Jul 20, 2017

The case for an Australian shipping industry – Opinion – Lloyd’s List Australia

Australia is an island continent “girt by sea” located in a relatively remote part of the globe.  Almost all of our imports and exports are transported in the hull of ships. Equally significantly, a tenth of global sea trade flows through our ports.

However, despite this obvious reliance on the maritime industry, Australia’s
own merchant fleet, as well as the skilled workforce it trains and employs, is fast disappearing.  Our task must be to prevent the demise of this proud industry.  It is about more than jobs and skills.  There are also sound national security and environmental reasons for doing so.

National Security

Firstly, there are clear synergies between our naval and merchant fleets.

Indeed, defence experts have long recognised the importance of maintaining a domestic maritime workforce.  It ensures that Australia has a pool of highly skilled labour that can be quickly mobilised during times of war or other national emergencies.

Furthermore, Australian seafarers undergo stringent background checks to ensure they pose no security threats.  Overseas seafarers whose backgrounds are a mystery to us do not undergo such close scrutiny.

The Environment

Secondly, Australian seafarers are familiar with our coastlines and have a vested interest in the protection of our world renowned environmental assets such as the Great Barrier Reef. The fact is all the major maritime accidents to have occurred in our waters in recent decades have involved foreign-flagged vessels crewed by foreign seafarers.

Labor’s Shipping Reforms

It was for these economic, national security and environmental reasons that the former Federal Labor Government was so determined to rebuild Australia’s shipping industry following years of neglect.  Our goal was simple: more Australian seafarers crewing more Australian flagged ships carrying more Australian goods around the Australian coastline.

After extensive consultations with all sections of the industry, we put in place far-reaching reforms designed to reduce the costs faced by Australian shippers and level the playing field with their international competitors.

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.

These measures were based on the extensive reform programs that had already been implemented by other maritime nations including the United Kingdom, Japan, China and Denmark.  For example, when the UK Government introduced a tonnage tax in 2000 its fleet almost doubled in size in just the next seven years.  So while others were employing policies to keep their industry afloat, ours was sinking
into oblivion.

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.

Our efforts to revitalise this country’s shipping 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.

Coalition’s Shipping Legislation

Not satisfied with white-anting Labor’s reforms in opposition, once elected the Coalition moved quickly to scrap them altogether and dismantle what remained of the industry.

All of us want to reduce the cost of doing business in Australia – but not at any cost.

Particularly if that cost is the destruction of a strategically-significant industry and the loss of a highly-skilled workforce – and that’s precisely what the Coalition’s 2015 legislation would have done.

The legislation put ideology ahead of the national interest.

Contrary to the Coalition’s repeated claims that their proposed changes were designed to eliminate “red tape” and “strengthen” shipping in this country, they were in fact all about eliminating Australian jobs – and ultimately the entire
domestic industry.

And this motive was laid bare by the regulatory impact statement (RIS) that accompanied the legislation.  It confirmed that almost all of the savings expected to be produced by the legislation – 88 per cent – was to come from shipping operators sacking their Australian crews and replacing them with cheaper foreign crews.

No other major advanced nation has attempted to engage in such unilateral economic disarmament – and against that backdrop, the Senate was right to reject the Coalition’s legislation at the end of 2015.  In doing so, it was acting in the national interest.

Nearly 18 months later the Coalition is back at it, albeit this time with far less draconian and destructive proposals.  However, one thing remains unchanged: the measures outlined in the Discussion Paper released by Transport Minister Darren Chester back in March will do absolutely nothing to reverse the decline in the Australian shipping industry.

The bottom line is: there is a very real difference between the two sides of
politics when it comes to shipping.  Labor strongly believes Australia needs a viable, competitive and growing domestic industry; the Coalition doesn’t.

Nonetheless, in an effort to guarantee the survival of this vital industry I will continue to strive to find whatever common policy ground that may exist between Labor and the Coalition on this issue.

The Australian long term national interest demands nothing less.


This piece was first published on 22 June 2017 in Lloyd’s List Australia’s SPECIAL REPORT: Coastal Shipping.