Introduction and conduct of the inquiry
On 22 March 2012, the Senate referred the provisions of the Coastal
Trading (Revitalising Australian Shipping) Bill 2012 and related bills to the
committee for inquiry and report by 19 June 2012. The committee tabled its
report on 15 June 2012. The related bills include the:
- Coastal Trading (Revitalising Australian Shipping) (Consequential
Amendments and Transitional Provisions) Bill 2012;
- Shipping Registration Amendment (Australian International Shipping
Register) Bill 2012;
- Shipping Reform (Tax Incentives) Bill 2012; and
- Tax Laws Amendment (Shipping Reform) Bill 2012.
In his second reading speech, the Hon. Anthony Albanese, MP, Minister
for Infrastructure and Transport, outlined that the bills aim to:
- promote a viable shipping industry that contributes to the broader
- facilitate the long term growth of the Australian shipping industry;
- enhance the efficiency and reliability of the Australian shipping
industry as part of the national transport system; and
- maximise the use of vessels registered in the Australian General
The bills were introduced into the House of Representatives on
22 March 2012 and were also referred to the Senate Standing Committee
on Education, Employment and Workplace Relations (EEWR committee) and the House
of Representatives Standing Committee on Infrastructure and Communications on
the same day.
The EEWR Committee tabled a short report on 24 April 2012 and outlined
that, in the interest of efficiency, its members would participate in this
committee's inquiry process and rely on its report to inform it of the content
and likely effect of the bills.
The House of Representatives committee tabled its report on 24 May 2012.
The bills were passed in the House of Representatives on 31 May 2012 with
a number of amendments.
A number of the amendments were made 'in response to issues raised by
stakeholders through the Parliamentary inquiries'.
The amendments relating to the Coastal Trading (Revitalising Australian
Shipping) Bills 2012 will be discussed in chapters 4 and 5.
The proposed commencement date for the package of bills is 1 July 2012.
Conduct of the inquiry
The committee advertised the inquiry on its website and in The
Australian, and wrote directly to a range of individuals and organisations
inviting written submissions. These included government departments, industry
groups and unions, shipping/maritime organisations and academics. The committee
received 26 submissions, which are listed at Appendix 1.
The committee also held a public hearing in Canberra on 15 May 2012. The
names of the witnesses that appeared are at Appendix 2.
The committee thanks all who contributed to the inquiry.
Policy context and background to the inquiry
The Regulation Impact Statement (RIS) to the package of bills noted that
the 'need to implement a contemporary regulatory and fiscal regime for
Australian shipping is compelling':
There has been a decline in the Australian shipping fleet and
industry over recent decades, as regulatory drift has allowed a concurrent
increase in the number of foreign registered ships and the proportion of
coastal trade they carry has increased. As a consequence investment in
Australian registered shipping has fallen substantially and is predicted to
lead to a situation where there are very few Australian ships within a few
years as the aging fleet is retired from service. The strategic consequences of
a decline in the domestic maritime industry could be significant for a trading
nation such as Australia, particularly for the viability and longevity of its
maritime skills base.
Our regulatory and fiscal frameworks have not kept up with
international trends and market reforms by other shipping nations, and the
rapidly changing nature of transport and freight logistics have not been able
to counteract that decline.
Australian international trade is heavily dependent on shipping, with
99 per cent of international trade volume transported by ship
'reflecting our position as an island trading nation with rapidly growing
exports of coal, gas and iron ore'.
Australian ports manage 10 per cent of the world's sea trade.
It is forecasted that the shipping task through Australian waters is
expected to double by 2029–30. The RIS for the package of bills highlighted the
value of freight carried by international shipping:
The volume of freight carried by international shipping is
predicted to reach more than one billion tonnes in 2012. The value of the
freight attributable to this task is valued at over $10 billion. The vast
majority of freight earnings are repatriated offshore.
The Explanatory Memorandum (EM) to the Coastal Trading (Revitalising
Australian Shipping) Bill 2012 outlines that the increased shipping task will
create a demand for technical maritime skills. It stated that a vibrant
domestic maritime sector is dependent on a consistent supply of these skills
including specialist shore-based roles that draw their skills from the
sea-based labour pool. Moreover, that
there is a global shortage of technical maritime skills and Australia cannot
rely on immigration to fill these positions.
The EM acknowledged that '[a] viable shipping industry is recognised by
a wide range of OECD and developing countries as critical to national economic
prosperity' and further highlighted the need for reform of the Australian
The Australian shipping industry has been in decline over an
extended period. The number of Australian registered ships in the major trading
fleet has dropped from 55 in 1995–96 to 22 in 2010–11. Without action, there
are unlikely to be any Australian registered vessels operating in the major
trades within the next five years. This decline stems from the failure of
Australian shipping policy to keep pace with global changes in the industry, as
well as the regulatory and competitive settings faced by the domestic industry.
Since the early 1990s, many developed countries have
implemented fiscal and policy measures to support their domestic industry.
Access to beneficial taxation and other arrangements further entrenches
operating cost differentials. The inability of Australian vessels to compete on
a level playing field with international operators has led to the current
decline. Indicative of this in 2010–11 approximately 417 ships operated on the
Australia coast under permit, compared to 22 Australian-registered and licensed
In an address to the Maritime Union of Australia Sydney Branch
Conference, the Hon. Anthony Albanese, MP, Minister for Infrastructure and
Transport commented on this decline and acknowledged that 'international
shipping is globalised and highly competitive':
We need to become participants, not just customers. Giving
our exporters opportunities to establish in-house shipping operations or to
enter long term arrangements with Australian shipping companies offers them
stable supply chains.
