MUA Deputy National Secretary Mick Doleman today addressed a Melbourne conference on the topic of National Freight Infrastructure and Shipping Reform. A copy of the speech is below:
It is a great pleasure to address you today, and celebrate with you the Government's announcement of their commitment to - and introduction of - a shipping reform package.
Transport Minister Anthony Albanese says that the package has four key elements:
- tax reforms to remove barriers to investment in Australian shipping and to foster the global competitiveness of the shipping industry
- a simplified three tier licensing framework for participation in the coastal trade
- establishment of an Australian International Shipping Register to put Australian companies on a level footing with their international competitors
- establishment of a Maritime Workforce Development Forum to progress key maritime skills and training priorities.
Companies will also be given a financial incentive to replace ships earlier, with the depreciation rate reduced from 20 years to ten years to encourage renewal of the fleet.
Much like Minister Albanese, the MUA sees shipping reform as a nation building economic reform
Why? Because it ticks all the boxes for national economic development to underpin economic growth and support productivity improvement.
As essentially a new industry, it will help diversify the economy to complement the resources and manufacturing sectors.
It expands the tax base, a key objective of the Henry tax reform package and the Tax Summit.
It provides a new target for investment, including foreign investment, which underpins economic growth and productivity improvement.
It will restore the maritime skills base to support our marine dependency as a major trading and shipping nation.
And it will increase the proportion of freight carried by ships as the least energy and carbon-intensive freight transport mode.
The Government's proposal to establish an Australian international shipping register, when combined with the proposed taxation measures, has the potential to be a major incentive for vessel owners engaged in international shipping, be they Australian or foreign, to register their ships in Australia and operate their international ships from Australia.
The package will help ensure that a much greater proportion of ship strategic and commercial management is conducted from within Australia and will be a key factor in helping build a maritime cluster in Australia.
A competitive international ship registration system is a key commercial consideration in international ship operations.
Shipowners are constantly on the lookout for competitive ship registries.
We still have a way to go, but I believe we are on the right track to chart the course for our industry into the future.
Australia is a trade and maritime dependent nation that depends on shipping for 99% of its trade.
We are a major supplier of raw materials for manufacturing, of energy for homes and enterprises and of food for Asia.
Shipping is the conveyor belt to Asia and the globe.
It is part of national infrastructure.
We should derive economic benefit from that shipping task.
A nation with such long freight transport corridors, with such a long coastline, and with high levels of population density in our major cities, which are suffering congestion, cannot ignore shipping as part of the long term solution to future freight distribution networks.
We all share the vision of a strong and vibrant maritime industry - both in Australia and abroad.
I am proud to have worked side by side with my fellow unionists and industry advocates, fighting for shipping reform.
My union, the MUA, welcomes shipping reform as one of the greatest policy developments in Australian shipping since the Navigation Act was introduced in 1912.
It recognizes the importance of Australia as the fourth largest shipping nation by volume and the numbers are increasing with the mineral resources boom.
We have long been one of the world's largest shipping nations but we lost critical momentum in this vital industry during the Howard years.
If implemented properly, shipping reform will be good for the domestic economy.
It will provide surety of investment, regular scheduling, efficient and effective utilization of ships, and developing the critical shortage in maritime skills that Australia as a trading and shipping nation so desperately needs.
The Government's shipping reform package has been developed in consultation with, and will be good for, shippers, ship operators, ship owners, and Australian and regional seafarers.
There can be no question that shipping and ports are two key pieces of infrastructure that underpin the nation's economic performance.
Shipping is one of the vertebrae - together with road and rail - which forms the backbone of the nation's freight system - indeed, it is the 'blue highway' of the world's trade.
Everyone in Australia knows that we are currently experiencing an extraordinary resources boom.
The Nation's prosperity is linked to the world needing our resources.
What many people do not know is that 99 per cent of Australia's international trade is carried by ships, yet only one half of one per cent of that trade is carried by Australian flagged vessels.
Our ports manage ten per cent of the world's entire sea trade. Without our 'blue highway', where would our trade be?
$200 billion worth of cargo is moved annually.
Our industry employs more than 14,000 people either at sea or onshore.
We are the biggest single island nation and the fourth largest shipping task in the world.
Yet there are only 22 Australian registered major trading ships plying our waters today - down from 55 ships in 1995.
