3.1
The road transport industry is a competitive industry where the clients at the top of the chain—large corporations such as retailers, mining companies and fuel companies which subcontract work to smaller owner-operators—are able to control pricing and exert downward pressure on the smaller operators. As demonstrated in Chapter 2, much of the trucking industry consists of small businesses that struggle to maintain financial viability and must find savings, work longer hours or sacrifice profit to survive.
3.2
This chapter considers unsustainable commercial practices that manifest as unliveable rates of pay and substandard conditions. The manifestations of such pressures can be seen in the rise of independent contractors and gig economy workers. This chapter also considers the abolished RSRT, followed by discussions about the adequacy of road transport award rates, unpaid wages and the enforcement of awards. Finally, this chapter considers cost recovery measures, operating costs and insolvencies across the road transport industry.
Price or safety?
3.3
The ‘race to the bottom’ on price, and consequent pressure on drivers creates the environment for unsafe work practices across the sector. The situation is enabled by inadequate minimum standards and the absence of a designated and functional enforcement body for the sector. These inadequacies result in unsustainable commercial practices across the industry, and ultimately high rates of insolvencies. Ensuring road transport drivers receive safe rates of pay is one of the primary solutions to the problems that plague the industry, however, this should not 'come at the expense of safety, minimum standards, fair working conditions’..
3.4
Industry participants emphasised the need for minimum standards. Mr Peter Anderson of the Victorian Transport Association, told the committee that the industry could not progress while it continued to undercut its competitors on price rather than compete on service, and argued for a minimum price point:
… what we don't have is a minimum floor. If they knew there was a minimum floor they couldn't go under, for payment to individuals, subcontractors, that would mean they would have to reconfigure how they were going to put their proposal forward to gain new work and create a differential.
3.5
Toll Group, the largest operator in the road freight sector in Australia, noted the difficulty in putting the industry on a sustainable footing, given the variety of views across the industry:
The industry is represented by a plethora of state based and national advocacy groups, many advocating for divergent views on policy reform. This combined with multiple overlapping state and federal based regulations has contributed to a very low appetite for reform in Australia.
3.6
Furthermore, Toll Group asserted that there has been a 'genuine fear of enacting change that will increase cost' and impact small businesses, possibly leading to business collapses and losses of jobs. Such fears in part led to the abolition of the Road Safety Remuneration Tribunal (RSRT), which was established in 2012 to protect the pay and conditions of road transport drivers.
3.7
The content of this chapter highlights that the absence of an appropriate and functional independent regulatory body has consequences. The role, once undertaken by the RSRT, provides regulatory protection for all commercial operators against the rise of low and incentive-based rates, which create the conditions for unsafe work practices to occur.
3.8
According to the Transport Workers’ Union of Australia (TWU), commercial practices in the gig economy illustrate the lack of regulatory oversight, and are:
…dangerously compounding the current safety crisis with an unforeseen willingness to forgo profits in order to undercut traditional transport operators and further erode already unsustainable industry standards.
Independent contractors
3.9
The road transport industry contains large numbers of workers such as owner operators and gig economy workers who conduct business outside the system of award wages and entitlements. While workers considered to be employees have minimum conditions and entitlements, workers considered independent contractors negotiate their own fees and working arrangements. Commonwealth and state legislation which provides for contractors and on-demand road transport workers is considered below.
Commonwealth legislation
3.10
Independent contractors are offered some protections under federal legislation by the Fair Work Act 2009 and the Independent Contractors Act 2006. The Fair Work Act contains provisions aimed at employers who misrepresent an employment relationship as an independent contracting arrangement (s357), dismiss or threaten to dismiss an employee for the purpose of engaging them as an independent contractor (s358) or make a knowingly false statement in order to persuade or influence an employee to become an independent contractor (s359).
3.11
The Independent Contractors Act sets up a national unfair contracts scheme where independent contractors can ask a court to set aside a contract if it is harsh or unfair.
