May 7, 2019

Address to Maritime Industry Australia Ltd Forum – Promoting Growth in Australian Shipping – Australian National Maritime Museum – Tuesday, 7 May 2019

There are just over ten days remaining until the Federal election.

I have been privileged over the past twelve years, first as a Minister and now as a Shadow Minister, to get to know the maritime industry and to learn from you.

While I am here today to talk to you about Labor’s plans for the next three years and beyond, I would start by saying that much of our plan reflects ten years of interaction with the industry through organisations such as the Maritime Industry Australia Ltd.

Your organisation performs an important role in advancing policy debate in the maritime sector.

Your contributions are always policy based; never political. So thank you for a decade-long partnership.

The Labor Party values the Australian maritime industry.

We see it as critical to our economy and critical to our national interests.

Virtually all of our imports and exports come and go by way of ship and one tenth of global sea trade flows through our ports.

And we have vast maritime activity occurring right around the coast line – from building infrastructure, ports, navigation buoys and offshore facilities to moving people, both commuters and tourists – and so much more.

We are an island nation.

Accordingly, Labor believes any serious Federal Government must put in place policy settings that promote a strong local shipping sector.

Over the past six years, the current Coalition has failed to support the Australian maritime sector.

Instead, it has undermined policy settings put in place by the former Labor Government without advancing any kind of alternative vision.

Today is a great opportunity for me to lay out my vision for shipping in this country.

I use the word vision very deliberately.

Vision is the ability to imagine a better future. It’s about recognising where you want to go and taking the steps that are required to make that vision real.

My vision for the Australian maritime sector is simple.

I want a vibrant industry that serves that nation’s economic, environmental and national security interests.

I want an industry that serves our nation’s shipping needs, creates profit for industry, secures a strategic set of maritime skills, and provides jobs and training opportunities for young people.

ECONOMIC SOVEREIGNTY AND NATIONAL SECURITY

One of the most enduring ideas of Australia is of the land that is girt by sea.

It’s a prominent symbol of our country, like the kangaroo and emu of our coat of arms, or the Southern Cross in the night sky.

But there’s another proud symbol of Australia that has not been afforded the same respect and prominence in our national memory – the Australian Red Ensign.

Just 30 years ago, around 100 large vessels flew the Australian flag while operating domestically and internationally.

Today that number is 14.

Internationally our fleet of big ships is a minnow.  Norway, with a population one-fifth of Australia’s boasts 519 vessels bearing its flag, the United Kingdom 1,157 and China 4,608.

Even the Merchant Marine of Switzerland, flying the flag of a land-locked nation with a population one-third of Australia’s, is larger.

The decline of Australia’s fleet has cost our nation economic activity, profits and jobs.

Less than half a percent of Australia’s seaborne trade is carried by Australian ships and that percentage is set to reach zero as their operators remove them from service over the coming years.

No nation should surrender its economic sovereignty in this way.

The current Federal Government has stood idle when it should have been supporting your industry.

It sees no value in the existence of a vibrant domestic shipping sector – or any other part of maritime industry for that matter.

By contrast, Federal Labor would focus on policy settings that would encourage growth in Australian shipping – whether they work domestically, internationally, or ideally, both.

We want to see Australians crewing vessels that proudly fly the Australian flag.

It’s not only about the economy.

It’s also about national security.

There are real synergies between Australia’s merchant fleet and the Australian Defence Force.

A strong merchant fleet brings with it capability and expertise, greatly expanding career pathways for seafarers and, as in the case of Timor-Leste, providing crucial support to ADF missions.

There is also an environmental imperative.

Shipping is the most efficient form of long haul transport.

We should be utilising a lot more of it to move freight around this country, and we should ensure that this is done by people trained to the highest standards.

Australia seafarers on Australian-flagged vessels are trained to those standards, understand our waters and are sensitive to our precious marine assets like the Great Barrier Reef.

LABOR’S REFORMS AND THE COALITION RESPONSE

The former Federal Labor Government sought to promote these economic, national security and environmental interests with reforms designed to rebuild Australian shipping.

We consulted extensively across the industry and looked internationally to identify best practice.

The reforms we put through the Parliament were strategic and forward thinking and designed as a shot in the arm for the domestic maritime industry.

We created an International Shipping Register, developed the country’s first National Ports Strategy, and brought in a single regulator to administer a national set of laws, replacing the piecemeal and convoluted system of state and territory-based laws and regulations.

Our 2012 package also included:

  • A zero corporate tax rate;
  • More generous accelerated depreciation arrangements;
  • Rollover relief for selected capital assets;
  • New tax incentives to employ Australian seafarers; and
  • An exemption from the Royalty Withholding Tax for ‘bareboat’ leased vessels.

These reforms were not protectionism.

They were not designed to eliminate foreign operators and vessels.

Instead, we asked firms that wanted to move goods through Australian waters to seek an Australian vessel in the first instance.

Where no Australian vessel was available, we allowed the use of foreign vessels on licenses, provided there was no undercutting of Australian wage standards.

Our reforms would have paved the way for a revival of Australia’s maritime industry.

However, even before the changes took effect in 2012, the Coalition, then in Opposition, sought to undermine them.

And after taking office in 2013, they tried to scrap them.

The legislation that the Coalition took to the Parliament in 2015 would have gutted our maritime industry under the guise of ‘cutting red tape’.

To the Coalition, the promotion of a vibrant maritime sector that serves our national interest is less important than reducing shipping costs.

It has to be noted that Coalition’s legislation that would have reformed the Coastal Trading Act acknowledged that 88 percent of the “savings’’ would come from replacing Australian crews with foreign crews working for foreign wages.

This was unilateral economic disarmament – destroying our own industry and the jobs of Australians.

It’s a good thing that crossbenchers in the Senate joined with Labor to reject the legislation.

