Speech to Maritime Industry Australia Ltd SEA18 Conference – Australian Shipping: Charting A New Course – Canberra – Tuesday, 16 October 2018
As recently as thirty years ago the Australian registered trading fleet consisted of almost 100 vessels, operating both domestically as well as on international trading routes.
Today, the figure stands at just 14.
These are worrisome statistics that signal a crisis.
Despite our proud maritime history and natural advantages, such as being the largest island continent on Earth with the vast majority of our cities situated on the coastline, we have all been witnessing the demise of a strategically important industry.
Importantly, this is not a time for partisan finger pointing.
Indeed, I readily acknowledge that the situation we confront today has developed under governments of both persuasions, driven by a range of complex factors including changes in trade patterns, globalisation, unfair competition from sub-standard and subsidised shipping, and flag competition from open registers.
But what certainly hasn’t helped is the failure of our political system to achieve bipartisan support for a long-term strategic vision of the importance to Australia of our shipping and wider maritime-related industries.
As a result, policy settings have chopped and changed from government to government. This has had the effect of creating uncertainty and deterring investment in Australian flagged vessels.
Worse still, the sector often appears to be invisible to some policymakers and the general public.
Nonetheless, it is one that my colleagues and I are passionate about.
Labor does not accept that the long decline in the Australian merchant fleet should simply be allowed to continue. As inhabitants of an island trading nation, it is inconceivable to us that we would even contemplate abandoning our historic involvement with the sea.
Australia needs a vibrant and strong maritime industry.
And our position is based on sound reasoning.
Firstly, Australia is highly dependent on international shipping services for our continued economic development.
It is a fact that each year 99 per cent of our imports and exports are transported in the hulls of some 5000 ships. However, with the exception of just four, every single one of those ships is foreign-owned, foreign-flagged, and overwhelmingly, foreign-crewed.
And even when it comes to those four vessels, the operators have announced they will be removing them from service over the next few years.
Australia is now almost entirely at the mercy of the commercial whims of foreign shipping companies. Currently, less than 0.5 per cent of Australian seaborne trade is carried by Australian ships.
That is a risky position to be in.
To be sure, no other major developed nation has attempted to engage in such unilateral economic disarmament.
For example, when countries such as the United Kingdom, Norway and the Netherlands were experiencing similar declines in their national fleets and began to rely on foreign ships and seafarers for the carriage of their trade, their respective governments stepped up.
Their policy responses included:
- Favourable tax regimes for ship-owners;
- Cost-offsets in employing domestic seafarers;
- Ship-financing schemes;
- Encouragement of training and career development; and
- Establishment of second registers.
In each case, the result was a return of tonnage back to their national registers. Indeed, when the UK Government introduced a tonnage tax in 2000, its fleet almost doubled in size in just the next seven years.
So while our domestic industry has been sinking, other countries have been employing policies that have not only kept their industries afloat, but led them to prosper.
Norway is another case in point.
Norway has a resources-based economy like us, but a population one-fifth the
size of ours, yet it has the 13th largest merchant fleet in the world employing over 100,000 people.
Australia, by comparison, is much further down the global ranking.
Despite having the fifth largest shipping task in the world, we don’t even make it into the top 35 countries.
The bottom line is that, unlike here in Australia, the political leaders in countries like the UK and Norway have made a conscious policy decision to assert greater control over their economic sovereignty. They want to safeguard their exporters’ access to global markets and not to be completely reliant on the ships of another nation.
They are also determined to be players in a global industry that is expected to double by 2030, offering major commercial opportunities for their existing maritime businesses and generating wider economic, employment and technological benefits to their economies.
Then there is the need to maintain a pool of people with seafaring skills and experience to fill jobs in the shore based maritime-related sectors of the economy, most notably ports. The fact is a strong and growing merchant fleet provides the most cost-effective means of training the workforce of the future.
In addition to reasons of economic sovereignty, revitalising our domestic shipping industry would present an opportunity to enhance the scope and nature of the Australian maritime industry’s capacity to support Australian Defence Force operations.
It would also provide more career opportunities for both parties.
Indeed, defence experts have long recognised the importance of maintaining a domestic maritime workforce. It would ensure Australia had a pool of highly skilled labour that could be quickly mobilised during times of war or other national emergencies.
That has certainly been the history, with Australian merchant ships and their Australian crews playing crucial roles in many of our nation’s armed conflict including both World Wars and later the Korean War.
The ADF even utilised civilian shipping for its mission in Timor-Leste.
Just yesterday MIAL itself underlined the potential synergies between the Defence and merchant fleets with your appointment of the former Chief of Navy Vice Admiral Tim Barrett as a member of your board.
