Bills Digest 75 1995-96
Shipping Grants Legislation Bill 1996
WARNING:
This Digest is prepared for debate. It reflects the legislation as introduced
and does not canvass subsequent amendments.
This Digest was available from 10 May 1996
CONTENTS
Date introduced:1 May 1996
House: House of Representatives
Portfolio: Transport and Regional Development
Commencement: Other than the repeal of the International
Shipping (Australian-resident Seafarers) Act 1995, which will have
effect from 1 July 1996, the Bill will commence on Royal Assent.
To repeal the International Shipping (Australian-resident Seafarers)
Grants Act 1995 and to alter the sunset clause in the Ships (Capital
Grants) Act 1987 from 30 June 1997 to 30 June 1996.
Shipping serving Australia is both a major industry and a large contributor
to Australia's current account deficit. In 1993-94, the cost of freight
on Australia's external trade carried by sea was approximately $9.9 billion,
with Australian shipping earning approximately $1.6 billion. The net cost
of using foreign shipping in 1993-94 was approximately $2.5 billion, or
15% of Australia's current account deficit in that year. (1) In June 1995
there were approximately 30 Australian ships engaged in international
trade.
Australian shipping faces greater costs than many other international
operators. This results from the higher standard in Australian ships than
those registered under flags of convenience, relatively high wage costs
and relatively high crewing levels. The latter problem has been addressed
through industry reforms, which saw the number of seafarers at the end
of 1993-94 being 233, or 8%, lower than at the end of 1992-93. Australian
crewing levels now are close to international standards.
The shipping industry receives a number of concessions, including:
- International shipping is exempt from many of the restrictive trade
practices prohibited by the Trade Practices Act 1974; To enable
international conference agreements to act;
- The existence of cabotage which restricts most coastal trade to Australian
ships;
- The Tasmanian Freight Equalisation Scheme which provides subsidies
for the carriage of freight to and from Tasmania. Payments under the
scheme totalled $39.5 million in 1994-95; (2)
- Bass Strait passenger subsidies, which totalled $411 624 in 1994-95;
(3)
- An accelerated rate of depreciation for Australian trading ships;
- Grants under the International Shipping (Australian-resident Seafarers)
Grants Act 1995 (the IS Act); and
- Grants under the Ships (Capital Grants) Act 1987 (the Capital
Grants Act);
As the Bill deals with the latter two Acts, they will be dealt with
in more depth.
The IS Act was introduced following negotiations on the proposed sale
of the Australian National Line (ANL). The proposed sale of a substantial
part of ANL was raised during debate on the Appropriation Bills in 1992.
In August 1994 the Government appointed a new board with the task of restructuring
ANL after doubts were raised about the financial viability of ANL. The
sale of ANL was subsequently endorsed by the ALP National Conference.
In September 1994 members of the government, ACTU and maritime unions
met to discuss an industry reform package, which was designed to make
ANL more attractive for sale. As part of the reform package it was announced
that grants would be paid to ships owners and operators to offset the
impact of income tax on seafarers engaged in international trade.
The explanatory memorandum for the Bill introducing the IS Act
estimated that the scheme would cost $19 million for 1995-96 based on
30 ships being engaged in international trade, with approximately one
third of this amount being recouped through tax paid by those receiving
the grants (this is based on the assumption that all the recipients would
be paying the full company tax rate). Each additional ship was estimated
to cost, after tax, $400 000 per year and the cost of the scheme to 30
June 2000 was estimated to be $59 million. The explanatory memorandum
to this Bill estimates that the repeal of the IS Act will save $40
million of the estimated $59 million expenditure, with $19 being paid
for entitlements to 30 June 1996.
The IS Act was opposed by the then Opposition which voted against the
legislation. The repeal of the IS Act was not detailed in the Liberal
and National Parties' transport policy released prior to the 1996 General
Election.
The sale of ANL did not proceed. After various other potential buyers
had dropped out, negotiations continued with the sole remaining potential
buyer, P&O. However, the sale of ANL to P&O was strongly opposed by the
Maritime Union of Australia (MUA) which threatened industrial action unless
P&O gave certain assurances about crewing matters. Such assurances were
not given and the government announced in December that the sale had been
abandoned and that ANL would be restructured instead.
The Capital Grants Act was, again, introduced as part of a shipping
reform program. The Act provides for grants at the rate of 7% of the cost
incurred in relation to registered Australian ships that are:
- purchased as new ships
- purchased as ships less than 5 years old that have not previously
been registered in Australia
- extensively modified ships
The Capital Grants Act was introduced to facilitate the updating
of the Australian shipping fleet to allow crewing to reflect international
standards. It is a condition of all grants that the crewing of the ship
in respect of which a grant is made does not exceed the maximum number
fixed under the Capital Grants Act. The Capital Grants Act as originally
enacted contained a sunset clause (section 9) which provided that grants
would not be payable in respect of activity (ie the purchase or modification
of vessels) that occurred after 30 June 1992. The sunset clause was extended
to 30 June 1997 in 1990.
In relation to the Capital Grants Act, the Department of Transport's
1994-95 Annual Report states:
....grants made under the Ships (Capital Grants) Act 1987
totalling $5 604 544.97 [were made in 1994-95]. The grants were for the
purchase of one new ship (introduced in 1994) and two supplementary payments
in respect of previous grants. This expenditure was down on the 1993-94
grant payments of $22.6 million for two new ships, four supplementary
payments and seven ship modification payments. The lower figure reflects
the relatively low capital value of the one new ship introduced in 1994
and the timing of new ship purchases by shipowners.
As with the repeal of the IS Act, the decision to terminate the Capital
Grants scheme from 1 July 1996 was not detailed in the Liberal and National
Partys' Transport Policy document released prior to the 1996 General Election.
The explanatory memorandum to the Bill estimates that the early termination
of the Capital Grants scheme will save approximately $12 million.
The measures contained in the Bill have been opposed by both industry
and unions. It is reported that BHP and two other Australian shipping
operators (reported to be Shell and CSR) are opposed to the termination
of the Capital Grants scheme due to the additional cost of new ships.
The MUA is reported to be considering industrial action over the measures
contained in the Bill and other proposed changes to shipping and the waterfront.
The ACTU has argued that the repeal of the IS Act will increase costs
for Australian international shipping by 20% and would force Australian
operators to cease international shipping. It has also been reported that
the executive director of the Australian Ship Owners' Association has
condemned the legislation. (4)
Item 1 of Schedule 1 of the Bill will repeal the IS Act.
Item 2 provides that the Act will continue to apply to entitlements
in respect of employment accrued before the date of repeal (ie 1 July
1996 - clause 2).
Item 3 of the Schedule will amend the Capital Grants Act to exclude
activity (ie the purchase or modification of eligible ships) after 30
June 1996 from the grants.
(1) Australian Shipowners Association, Industry Report 1995, p.1.
(2) Department of Transport, 1994-95 Annual Report, p. 49.
(3) Ibid, p. 50.
(4) See: The Sydney Morning Herald, 4 May 1996 and The Australian
Financial Review, 9 May 1996.
Chris Field Ph. 06 277 2439
Bills Digest Service
Parliamentary Research Service
This Digest does not have any official legal status. Other sources should
be consulted to determine whether the Bill has been enacted and, if so,
whether the subsequent Act reflects further amendments.
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Senators and Members and their staff but not with members of the public.
ISSN 1323-9032
© Commonwealth of Australia 1996
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Published by the Department of the Parliamentary Library, 1996.
This page was prepared by the Parliamentary Library, Commonwealth of
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Last updated: 10 May 1996
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