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Coastal shipping

By David Leyonhjelm - posted Tuesday, 16 December 2014

Just before it lost office, Labor did a sweetheart deal with maritime unions on coastal shipping. It passed the Coastal Trading Act, which was meant to revitalise the shipping industry by protecting coastal trade for Australian ships and seamen.

Since the Act took effect, coastal shipping users have seen significant cost increases leading to a serious decline in the amount of coastal freight loaded at our ports, a reduction in Australian-flagged vessel capacity, fewer voyages and fewer Australian vessels. Worse, the deal has spread the misery around – there are now 2 million tonnes less freight being moved by foreign vessels and the number of major Australian registered ships with coastal licences fell from 30 in 2006/07 to just 13 in 2012/13.

The importance of a productive and competitive shipping industry cannot be overstated. Australia is enormously dependent on shipping, with 99 per cent of international trade volume carried by ship and Australian ports handling 10 per cent of the world's sea trade.


What we have now is definitely not the revitalised shipping industry Labor promised. Its deal with the unions is costing our industry money and markets by entrenching poor workplace practice and restricting competition.

Some of the regulations are simply bonkers. For example, one of them requires a vessel to sit in port for a day before it can start loading. This costs up to $10,000 a day for foreign ships and $20,000 per day for Australian ships. And even though there are no Australian ships currently capable of carrying bulk liquids between Australian ports, companies chartering shipments of liquids must still allow time for an Australian shipper to tender. The cost of waiting has caused at least one company to lose business.

Gypsum Resources, a CSR/Boral joint venture, supplies and ships bulk gypsum from a mine in Thevanard, South Australia, to plasterboard factories in Melbourne, Sydney and Brisbane. The business had lost substantial volume to imports because it is more attractive to import product from Thailand than to supply from Thevenard.

Because it is almost entirely reliant on shipping, Tasmania has been more severely affected than any other state. The Coastal Trading Act was one of the reasons the AAA international shipping service left Tasmania. Now all Tasmanian exporters must ship their products to Melbourne for unloading and reloading onto international ships.

During the first year of the Coastal Trading Act, Bell Bay Aluminium saw its shipping freight rate from Tasmania to Queensland increase from $18.20 per tonne to $29.70 per tonne. This compared with $17.50 a tonne being charged by foreign vessels in 2012. The increase added $4 million per year in extra costs to the Bell Bay smelter.

Another Tasmanian business, Simplot Australia, had an additional $550,000 per year added to its annual costs and has lost markets as a result. This is a crushing burden at a time when the company, the last vegetable processor in the country and an important regional employer, is considering the future of its Devonport plant.


Yet another major company says it is cheaper to ship product from New Zealand to every port in Australia – except Melbourne – than to ship product from Tasmania. And that's after taking into account the benefit of the Tasmanian Freight Equalisation Scheme rebate, which the Kiwis don't receive.

Australian Peak Shippers, which represents companies like Sunrice and Bega Cheese, said in a submission to the Parliamentary Inquiry on shipping:

"When it is cheaper to buy product in New Zealand and land it in Brisbane for blending than it is to purchase the equivalent Australian raw material from Victoria and ship it to Brisbane, or indeed when it is cheaper to ship product from Melbourne to Singapore than it is to ship the same from Melbourne to Brisbane, it is not hard to realise that our Australian exports, which are competing with Singapore based companies for the same market, are finding it tough to do so."

Labor and its union allies created this mess. The effect on manufacturing and agriculture is completely contrary to Labor's claimed support for the two industries and their workers. The Coastal Trading Act is facilitating the replacement of Aussie made products with imported products. Australian companies are not competitive in their own market due to excessive freight costs.

Tasmania's economy is in bad shape and needs help. What would help most is not more handouts from taxpayers in other states, but removal of the hurdles that prevent it from helping itself. Chief among these is a crying need to make our logistics more competitive by deregulating coastal shipping.

David Leyonhjelm is Liberal Democrats Senator for NSW.

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This article was firs published by the Australian Financial Review.

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About the Author

David Leyonhjelm is a former Senator for the Liberal Democrats.

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