Shipping operators maximise their competitive edge by
registering with countries that provide competitive policy settings. Under our
plan, Australian businesses will be able to invest in Australian registered
ships using a model which has proved successful in other countries. As a
Government, we are determined to remove the disincentives that have made it
uneconomic to operate Australian ships in a global environment.
Benefits of the reforms
The Department of Infrastructure and Transport indicated that it was
difficult to predict precisely how many companies will respond to the
incentives offered to ship operators in the reforms. It emphasised however that
the reforms provide 'a strong investment platform'. It outlined that the
Australian Shipowners Association (ASA) 'has indicated publicly that there may
be a spike with as much as $4 billion worth of investment flowing from the
The ASA outlined:
What we know right now is that successful passage of this
package will result immediately in an investment of $180 million in new tonnage
in the Bass Strait trade. Those new ships will be more efficient,
technologically advanced and LNG fuelled, which is much cleaner.
Current regulatory environment for
Australian coastal trading
Currently, under Part VI of the Navigation Act 1912 vessels
seeking to access the Australian coast line are required to hold a licence, or
for foreign-flagged vessels: a Single Voyage Permit (SVP) or a Continuous
Voyage Permit (CVP).
Vessels using permits currently perform approximately 30 per cent of
Australia's coastal shipping task.
Vessels holding these permits are required to meet the following conditions:
- there is no suitable licensed ship available for the shipping task; or
- the service carried out by licensed ships is inadequate; and
- it is considered to be desirable and in the public interest that an
unlicensed ship be allowed to undertake that shipping task.
The House of Representatives Committee on Infrastructure, Transport,
Regional Development and Local Government's 2008 report Rebuilding
Australia's Coastal Shipping Industry noted:
Licensed vessels may be registered (flagged) in Australia or
elsewhere but are required to pay Australian rates of pay when operating in the
Australian coasting trade. Permit vessels are not. This has the effect of
making licensed vessels less competitive with international permit vessels;
thereby, decreasing the number of licensed vessels operating on the Australian
However, since the tabling of the report, the rates of pay for both
licensed and permit vessels engaged in coastal trading has been adjusted.
Seagoing Industry Award
On 1 January 2010 new remuneration structures for the Seagoing Industry
Award (SIA) were put in place to account for award modernisation legislation.
Wages on licensed vessels are now determined by Fair Work Australia (FWA) and
registered under the Seagoing Industry Award (SIA) Part A or individually
negotiated Enterprise Bargaining Agreements (EBAs).
As of 1 January 2011, wage rates on foreign flagged vessels operating in
the coastal trade under SVPs or CVPs were no longer set by the International
Transport Federation (ITF) market rate, instead wage rates on these vessels are
in accordance with the Fair Work Act 2010 — these wage rates are known
as SIA Part B rates.
The Department of Education, Employment and Workplace Relation informed
the committee that the government's policy position is 'that all seafarers
working regularly on ships in Australian waters should have the benefit of
Australian workplace relations laws and a fair safety net of employment
A Deloitte Access Economics report, Economic impacts of the proposed
Shipping Reform Package, explained that SIA Part A has more generous
provisions than SIA Part B.
Under the provisions of the shipping reform package general licensed
vessels (Australian-licensed) will continue to pay SIA Part A rates, and
temporary licensed vessels (foreign-registered vessels) will continue to pay
SIA Part B rates.
Consultation and related inquiries
Consultation for the package of legislation began in 2008 with the
inquiry conducted by the House of Representatives Committee on Infrastructure,
Transport, Regional Development and Local Government (transport committee) into
Rebuilding Australia's Coastal Shipping Industry. The transport committee made
14 recommendations which 'articulated a comprehensive policy framework
aimed at revitalising the industry'.
In response to these recommendations:
- a Shipping Policy Advisory Group, comprised of industry and
unions, was established in 2009 to advise the government on how to implement
the Department of Infrastructure and Transport released Reforming
Australia's Shipping–A Discussion Paper for Stakeholder Consultation in
December 2010 — 46 submissions were received;
three industry reference groups on the taxation, regulatory and
workforce elements of the reform were established and met from February – May
2011 to advise on implementation issues of the reform package;
- the Exposure Drafts of the Coastal Trading Bill 2012 and the
Coastal Trading (Consequential Amendments and Transitional Provisions) Bill
2012 were released on 19 December 2011 — 20 submissions were received;
the Exposure Drafts for the full package of legislation were
released on 20 February 2012 — 27 written submissions were received; and
- an industry roundtable was held on 28 February 2012, ahead of the
close of public consultation on 5 March 2012, to allow industry to provide
feedback on policy issues arising from the bills — 60 industry representatives
Structure of this report
Chapter 1 of this report has provided an introduction and background to
Chapter 2 will give a broad overview of the package of bills and the
proposed new licensing regime.
Chapter 3 will consider the economic impact of the bills on 'downstream
Chapters 4 and 5 will examine submitters' concerns with the proposed
licensing regime, in particular the provisions on temporary licences.
Chapter 6 will discuss implementation and scrutiny of the proposed
reforms; the compact between industry and unions; and offer some concluding
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