State legislation
3.12
There are no specific schemes for the protection of contractor drivers in Queensland, South Australia, the Australian Capital Territory or the Northern Territory. Schemes for the other states are described below.
Victoria
3.13
In its submission, the Victorian Government outlined changes it had made to the Victorian Owner Drivers and Forestry Contractors Act 2005 (ODFC Act) to improve conditions for owner drivers with a maximum of three vehicles who drive one of the vehicles:
A key feature of the ODFC Act is the publication of annual rates and cost schedules for owner drivers. The rates and cost schedules contain base and casual hourly rates that would typically apply to owner drivers if they were performing work as an employee. They do not mandate rates but provide owner drivers and hirers with information about typical operating costs including: vehicle operating costs and costs of registration, finance, administration, insurance and self-funding of superannuation.
3.14
The Victorian Government further explained that a hirer who intends to engage an owner driver for at least 30 days must provide the owner driver with a copy of the applicable rates and cost schedule and a copy of an information booklet published by the Victorian Government that sets out the legislation and practical information on operating a small business. This obligation also extends to 'persons who provide an online platform to engage drivers'. The application of chain of responsibility legislation to online freight platforms under the national law is discussed in chapter 4.
3.15
The ODFC Act provides a framework for resolving disputes that, according to the Victorian Government, is 'fast, low cost and binding'. There is also a code of practice to govern the relationship between owner drivers and hirers.
3.16
In the view of the New South Wales Business Chamber and Australian Business Industrial, the ODFC Act:
… in providing for the publication of a code of practice, which outlines the behavioural expectations applicable to parties when bargaining for new contracts is usefully informative without being unduly restrictive or perverting reasonable commercial dealings.
3.17
The ODFC Act also sets up the Victorian Transport Industry Council—containing representatives from industry, employee associations and government—to advise on the rates and cost schedules, the code of practice and information booklet.
3.18
While these reforms have strengthened protections for owner drivers in Victoria, the Victorian Government noted that 'as Victoria has referred the majority of its industrial relations powers to the Commonwealth, the Victorian Government is limited in the actions it can take to set minimum working conditions'.
3.19
The committee also heard evidence that there was a lack of enforcement, holes in dispute resolution, and a lack of bargaining rights existing through the supply chain.
New South Wales
3.20
Mr Hugh McMaster, secretary/treasurer of the Australian Road Transport Industrial Organisation (ARTIO), at his appearance before the committee explained that in New South Wales, chapter 6 of the Industrial Relations Act 1996 provides for owner drivers, called contract carriers 'to make application to have contract determinations as industrial instruments'. This allowed owner drivers to 'negotiate terms and conditions with the union, in a traditional Australian conciliation and arbitration framework'.
3.21
The ARTIO added that contract determinations have been made to cover interstate drivers as well as other industry sectors including 'general cartage, courier and taxi work, waste work, concrete agitating, excavating materials and quarried materials'.
3.22
Mr Richard Olsen of the TWU of NSW clarified that the legislation allows for contract agreements between principal contractors and contract carriers who work exclusively for them, similar to an enterprise agreement. The agreements set enforceable minimum standards and conditions and rates are subject to review and adjustment. As at February 2021, a revision of the determinations for courier and taxi truck contracts and general carrier contracts was in progress.
Western Australia
3.23
The Western Australian owner driver legislation, the Owner-Drivers (Contracts and Disputes) Act 2007, sets the rights and responsibilities for hirers and owner drivers. A code of conduct specifies recommended rates for heavy vehicle owner drivers and obliges hirers to provide owner drivers with information about the recommended rates to drivers they employ. Owner drivers are paid within 30 days of submitting a payment claim. Drivers and hirers can apply to a tribunal for dispute resolution.
Owner drivers
3.24
The road transport industry predominantly consists of a large number of small owner driver businesses, many of whom operate only one truck.
