Australia, which has a coastline of about 16,000 miles, has been a shipping nation since Aborigines used canoes to transport goods and people. White settlement over two centuries ago was made possible by shipping. Even today, most of our exports are leaving our shores in ships (mainly bulk carriers), but only a few of these ships carry the Australian flag.
In fact, the number of Australian flagged vessels has been in decline for decades and currently less than 50 (mainly old) Australian vessels service Australian ports. Coastal shipping has seen a similar decline and currently less than 20 Australian flagged vessels operate on the Australian coast.
The previous federal government tried to halt this trend and revive the Australian shipping and maritime sector.
They introduced the Coastal Trading Act 2012 along with changes in the Fair Work Act (2009) and taxation laws to create more favourable conditions for Australian flagged vessels. Whilst the intentions were good, some unintended side effects have had an impact on the supply chains of a number of Australian businesses and increased their costs.
Coastal shipping in a large number of countries such as the USA (regulated by the Jones Act of 1920), Denmark, Indonesia, the Philippines and to some extent even China is protected by so-called cabotage laws. These laws dictate that any coastal cargo is carried by vessels which are flagged (and usually manned, or even built in the case of the USA) in the home country.
Australia does have similar laws but it permits foreign flagged vessels to carry coastal cargo if no suitable Australian flagged vessel is available. A single voyage (or in some cases multiple voyages) permit is then issued.
However, changes to the Fair Work Act mean foreign flagged vessels must pay Australian style wages to the (usually lower salaried) foreign crews whilst on the Australian coast. This has made it much harder, more expensive, and in most cases not viable for foreign flagged vessels to carry coastal cargo, to the detriment of the shippers who have had to find alternative (usually more expensive) options to keep their supply chains operating. This movement of cargo has shifted from transport by sea to rail or more commonly by road. In some cases the shift was not possible and the supply chain ceased to operate.
The current government is considering its options of repealing or amending both the Coastal Trading Act and the Fair Work Act and a review by the Productivity Commission is currently underway. Recent comments by Deputy PM Warren Truss (also the Minister for Infrastructure and Regional Development) and Prime Minister Tony Abbott indicated that the Coastal Trading Act could be part of “Repeal Day”.
Minister Truss recently released an options paper which canvasses a number of options such as doing away with regulation of all access to coastal trading in all Acts of Parliament, repeal the Coastal Trading Act or continue to regulate the coastal trade but change some aspects of the existing regime.
A number of organisations such as the Australian Competition and Consumer Commission (ACCC), the Business Council of Australia (BCA) and the Institute of Public Affairs (IPA) have criticised the new coastal shipping regime for driving up costs in the supply chain of Australian companies describing it as protectionist and anti-competitive.
In Victoria a number of members of the Supply Chain Advisory Network (SCAN) have indicated that it is cheaper for their businesses to import goods directly from overseas rather than sourcing them interstate. Another one commented that it is now cheaper to ship their product from Melbourne to Singapore than from Melbourne to Brisbane and that alternatives such as using rail or road rather than sea are just not viable.
Coastal shipping should be considered as part of broad-based thinking about transport solutions for interstate and inter-capital freight movements. Multi-modalism (the transportation of goods under a single contract, but performed with at least two different means of transport) must be used to improve the availability of convenient and cost-efficient road, rail and sea freight options for the movement of (in particular) interstate domestic freight.
It is important that both government and industry consider measures to promote multi-modalism. Viable alternative transport (such as coastal shipping) needs to be available quickly and cost effectively in instances such as derailments or road and rail being cut off by floods (as happened recently in North Queensland).
A side but important issue is that rail and sea transport produce less greenhouse gasses and are safer than road especially over long distances.
Lack of modal choice is seen as a significant issue by SCAN members and it implores the government to urgently fix some of these issues in order to ensure that no additional costs are imposed on the businesses that move freight (and in the end on the freight owner and the consumer).
Maybe a first step in addressing the current situation is to amend or repeal these laws, but more needs to be done to promote multi-modalism and create a level playing field for all modes of transport.
Dr Hermione Parsons
Director, Institute for Supply Chain and Logistics; Associate Professor, College of Business, Victorian University; Chairperson of the Supply Chain Advisory Network
Peter Van Duyn
Maritime Industry Expert, Institute for Supply Chain and Logistics at Victoria University; Member, Supply Chain Advisory Network