Dec 8, 2010

Reforms to the Australian Shipping Industry – Opinion Piece – The Australian

Australia is the largest island continent on earth. We are surrounded by vast oceans and almost all our major cities nestle into our coast-line. Our busy ports manage ten percent of the world’s sea trade, while 99 per cent of our imports and exports are carried by ship.

Yet somehow this country, which is encircled by a vast ‘blue highway’, has just 30 registered major trading ships aged on average 20 years. With so few ships and an ageing fleet we are reaching the tipping point where an Australian industry will simply cease to exist.

For some this doesn’t matter. If the market determines this outcome then so be it. I believe this is short-sighted and ignores the fundamental economic, environmental and security benefits of an Australian-based industry. When the Howard Government was elected in 1996, there were 55 Australian trading vessels shipping 3.2 million tonnes. By 2008, the 30 remaining vessels were shipping just 1.8 million tonnes. Less than half of one percent of our huge export trade was carried by Australian ships.

The Howard Government had abandoned Capital Grants Assistance, accelerated depreciation and the PAYE rebate scheme. At the same time, it had tripled the number of trading permits to foreign-flagged crews from less than 1,000 in 1999 to more than 3,000 in 2008.

So while major shipping nations such as Japan, China, the UK and Denmark were employing a list of new tax measures and policies to keep their fleets competitive, ours was in freefall.

With trade at our ports predicted to triple over the next two decades it makes great economic sense that the Australian economy enjoys the benefits from this growth.

In 2000, the United Kingdom introduced a tonnage tax to help reinvigorate its failing shipping sector. Historically one of the world’s greatest maritime nations, by 2000 the UK’s fleet had contracted to just 379 ships.

By 2007, seven years after the introduction of the new tax, the UK fleet had swelled to 646 vessels and since 2004 UK shipping has consistently recorded a surplus, contributing $15.7 billion annually to GDP and $4.65 billion in overall tax revenue. Importantly, the training of UK seafarers has soared and this is seen as critical to maintaining London’s position as one of the world’s leading providers of maritime services.

These competitive reforms contrast with the United States’ model where every ship in its domestic industry must be not just American flagged, owned and crewed but also built in its own ship-yards. In the past this was probably a case of old-fashioned protectionism, but now this position is argued on the basis of national security.

The Australian Government does not support this protectionist model.

In early 2008 I asked a parliamentary committee to inquire into Australia’s coastal shipping sector and recommend ways of improving competitiveness and sustainability.

The committee issued a unanimous bipartisan report in October 2008. I then convened an advisory group to look more broadly at the international shipping sector made up of industry leaders from Rio Tinto Marine, Teekay Shipping, ANL Container Lines, the MUA, Jebsens International, Australian Shipowners Association, ASP Ship Management and the National Farmers’ Federation.

I asked this group of experts to consider the parliamentary recommendations and, using their industry knowledge, report back to me with a package of reforms to revive and revitalise Australian shipping.

One of the most urgent calls was to remove the barriers to the sustainable use of Australian ships and crews.

That’s why the Gillard Government will allow Australian registered ships to elect to use either a low, flat tax based on vessel tonnage, similar to the UK system, or stay with the current tax regime, bolstered by accelerated depreciation.

We will consider exempting vessels leased to Australians from the Royalty Withholding Tax when they engage Australian crews, bringing them into line with the use of foreign crews.

Increasing our workforce of skilled seafarers is essential for the industry to grow so companies seeking eligibility for the financial incentives will be required to sign up to a training program. A reference group will be formed, bringing together industry, unions and training providers to advise on the best way of improving our maritime skills base.

Existing education funding programs will be extended to trainee seafarers and major training providers such as the Australian Maritime College in Launceston, and TAFEs in Perth and Newcastle will be encouraged to provide seamless national training.

The Gillard Government will work with the industry and unions to align practices in Australian shipping with the best in the world. We will be seeking a compact between industry and the unions to drive that productivity agenda. This compact will address cost reduction targets, work practice improvements, and training and skills development.

A skilled maritime workforce is in the national interest. This was recognised in the 2008 Defence White Paper which saw enhancing our maritime capability as important to security and necessary to help address the significant workforce challenges faced by the Australian Defence Force. A highly-experienced, capable seafaring workforce creates career opportunities in both the navy and commercial shipping sector.

There are also good environmental reasons for viable shipping sector. A greater number of safer, cleaner Australian ships travelling our ‘blue highway’ will reduce the likelihood of incidents such as the grounding of the Shen Neng 1 on the Barrier Reef earlier this year and oil spills off Moreton Island early last year. Both those incidents are the subject of criminal proceedings.

Importantly, the outdated Navigation Act 1912 will be completely rewritten and eight separate and different regulatory regimes in the States and Northern Territory will be replaced by a single national maritime safety regulator. So one national regulator, one national law and much less red tape at our ports.

Without reform to our shipping sector, we risk simply becoming the customers of others. Australia must become an active player in the enormous international shipping industry. Other developed countries have embarked on extensive and successful programs to rebuild their shipping industries. They have all recognised that a healthy competitive shipping sector brings great economic, security and environmental benefits.

Those benefits are something that Australia should seek and clearly we have a long way to go. However the Gillard Government is facing this challenge head on. No-one questions Government involvement in our road and rail, in fact they expect it. A viable shipping industry should be no different. Ships are the lowest carbon emitters of any transport mode and the more goods we carry along the blue highway, the fewer trucks crowd our national highways.

Reforms to Australian shipping, when added to improvements from our national ports strategy, will stop the sinking of the Australian shipping industry. They will create a platform for rejuvenation with enormous potential for new jobs, opportunities and productivity that will benefit the whole of this island nation.