Sep 13, 2011

Shipping reforms will make us a maritime player once more – The Australian

The Australian Government has proposed the most comprehensive package of reforms in Australian maritime history. These reforms will bring jobs and return Australia to a major force in world shipping. The alternative to these bold and innovative reforms is for Australian shipping to pass the tipping point where it ceases to exist.

Our industry has declined from 55 ships in 1995 to just 22 today. This is in spite of the fact that Australia accounts for ten percent of the world’s entire sea trade. But while 99 percent of our international trade is carried by ships, only one half of one percent of that is carried by vessels that proudly display the Australian flag. Those 22 Australian ships that still service our ports average 20 years of age, around eight years older than the world average. Our seafarers are also getting on in years with half of them aged older than 45.

With so few ships, an ageing fleet and a declining workforce, our industry has reached the point where it is facing extinction. Such a collapse is not just an economic tragedy. There are also sound security and environmental reasons why an Australian shipping industry is essential. We all watched with dismay when the Chinese bulk-carrier the Shen Neng 1 ran aground on the Great Barrier Reef. Cleaner, better maintained Australian ships would provide greater environmental certainty for our precious marine ecosystems. More Australian ships would also improve our broader maritime security, particularly at our ports.

In 2008, the newly elected Labor Government commissioned a parliamentary inquiry into coastal shipping. It unanimously recommended revitalising Australian shipping. During the 2010 election campaign, a commitment was given that a re-elected Gillard Government would revitalise not just the coastal sector, but the Australian shipping industry as a whole.

Last December, I released a discussion paper with a list of proposed reforms. Since then, separate industry groups have tackled the complex tax, regulatory and workforce elements of the package. They represent the breadth of the maritime industry – ports, shipping operators, regulators, unions and training providers.

Bringing together the collective intelligence of people from across the maritime sectors has paid great dividends. What has been produced is a bold package that follows no precedent or formula. It is uniquely crafted to suit the complexities of a sector that employs Australians but for the most part, operates internationally.

At the heart of the package is tax reform. We recognise that foreign operators enjoy very competitive rates. We want to not simply catch up but lead them. Thus the tax arrangement agreed to includes a proposed zero tax rate. In other words, Australian-based companies with vessels registered here, including those that will operate internationally, will pay no company tax. There are conditions – ships must be Australian-flagged, they must embark on training for new mariners, once they elect into the exemption they must remain there for 10 years and there will be a 10 year lock out period to curb tax avoidance.

To encourage cleaner, younger vessels, we are also halving the depreciation rate from 20 to ten years. There’s an economic benefit here because the cost of operating a 20 year old bulk carrier is at least 40 percent more than for a five year old ship. This will also encourage more ship-building in Australia with the benefit flow-on of jobs.

We are creating an Australian international shipping register to address the cost disadvantage faced by Australian ships. This will bring us into line with other successful maritime nations. Under the new deal, crews operating via this register will work according to the terms and conditions of the International Maritime Convention. When vessels work the domestic coastal route, Australian workplace laws will apply.

Encouraging Australian-flagged ships to work our own blue highway is a prime aim of this reform agenda. Remember, the more we use the blue highway the less we need spend on land transport systems that are certainly not free of cost. Not only are ships the lowest carbon emitters, every tonne carried in a ship’s hull is not being transported along our public roads and highways. We are also removing the disincentive to employ Australian crew on vessels chartered by Australian companies by removing the royalty withholding tax for bareboat charters. These reforms will not close the coast to foreign shipping. What they will do is set clear and fair rules for all operators.

There can be no industry revival without a serious commitment to training. The Australian Government recently funded a new simulator at the Australian Maritime College in Launceston. It is the best of its kind in the world and, supported by a large educational funding package, has set the foundations for the training of a new workforce. Governments can do only so much. It is in the interest of the industry to also address the skills lag and share this vital training task.

This momentous reform package will turn Australian from a shipper to a shipping nation. We will once again be participants rather than simply customers. “This policy provides the necessary elements to allow shipowners to base their operations in Australia and add value to the economy by doing so,” says the Australian Shipowners Association. The Maritime Union of Australia says the reforms greatly increase the potential for Australian businesses to participate in international shipping and address “the critical shortage in maritime skills that Australia so desperately needs.”

Given the dire straits that the industry is in, we have brought forward these reforms by 12 months to 1 July 2012. They come on top of the deal struck last month at COAG that will see a single maritime regulator replace the multiple costly state-based rules that have burdened the industry since Federation. With a national port strategy now advanced, Australian shipping is embarking on a brand new era. There is nothing stopping us taking our place as a global maritime player, a fitting place for the world’s largest island nation.