3.25
A variety of views were presented to the committee on legislative provisions for owner drivers. NatRoad emphasised that its subcontractor members do not require 'the paternalistic protection of labour laws':
They want to be treated as independent operators of commercial businesses and be free to negotiate their own terms of trade. They hold fiercely to that outlook. Sub-contractors should be regulated by commercial laws rather than by laws which are built on an industrial relations perspective.
3.26
Possible commercial law solutions to improving the conditions of independent operators proposed by NatRoad included strengthening the unfair contract terms provisions for small businesses in the Australian Consumer Law and amending the Independent Contractors Act to make the proscription on the undercutting of wages clearer:
This prohibition would have to exclude payments where the independent contractor/owner driver clearly made a commercial decision to accept a lesser rate than the Award prescription because they would otherwise be travelling empty or they were involved with a backload. Hence, informed consent to such an arrangement should override any strengthened provision. That informed consent must have been reduced to writing.
3.27
The Australian Livestock and Rural Transporters Association (ALRTA) also feared the loss of competitive advantage for owner drivers who operate as independent contractors if they were to be subject to awards and industrial instruments. Mandating minimum rates, ALRTA argued, would result in the market favouring larger companies with employee drivers over owner drivers. ALRTA stressed the benefits of independent contractual arrangements including 'secure work, more control and better income levels than could be achieved as an employee'. It pointed to section 309(4) of the NSW Industrial Relations Act 1996 which excludes certain primary producer transport contracts from laws governing owner drivers.
3.28
The secretary of the Livestock and Rural Transporters' Association of Victoria, Mr Graeme Howell, raised the difficulty of setting a regime of minimum rates in the rural transport sector where the vehicles were highly specialised, back loads rare and work was often based on word-of-mouth, at short notice and dealing directly with farmers or abattoirs.
3.29
Other submitters and witnesses expressed concerns to the committee that owner drivers had been insufficiently protected since the abolition of the RSRT in 2016 removed their access to enforceable minimum rates and conditions. In its submission to the committee, the Victorian Government observed that owner drivers frequently operate at the bottom of the supply chain:
… owner drivers [are] a vulnerable group who often face low rates of pay, long hours of work, poor business skills, information imbalances and inequitable bargaining positions. High levels of competition in the road transport industry mean that the major players can set the rate they are willing to pay sub-contractors, forcing owner drivers to accept lower margins or lose work.
3.30
Mr Arthur Tzaneros, managing director of ACFS Port Logistics, told the committee that he ran a fleet of 300 trucks and employed 1200 permanent workers. With his own employees on enterprise agreements at 30 per cent above the award wage, he expressed the view that the ability to employ subcontractors with their own trucks and trailers on non-award rates was a 'threat to our broader business' given that he could pay them 'less than what we actually pay our company driver purely in wages'. Mr Tzaneros speculated that in order to earn a 'real wage', subcontractors would need to acquire cheap assets, not maintain their fleets and forego rest breaks. Mr Tzaneros stated:
You cannot have someone driving around earning less than the modern award when it comes down to their pure wage after all costs. They have to earn the modern award. Anything below that is dangerous to the individual, dangerous to the sector and dangerous to the economy.
3.31
Ms Michelle Harwood, executive director of the Tasmanian Transport Association, observed that in Tasmania, the transport and road freight sectors were the industries with the greatest number of new business entrants but that the three-year business survival rate was less than 50 per cent:
… a lot of the time they're people who invest in a truck and offer their services as a subcontractor, but they are generally so busy keeping wheels turning so that they've got some income coming in that they are pushed and really struggle to understand the full operating environment of the transport industry, and possibly the business operations skills that they need … So the new people are going out of business within three years, but in that year or couple of years they've been able to offer their services at a lower rate, which ultimately hasn't been sustainable and has done damage to the structure of the other operators in the industry.