On top of this, a lack of investment means that our ships are getting older.
We all know that the newer vessels are safer, more energy efficient and better meet the needs of modern shipping.
The new policy restores fairness and transparency to the way shipping participates in the domestic freight market, while greatly increasing the potential for greenfield opportunities for Australian businesses to participate in international shipping.
Like many industries, the maritime sector is also feeling the pressures of an ageing workforce with employers reporting that 49 per cent of their seafarer workforce is aged 45 years or older.
To compound the problem, attracting new recruits and building a strong and sustainable skills base has been hampered by the high cost and complexities of existing training structures.
If we do not act now the Australian shipping industry will be lost forever.
This must change. My union will not allow Australian shipping to die. I hope you will join us in that fight.
THE ROAD TO SHIPPING REFORM
It is worth recapping how we got here.
Working together, unions and industry have been lobbying for reform for many years.
We know that revitalising the shipping industry must be a priority as national shipping creates jobs, is vital for our environment and essential to our security.
After a series of Government committees, inquiries and reports - which industry, unions and workforce participated in - policy commitments were made.
My union lobbied many in Canberra, as I know did industry and employer associations. We were singing from the same songsheet.
Especial thanks must go to the support of the ASA and Teresa Hatch and her team at the ASA, who have been very supportive of these reforms.
They know that they are good for business, good for industry, and good for workers.
In closing I want to state the obvious - and that is that it makes no sense, no sense at all for Australian trading to take place almost entirely in the hulls of foreign ships.
We need to become contributors, not just customers.
We need to improve and upgrade our fleet.
We need to get the regulatory framework right.
We need the best possible tax system for shipping.
And we need a pool of skilled and dedicated seafarers to operate the ships of the future.
These reforms will confirm Australia's long term economic, environmental and security objectives.
The Government has stepped up to the plate.
Now, we need to work together to ensure they succeed.
Flags of Convenience - The Rena
The 'Rena' oil spill in New Zealand's Bay of Plenty has reinforced the need for more effective control of the way foreign flagged ships operate on the Australian coast.
The 'Rena', a Liberian domiciled ship hit a reef last week, creating a damaging oil spill in pristine waters.
The disaster highlights the need for shipping reform as it could just as easily occur on the Australian coast.
People will no doubt recall the grounding of the Pasha Bulker in Newcastle in 2007 and the Shen Neng 1 just east of Great Keppel Island in 2010.
This grounding of the 'Rena' is a terrible incident and it underscores the urgent need for shipping reform.
The 'Rena' is registered in Liberia and is known in the industry as a 'Flag of Convenience' ship, because its owners seek to exploit cheaper labour and weaker regulation.
Liberia is well known as a well-known tax haven for often reckless shipowners.
The MUA has had concerns about the 'Rena' and other FOC ships because they pose a threat to the natural environment, national security and local jobs.
The Union understands that due to legal complications related to the ship's registration, it took two days for the insurance company to organise the Rena's salvage.
The situation highlights possible problems between regulatory authorities and insurers, and also the availability of salvage tugs in New Zealand.
There are real lessons Australia must learn from this disaster.
The delay between the insurance companies and the regulatory authorities means we may have lost the opportunity to salvage the vessel.
Without FoC dominating our coastline, we could possibly have avoided the incident in the first place.
FREIGHT FORWARDING AND INFRASTRUCTURE FINANCE
The new regulatory and taxation framework for Australian shipping substantially alters the economics of the Australian shipping industry and should create new commercial opportunities right along the Australian domestic and international freight supply chain.
Shippers with any reasonable volume of domestic cargo who have to date relied on rail and or road transport will now need to consider shipping if they are to adequately service their customers' interests.
However, this will require a change of mindset by freight forwarders and logistics operators who will need to partner with shipping operators, both current and potential, to assess the new commercial advantage of shipping.
Ship owners and operators will also need to be more proactive in marketing shipping options, while ships' brokers will need to work closely with shippers and ship operators to ensure the right ship configurations are secured for each unique trade in the Australian freight market.
Ship selection has been a weak point in the recent Australian domestic sea freight market as we have witnessed with the Boomerang, the Andrea and in the WA state ships market.
There needs to be much better collaboration all round so the mistakes of the past are not repeated, as these can damage the overall credibility of shipping.