As Vice Admiral Barrrett said when his appointment was announced:
“There are new opportunities in the maritime arena which will demand greater understanding and collaboration between industry and defence. I hope to contribute to that.”
LABOR’S 2012 REFORMS
It was for these economic and national security reasons that the former Federal Labor Government was so determined to rebuild the Australian maritime industry.
At that time, our particular focus was on the coastal shipping aspect of the industry.
This was an obvious starting point.
Not only was the number of Australian flagged vessels involved in this trade declining, but the total amount of goods being moved by ship around our coastline was also in free fall. Indeed, shipping’s share of the domestic freight task had halved from around 40 per cent in the early 1990s to just 20 per cent.
After extensive consultations with all sections of the industry, and drawing on the experiences of other maritime nations, which I touched on earlier, we put in place far-reaching measures designed, not as a form of protectionism, but to simply level the playing field.
Importantly, Labor’s changes did not preclude the use of foreign vessels. They simply required firms needing to move freight between Australian ports to first seek out an Australian operator. When none were available, foreign vessels could be used so long as they paid Australian-level wages on domestic sectors.
For Australian shipping companies the package included a zero 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.
To further strengthen the local industry, an International Shipping Register was created, allowing operators of Australian flagged vessels to employ mixed Australian and foreign crews on internationally agreed rates and conditions.
But our efforts to revitalise the industry didn’t stop there.
We also enacted the first major rewrite of the nation’s maritime laws in almost a century, made sure oil companies pay for any and all damage their ships may cause, and developed Australia’s first National Ports Strategy. And we replaced a myriad of confusing, often conflicting state and territory based laws and regulations with just one national regulator administering one set of modern, nationwide laws.
However, for Labor’s suite of reforms to work, they needed time.
Unfortunately, even before they took effect the Coalition sought to undermine them.
Their attacks were calculated to create uncertainty and doubt in the minds of those considering investing in the Australian industry as to the durability of the regulatory changes and the new tax incentives.
LABOR’S PLAN FOR SHIPPING
So the question now turns to what the next Federal Labor Government will do.
In answer to that, I will firstly return to where I started my speech today – and that is the need to not only build consensus across the industry, but bipartisanship within the Parliament. It is undeniably the case that reviving Australian shipping will simply not be possible in a single parliamentary term or even the tenure of any one government.
It will need long term policy certainty and the genuine support of both sides of politics.
And while they weren’t perfect nor satisfied everyone, Labor’s starting point will be our 2012 reforms.
From there we will seek to build, drawing on the proposals outlined in the Coastal Trading Green Paper developed under the leadership of Maritime Industry Australia in consultation with the providers and users of shipping, as well as the maritime unions.
There are two particular proposals worthy of consideration, the first of them being the establishment of a “strategic fleet”.
Under such a proposal, the Government, acting in the national interest, would support the creation of a fleet of vessels 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 would be Australian flagged and Australian crewed, and while they would operate commercially, they would be available to be seconded by the Defence Forces for operational requirements in times of crisis.
They would also provide a platform for the training of future seafarers.
This approach would enhance Australia’s economic sovereignty and security.
The second proposal worthy of consideration is a Seafarer Income Tax, a regime that would effectively exempt those Australian seafarers working for foreign international shipping companies from paying income tax here in Australia.
This 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.
Such a regime would create greater career opportunities for Australian seafarers.
The fact is 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, and on top of that they are required to pay income tax, which most of their international counterparts do not.
Simply put, Australians working internationally get less take home pay then those from other countries they work alongside.
Further, this measure would also in part 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.
In short, this proposal would help provide the strategic maritime skills and experiences our nation needs.
Beyond considering the Green Paper proposals, Labor will also:
- Ensure that the national interest is prioritised when it comes to licensing foreign ships to work in Australia;
- Stop the abuse of temporary licences that has occurred in breach of the existing legislation;
- Streamline regulatory processes where possible.
And we will reinstate the Maritime Workforce Development Forum and task it with developing strategic responses to the skills issues facing the maritime industry, and building strategic, productive working relationships across the industry and with training sectors.
My core message to you today is that the next Labor Government will work with you to prevent the demise of not only a proud, but strategically important industry.
Labor will never waive from the principled position that Australia needs a strong, competitive, growing and home-grown maritime industry – and we will be taking a set of policies to the next election that will help achieve just that.
Simply put, we want to see more Australian seafarers crewing more Australian flagged ships carrying more Australian goods around our coastline and to markets overseas.
Our long term national interest demands nothing less.