3.32
Dr Michael Rawling informed the committee that 'the transport, postal and warehousing industry was one of the top industries for the highest number of business insolvencies in 2018'. This in turn, he argued, can lead to drivers engaging in hazardous practices resulting in poor safety outcomes:
Because owner-drivers are paid per kilometre or per load, in some circumstances, owner-drivers may have an incentive to drive faster and longer in order to earn an adequate wage. This can be hazardous and can lead to death and other poor health and safety outcomes in the industry. So this is the nub of what the literature calls the link between the pay and safety.
3.33
NatRoad submitted that the lack of training and entry barriers for new operatives was 'hindering the industry's drive towards increased safety objectives' and 'allowing an oversupply of unskilled operators who are not adept at proper costing'.
3.34
Ms Alejandra Cruz Ross, a transport specialist with the International Labour Office, a secretariat of the International Labour Organization (ILO), told the committee that the recently updated ILO Guidelines on the promotion of decent work and road safety in the transport sector (ILO Guidelines) 'do not make a distinction between employed drivers and subcontracted drivers, owner-drivers or informal drivers'. By referring to 'commercial motor vehicle drivers', the guidelines 'seek to help with the uncomfortable truth that, in some cases, large industry players might have robust road safety programs and measures for their own few employees that happen to drive while having no road safety programs or measures for all of their subcontracted transport operations'.
3.35
The ILO Guidelines stipulate the need for sustainable payments for non-wage-earning drivers through national regulations that ensure:
…non-wage earning commercial motor vehicle (CMV) driver contracts are transparent and that invoices or claims for payment are paid within 30 days.
3.36
Further, the ILO Guidelines provide that governments, in consultation with social partners and road transport chain parties:
…establish mechanisms to encourage predictable cost recovery for non-wage-earning CWV drivers by making provisions to support:
(a)
recovery of fixed costs — typical fixed or annual business costs that a business must pay each year regardless of how many kilometres a vehicle travels;
(b)
recovery of variable costs — typical variable business costs, i.e. costs (such as fuel and tyres) that vary with how many kilometres are travelled;
(c)
payment for personal labour at the national minimum-wage rate or higher;
(d)
return on investment;
(e)
remuneration for both driving and subsidiary non-driving work activities.
Sham contractors
3.37
The committee heard that some operators use a 'sham contracting' business model to avoid paying full entitlements to employees. According to the Fair Work Ombudsman, sham contracting occurs:
… when a person working as an employee is told they're an independent contractor when they're not. These types of arrangements can be set up by employers who are seeking to avoid responsibility for paying legal entitlements to employees, such as paid leave and superannuation.
3.38
Mrs Jan Cooper, chief executive officer of the Livestock and Rural Transport Association of Western Australia (LRTAWA), further detailed how the lowering of safety compliance standards and undercutting of pay and conditions in the industry could frequently be attributable to industry entrants with poor regulatory knowledge and business skills. She argued that:
Buying a truck and getting an ABN doesn't necessarily make you a business owner, and I think there are operators in this category to which the contractual arrangements are more akin to an employer–employee arrangement.
3.39
Mrs Cooper concluded that such arrangements 'could quite properly be dealt with by the IR system' and should be scrutinised because 'a closer examination of those arrangements might uncover some of the causes of low rates in the industry'.
3.40
The LRTAWA submitted that a public assessment of independent contracting arrangements should be undertaken 'to analyse the prevalence of genuine contracts for service (contractor) as opposed to contracts of service (employee)'. LRTAWA noted that the results of this analysis 'could lead to further reform in dealing with independent contracts through corporate law and employees through industrial relations law'.
3.41
The committee was told by Mr McMaster of ARTIO that in New South Wales, having an ABN was increasingly becoming a condition of work within the gig economy, with Mr McMaster providing the following example:
On the weekend in the paper, Hungry Panda were saying that their gig workers have to have an ABN if they want to continue to work for them and that their workers must work for other platform companies. That's because Hungry Panda don't want any grey area in terms of a court saying that someone's an employee or a principal contractor … That says a company wants someone to be a contractor; they want them to be outside any legislation, therefore they will be working at minimum conditions and the race to the bottom will become more widespread.