There is little doubt that service standards, reliability and scheduling are all critical success factors if shipping is to successfully compete with other transport modes and win market share.
When Minister Albanese addressed the Australian Shipowners' Association SEA11 Conference on 29 September, he made it clear he was expecting the industry to take advantage of the opportunity the Government had created through the package of shipping reforms.
He was calling on all sectors of the industry - shippers, freight forwarders and logistics managers, ship brokers, ship owners, ship operators and ship crewing agents - to review and analyze the Government's reform package and to explore the commercial opportunity.
This is a major challenge for the entire sector.
We have long argued that the failure of the market, which has resulted in the near terminal decline of Australian shipping, can recover entirely on the basis of market signals, no matter how positive.
It is for that reason we have made representations to Kim Carr, Minister for Innovation, Industry, Science and Research, seeking to attract his interest in a whole of Government coordination of shipping reform and related infrastructure support.
We have proposed to the Government that it establish a shipping reform start up task force which brings together the agencies that will have a role in implementing shipping reform.
- The Australian Maritime Safety Authority/Department of Infrastructure and Transport (ship registration and trade forecasting),
- Infrastructure Australia (National Ports Strategy and National Freight Strategy),
- Australian Taxation Office/Treasury (administration of the tax measures),
- Austrade/Department of Foreign Affairs and Trade (promoting/marketing trade opportunities and the Australian International Ship Register),
- Defence (procurement/collaboration on ship repair/shipbuilding) and
- Climate Change (emissions reduction strategies).
We think that recovery from market failure will require a government-supported coordination effort aimed at helping to connect the players in a concerted effort over a number of years.
This will stimulate the collaboration that will be necessary to grasp the commercial advantage provided by the price signals inherent in the taxation and regulatory changes that are now on the table.
We think a taskforce could play a useful role in areas such as:
- Helping coordinate the successful entry of new entrants or new investment into the Australian shipping industry, particularly into the coastal container and bulk commodity trades.
- Undertaking international marketing and promotion of the new Australian international shipping register, and identifying ways that bodies like Austrade and the Export Finance and Insurance Corporation (EFIC) may be able to join with industry to gain competitive advantage for Australian shipping under the new policy framework.
- Working with the banking and financial services sector to promote ship financing as a new market niche given that Australia's corporations, competition and ship admiralty law are considered worlds best practice in terms of ship finance lending security.
Such a strategy would also fit well with the work undertaken by the Australian Financial Centre Forum (AFCF) which is tasked with providing a leadership role and advising Government on establishing and promoting Australia as a leading financial services centre in the region.
Identifying Government procurement strategies that could help generate volume as a means of creating baseload and backload opportunities in certain markets. For example: access to Defence national logistics and heavy lift requirements in the coastal trade.
- Working with Port Authorities and stevedoring companies to ensure, in domestic shipping, equal access and preferential loading/discharge slots are available at competitive (or discount) pricing to help establish optimal ship scheduling and to improve service reliability for domestic shippers.
To develop and design a freight forwarding education strategy to support domestic shipping in the modal choice configuration under a reformed shipping environment, as proposed in the Victorian Freight Logistics Council report entitled Multimodal Australia Responsiveness Project Report of December 2010, as well as ensuring there is market awareness of under-utilisation of mode capacity that might provide market opportunities for shipping.
To examine the potential for freight transport fuel efficiency programs and incentives to be extended to Australian shipping, and to identify industry and research/academic collaborations to ensure new investment in ships takes advantage of leading edge propulsion and other on board (and port) technologies aimed at reducing greenhouse emissions.
The example of Incat in creating the worlds first LNG powered commercial ferry, to be used in the Argentina-Uruguay passenger ferry service is representative of what Australia can deliver, and the recent grant from the Australian Research Council to help develop energy efficient ships indicates the Government is already committed in this area.
There is little doubt that the new coastal trade licensing system announced by Minister Albanese represents cutting-edge innovation in freight transport logistics, where a combination of certainty, flexibility and transparency creates the conditions for collaboration to deliver freight transport solutions that are efficient and contribute to freight transport productivity improvement.
When combined with the workforce, cultural and productivity benefits provided in the labour relations Compact that is under negotiation to support shipping reform, which will represent the joint commitments of the employers and unions, the shipping reform package could significantly change freight logistics in Australia.