Since the defeat of the legislation the Coalition has advanced no alternative.

Instead, it has allowed the abuse of the existing system of licensing foreign vessels which have led to more job losses and fewer Australian flags flying off the back of vessels working in our waters as well as internationally.

LABOR’S APPROACH

Labor will never compromise on our view that Australia needs a strong, competitive, growing and home-grown maritime industry.

If we are successful on Saturday week, will move quickly to get behind Australian shipping because to do so is to get behind the national interest.

First, we will direct the Department to enforce Labor’s 2012 reforms to prevent further undercutting of the Australian-flagged fleet.

We will stop the abuse of temporary licences that has occurred in breach of the existing legislation and ensure the national interest is prioritised when it comes to licensing foreign ships to work in Australia.

Second, we will create a Strategic Fleet of Australian flagged vessels that can be called upon in areas of strategic importance to the Australian economy, such as the importation and distribution of liquid fuel, namely crude oil, aviation fuel, and diesel.

The vessels will be Australian flagged and Australian crewed, privately owned and commercially operated.

They will also provide a platform for the training of a new generation of Australian seafarers.

A significant reform like this requires careful deliberation and broad consultation.

So as a first step, a Labor Government would create Strategic Fleet Taskforce to provide advice on the design of a Strategic Fleet.

The Taskforce would include representatives of:

  • Charterers;
  • Ship owners and operators;
  • Maritime Industry Australia Ltd;
  • Maritime unions;
  • Department of Defence.

Third, Labor will reinstate the Maritime Workforce Development Forum to develop strategic responses to skills development.

The forum would build productive working relationships with industry to properly align its needs with the training sector.

The need for this reform was underlined just two months ago in MIAL’s Seafaring Skills Census which identified an ageing workforce with few young seafarers in the pipeline and a shortage of more than 500 seafarers expected by 2023.

In addition to these three approaches, there is much more we can do to reverse the decline in the Australian shipping industry.

In close consultation with the sector a Shorten Labor Government would explore other ways to stimulate growth in the industry.

For example, if we want to encourage more investment in Australian shipping, we could take a closer look at the tax system.

Under current arrangements, shipping companies pay no tax on profits earned from profits made from the operations of their Australian-flagged ships.

However, when the profits from those companies are distributed, shareholders must pay tax on the dividends.

This arrangement facilitates the reinvestment of profits by the company rather than distribution of dividends.

This can be a positive when companies are growing or renewing fleets.

However, other jurisdictions adopt a variety of arrangements that in practice equate to complete tax exemption.

Retaining the existing zero corporate tax rate and exempting investors from paying tax on the dividends they receive could make Australia a more attractive place to invest in shipping, which could lead to growth in the Australian-flagged shipping fleet.

Another proposal worthy of consideration is a Seafarer Income Tax regime to exempt Australian seafarers working for foreign international shipping companies from paying income tax here in Australia.

Creation of such a regime would bring us into line with the situation that already exists in most other maritime nations including Denmark, Germany, Netherlands, Singapore, Norway, the UK, South Korea, Thailand, and the Philippines.

At the moment, very few Australian seafaring officers, in particular, are working internationally for the simple reason that international wage rates are lower than Australian wages.

On top of that they are required to pay income tax, which most of their international counterparts do not.

This means Australians working internationally get less take home pay then those from other countries they work alongside.

Changing this system could create greater career opportunities for Australian seafarers.

In part it will address the significant shortfall in berths able to be utilised on Australian vessels for Australian seafarers to fulfil their sea time requirements by encouraging trainees to accept appointments on foreign vessels.

This proposal would help provide the strategic maritime skills and experiences our nation needs.

SUPERYACHTS

Before concluding, I want to touch briefly on the issue of super yachts.

The super yacht sector has been lobbying to make it easier for foreign flagged superyachts to charter in Australian waters.

It sees, correctly, great potential for an expansion of this sector, which would generate jobs and economic activity.

The sector has argued that importation costs associated with bringing a vessel into Australia, as prescribed by the Customs Act, are inhibiting the industry’s growth.

It proposes addressing this through a change to the Coastal Trading Act to allow super yacht operators to obtain temporary licences so they would be protected from Customs obligations.

However, the legislative change that was suggested would have harmed existing sections of our domestic maritime sector. It would have opened the door to foreign transhipment and bunker barge operators to apply for temporary licences to work around the Australian coast.

This would not have been a desirable outcome, because the companies currently performing those activities are Australian based and employ Australian seafarers.

Nonetheless, Labor is open to reforms that will promote the growth of the superyacht industry to the benefit of communities up and down the Australian coastline.

But in doing so, we need to act in a way that avoids unintended consequences such as those that I have just described.

Accordingly, we think a better, more sensible long term solution would be new, standalone legislation covering all tourism operators, both local and foreign, which creates a level playing field.

CONCLUSION

Labor’s vision for your industry is unashamedly bold.

We know the work cannot be completed within the life of a single Parliament. But we also know but if we do not start now, we run the very real risk of losing our domestic maritime industry entirely.

Australia’s status as an island nation with a continent to itself provides unique privileges and challenges.

We are a nation with just shy of 26,000 km of coastline and yet a nation nearly wholly reliant on others for our supply and the movement of our goods.

Labor recognised the folly of such a position when we took our 2012 reforms to the Parliament.

The past six years has undone the work we began and made our precarious position even more so.

Thanks again for giving me the chance to be here today to outline Labor’s plan to correct course and commit a Federal Labor Government to ensuring our merchant fleet and maritime industry reaches new heights.

We want a strong maritime industry – one that is globally competitive, continually growing, and supported by the Federal Government rather than neglected.

In the interest of Australia’s proud maritime industry and of the nation, our promise is one of partnership to achieve this vision.