remittances not being made to their families at home; sailors being denied medical attention; officers regarding maritime crews as dispensable; and crews being denied basic toilet and laundry materials.

The beneficiaries of these flag of convenience arrangements and the arrangements that were in place then were flag states who take the shipper registration fees and pay lip service to their international maritime obligations; the classification societies who readily accepted changes in the class of vessels already rejected by reputable classification societies; the classification societies that issued certificates that did not accord with vessels' true conditions; ship owners, operators and managers; crewing and training agencies; and charters, exporters and importers.

This parliamentary report, Ships of shame, into ship safety was the first of many reports in this area that outlined some of the difficulties in protecting the interests of the nation state and our reputation as a First World country and the real and lived experience of the shipping industry. Even today, some 40 per cent of international shipping is under flags of convenience, under the open registry in places like the Marshall Islands, Panama and Liberia. We know that these flags of convenience are there for a reason: they are attractive to ship owners because they can often hide their ownership, they can avoid international regulations on labour standards or environmental standards, they can avoid international criminal sanctions, they can avoid international arms control sanctions.

We know that there is this great problem out there with regulation of international maritime transport, shipping and the like. It is a very big problem for this country. I remember when this report came out, there was an incident off the Western Australian coast with the Kirki, which was a Liberian flagged ship that was Greek owned. It was rust bucket and it was carrying oil. The bow fell off the front of the ship. The pointy end of the ship fell off into the ocean and oil spilled out onto the Western Australian coastline. But for the bravery of an Australian rescue crew, that would have been an environmental disaster to match the Exxon Valdez. We came very close to that.

One only has to look at some of the recent headlines around the place of ships ploughing through the Barrier Reef and off the coast of Newcastle to know that international shipping is a serious business—it is not one in which you want to make mistakes. There has been a recent disaster in New Zealand as well. I think that we would be wise to have good shipping laws in this country—shipping laws that do not just improve our national shipping and make sure that we are not an island nation without an international maritime capacity, but that also go some way toward, if you like, civilising the savage world of international shipping.

The Shipping Reform (Tax Incentives) Bill 2012 promotes a viable shipping industry, which will contribute to a broader Australian economy. We know that it is terribly important to make sure we have got an Australian choice, an Australian option. We know that this bill is important to facilitate the long-term growth of the Australian shipping industry. It will enhance the efficiency and reliability of Australian shipping as part of a national transport system, and it maximises uses of the vessels registered on the Australian General Register under the Shipping Registration Act 1981. This is achieved by making sure that, first of all, we have a general licence for Australian general registered vessels, which will provide unrestricted access to engage in coastal trading in Australian waters. There will be temporary licences that provide access to engage in coastal trading in Australian waters, which is limited in time and in the number of voyages authorised by the licence. There will also be an emergency licence that provides access to coastal trading in Australian waters, which is also time-limited but is there to deal with an identified emergency situation. Those three different types of licence help to safeguard the national interest. They will provide for more than enough options for those who want to ship their goods from port to port, and they allow for the coast to be open but appropriately regulated. That is a particularly important thing.

In the last decade—and we have heard all the speakers talk about this—the Australian fleet has gone from 55 ships to 21, with only four operating on international routes. In a country which is basically an island nation where our trade with the rest of the world is by ship, we need to act so that there is an industry there for the future. At this time, at the point of action, as it were, you do not want to defer a decision to another inquiry and another time. That would be not very sensible at all.

At the moment we have one of the most liberal domestic shipping regimes with some 30 per cent of our coastal cargoes being transported by foreign vessels—470 permit ships—and I think that tells you something. In every other country in the world, and particularly if you look at the United States and places like the United Kingdom, they provide some sensible regulation on their coastal shipping. And that is for good reason. They understand the good national interest reasons why one would do that, and it is important that this House does as well.

I find it a little strange that after all these inquiries, and there have been many of them, that we are considering looking at the matter again. There was the Rebuilding Australia's coastal shipping industry report, and we have recently had the infrastructure and communications committee look at this matter again, and a Senate committee is being set up in anticipation of this. One questions, after 22 years, from the Ships of shame report to now and the many different people looking at it with more than enough opportunity to provide their views, whether it is not just time to act. Acting is important in protecting the national interest. I think that it is important to getting this industry back in the game. It is important to protect this industry, there is no doubt about that. It is important for an island nation to have an Australian fleet. Where would we be without it? I think that is a particularly important point.

The Nationals' own platform boasted about how they would do exactly what is in this bill. Their platform to the people talks about all of these reforms—the zero tax rate, sensible regulation around these things, and development of the workforce. Yet when push comes to shove, we have the member for Wide Bay, who hopes to be Deputy Prime Minister one day, walk away from his own platform. I think Barnaby Joyce is negotiating his passage into this House at the expense of other sitting members; he is the circling the member for Wide Bay. And it is very curious then that the member for Wide Bay should walk away from his own platform. It is an odd thing to do. When we look at what people say and what they do, they are often two different things, and on this issue it is no different.

The government has been quite upfront with the fact that we have gone through a very long negotiation period. The previous speaker talked about some of the concessions that have been made on the temporary licences, from 10 voyages to five. I think that that is a sensible concession to make, but you would not want to lower it to zero. What would be the point? What would be the point of having reforms if you make them so meaningless as to not be effective?

It seems to me that in all these things the question you get down to is the same question that William Wilberforce faced when he moved in the House of Commons to abolish slavery. He was in there talking about ideals and about principles and about the way the world should be if the government and society willed it. Then you had people getting up making speeches about how the boats and the money that had been invested in the slave trade would lie idle—and what would we do then? They were quite extraordinary speeches to the House of Commons. I remember reading William Hague's fine biography of William Wilberforce, and it was very interesting to see some of the arguments we have on so many of these issues—the argument of regulation versus the economic cost of regulation—and there are echoes in this House even now of those debates.

It seems to me that we should protect the national interest, that we should have Australian ships trading in Australian waters, carrying Australian goods to produce Australian jobs. To me it is a sensible thing for an island nation to have an Australian shipping fleet. I think that it is terribly important when you think about some of the longer term challenges that we might face. And it will not have that unless this House is prepared to put in place the laws and regulations and the zero tax rate that support it. I commend this bill and the related bills to the House. We should act now and not put it off, not absolve ourselves or avoid our obligations by shunting it off to yet another inquiry.

Debate adjourned.

Resumption of debate made an order of the day for a later hour.