3.42
This observation was reinforced by the lead official of the Transport Workers' Union of New South Wales, Mr Robert Rasmussen, who described developments where concreting companies, including some working on government projects, are engaging outside hirer vehicles known as 'white trucks' to allow for lower pay and conditions. The workers who drive these vehicles, some of which he alleges are on student visas, are engaged on ABNs and paid a weekly rate to 'ensure that the drivers have to take care of their own superannuation payments'. Mr Rasmussen added that even when the drivers are engaged as employees, conditions are poor:
… they get paid a flat hourly rate, so there are no shift loadings for early morning starts or late starts. If there are any damages or issues with concrete where loads get sent back, the loads get charged back to the drivers or the damages are paid for by the drivers out of their own pockets.
3.43
Furthermore, Mr Rasmussen reported that white truck operators are utilising phoenixing practices and 'engaging their drivers under a new entity every year' to absolve themselves of liability of the previous year. Mr Rasmussen stated that these practices were widespread:
I wish I could mention that this is only in the concrete agitator industry; however, through the excavator materials industry, the tip-truck section of the Transport Workers Union, it's rife as well. At every job we go to we seem to uncover underpayments, late payments and severe issues of sub-arrangements, where nobody within that supply chain is getting paid correctly. These are all on government projects.
3.44
Mr John Berger informed the committee that once the TWU in Victoria has been notified of a potential sham contracting arrangement, it had the option to carry out an internal investigation, report it to the Victorian Inspectorate or report it to the Fair Work Ombudsman.
3.45
Representatives from the Fair Work Ombudsman told the committee that it had established a sham contracting unit and was targeting four sectors for proactive investigations, including road transport. Since 1 July 2019 the sham contracting unit had completed 548 disputes (of which about 18 per cent related to road transport) and recovered $423 000 for workers in all industries. It also had an anonymous reporting tool for workers who were not willing to come forward.
3.46
Ms Michelle Allen, acting assistant commissioner with the Australian Taxation Office (ATO), reported that when the ATO identified 'businesses that are deliberately misclassifying their workers to get an unfair advantage', it could take actions including the 'imposition of tax and superannuation penalties'.
3.47
Ms Allen explained that there was no federal definition of 'employee'. In determining whether somebody was contracted, the ATO considered a range of factors including the person's ability to subcontract or delegate, whether they were contracted to provide a result (rather than paid by the hour), whether tools or equipment were provided for them, who bore the commercial or legal risk, who had control over how the work was carried out and whether the worker could operate their business independently, including accepting other work.
3.48
Ms Allen added that when a worker lodged an 'employee notification' to alert the ATO that they had been incorrectly classified as a contractor, or had not received the correct superannuation, the ATO investigated and responded to every case.
Gig economy workers
3.49
Gig economy workers provide services such as ride sharing, deliveries or personal services to customers for a fee via a digital platform. Like owner drivers, on-demand workers operate outside award pay and entitlements including paid sick leave and superannuation.
3.50
The committee was informed that Australian Taxation Office figures suggested that between August 2015 and June 2017, 100 000 individuals received a payment for a ride-sharing service. A Victorian Government national survey found that '7.1 per cent of respondents currently work in the gig economy and that the main type of work is in transport and food delivery (18.6 per cent of platform workers)'.
3.51
The operation of the new platforms was explained by ARTIO in its submission:
In the road freight industry, platforms have emerged in relation to areas such as food deliveries performed by companies like Deliveroo and Foodora. They operate in a similar manner to loading agents in long distance road transport where a driver, usually an owner-driver, may rely on regular or irregular load/s for a return journey. These platforms are distinct from courier businesses which usually involve tied principal contractors/sub-contractor relationships, vehicles and bicycles painted in the principal contractor's colours and more structured and secure work.