At the same time, Minister Albanese is also pushing forward on the National Ports Strategy and National Freight Strategy.
Although we understand the National Ports Strategy is yet to receive final COAG approval, it contains many features that should complement shipping reform if the States can be convinced to move beyond their traditional parochial view of the world.
For the first time in Australia's history, Governments are being urged through the National Ports Strategy to view ports as having both land and sea-side elements that require nurturing and development if Australia is to match gateway supply with trade demand and to facilitate trade - container import trade, bulk commodity export trade and sea tourism trade in particular.
While we consider that the allocation of responsibility between the States and Commonwealth agencies for various aspects of the Strategy are mostly right, it is the overall monitoring of performance in implementation of those responsibilities that remains a potential weakness in the Strategy.
We are not at all sure where that performance monitoring responsibility will rest, what structures will be necessary to perform the monitoring and reporting role, who will pay for it and importantly, what penalties apply for lack of performance.
We note that in other Commonwealth reforms in areas like health and education, Government payments to the States can be used to secure outcomes and to incentivize performance, but will such a system work in the ports sector?
One problem is that Governments are increasingly looking to provide finance to fund port infrastructure, particularly at a time when the Government's fiscal position is not conducive to being able to wield financial influence.
A look at the Building Australia Fund which had just $8.2B in reserves at 30 June 2011 compared to Infrastructure Australia's published list of $86bn worth of projects in its July 2011 priority list, of which $19.2bn are deemed ready to proceed, shows there is a massive shortfall in the capacity for Government to fund new infrastructure.
Even if the Minerals Resource Rent Tax succeeds in delivering additional funds for infrastructure through the Regional Infrastructure Fund, it will only meet a small proportion of the required investment.
This is part of the reason why the MUA, along with other key industry unions and trustees on large industry superannuation funds, have been advocating the use of workers' superannuation savings or workers capital, which the Treasurer describes as Australia's sovereign wealth fund, for nation building infrastructure.
While it is true that some superannuation funds are investing in infrastructure, like the Port of Brisbane which is part owned by Industry Funds Management, the amount of Australian workers capital being invested in this way is only a tiny proportion of what could be invested if the Government was prepared to be more innovative in providing better investment vehicles or instruments though which superannuation funds could be attracted to infrastructure projects.
What we believe is required is the availability of long term infrastructure investment vehicles like infrastructure bonds, supported by, and including, fiscal redesign in the application of taxation measures, particularly for the early stages of greenfields infrastructure investments, that is underpinned by some form of Government guarantee.
An infrastructure bond or similar vehicle would need to contain the following characteristics:
- Be either project specific, asset class specific or region specific i.e. the capital raising is used for a particular infrastructure project, or class of project e.g. sea ports, airports, or for defined infrastructure in a region e.g. renewable energy power, public housing etc
- Is government guaranteed i.e. the coupon rate and principal are essentially known at the time of purchase
- Would be offered to specified investors e.g. industry super funds
- Lead to Government investment in the infrastructure project, which imposed conditions on the project builder, owner and operator relating to employment, labour relations, training, safety etc
- Could be structured so that the bond holder has first right of purchase of the completed project after the Government has broken even on the cost of the bond
Such an arrangement would enable industry superannuation funds to offer a new investment product class that would provide a defensive vehicle that would meet the choice requirements of contributors but provide a bulwark against the flight to liquid products (mainly cash) in an increasingly volatile financial market that is undermining the capacity of superannuation funds to make long term equity investments.
The development of a defensive infrastructure asset class, recognising the long term illiquid nature of the investments and underpinning that with regular, reliable and secure returns on superannuation savings that match the CPI plus a margin (say in the order of 4%) would be an attractive option for superannuation contributors and would free up private finance for meeting national infrastructure priorities.
We say that the shipping reforms, the National Ports Strategy and new approaches to infrastructure financing could lead to a genuine renaissance in Australia's maritime industries and create the preconditions for lifting national productivity performance.
The Gillard Government and Minister Albanese in particular have set the wheels in motion.
The maritime unions have committed to play their part in committing to labour reform and to workforce development to underpin shipping reform and to work with Government on the workforce development, skills, productivity and safety aspects of the National Ports Strategy.
There is now a need for investors and entrepreneurs to step up and invest in ships and related maritime infrastructure.