3.52
A more recent development has been the entry of online platforms such as Uber Freight and Amazon Flex into the on-demand freight business. Mr Simon O'Hara, chief executive officer of Road Freight NSW, noted some implications of the transport industry needing to compete with certain digital platforms which run at a loss:
You might get cheaper deliveries, but there are a whole lot of problems that run off that. From our perspective, we want to make sure that Australian businesses continue to make money and that it's sustainable, notwithstanding that it's a two per cent to three per cent profit margin. We don't want to see that eroded. If you start cutting that out then you will start seeing Australian businesses affected, and the only winners will be multinationals.
3.53
Mr Biagini of the Queensland TWU expressed the fear of many that 'what Uber has done to the taxi industry, Amazon is going to do to the transport industry'.
3.54
A number of inquiry participants outlined shortcomings in the pay and conditions of gig economy workers. Dr Rawling reported on a major survey of 1100 rideshare drivers in 2018 which found that drivers were earning 'well below $16 per hour before costs' and that many could not afford to save for superannuation or leave. The TWU warned that Australia’s transport sector was:
…particularly vulnerable to such market entrants and the consequences for the transport industry will be tragic should these companies be left to further erode conditions.
3.55
Mr Malcolm Mackenzie, a rideshare driver, told the committee that Sydney had the highest rates, at around $25 to $35 per hour, but that from this wage drivers needed to cover 'vehicle operating costs, GST, petrol [and] maintenance'.
3.56
The TWU highlighted the need for better work conditions, reporting on 2018 survey results in its submission that found that 10 per cent of rideshare drivers had been physically assaulted and six per cent sexually assaulted. One in four food couriers had been in an accident. National secretary Mr Michael Kaine referred to the deaths of five food delivery riders in 2020 and that work safety investigations found 'some of them weren't wearing approved safety helmets and weren't given proper training, and none had the right to workers compensation'.
3.57
In its submission, ARTIO asked 'if the employees of traditional transport operators with OH&S systems and regimes in place are being replaced by "gig workers" receiving jobs from a particular platform, then the question of driving hours, fatigue management and related OH&S training becomes a bigger concern for society'.
3.58
In the view of the ARTIO, online platforms where work consists of 'a series of one-off transactions', bring about a 'fundamental reorganisation of work and relationships between those who provide that opportunity and those who undertake the work'. In particular, 'the scope and extent of regulatory obligations imposed on platform owners, including those in workplace law, is substantially less than that of transport operators'.
3.59
According to the TWU, the 'poor remuneration and safety practices of this type of work is now well documented, prompting several jurisdictions around the world to regulate these emerging sectors'. Their submission cited Uber recently admitting to a NSW Parliamentary inquiry into the gig economy that it was ‘not possible’ for the company ‘to ensure all of its workers were using safety approved equipment’.
3.60
Similarly, the submission referenced a series of 2020 audits of Amazon Flex’s yards which reported that numerous drivers were:
earning below $10 to $15 per hour on average after costs;
regularly overloading vehicles (commonly personal vehicles in use) and subsequently obstructing driver’s vision;
delivering packages that require two or more people to carry and transport;
engaging in dangerous road practices driven by pressure to complete a unrealistic number of deliveries in short windows; and
insufficiently trained, with driver training and limited to a short 2-minute video (covering safety, manual handling and use of the company’s app).
3.61
A number of witnesses reported on efforts at state level to improve conditions for gig economy workers. For example, Mr Biagini reported that the Queensland Government had put in place a code of practice. He noted that it was 'voluntary at the moment, but at least it's a start'.
3.62
In Victoria, changes to the definition of a 'freight broker' in the Owner Drivers and Forestry Contractors Act 2005 gave gig economy workers access to dispute resolution and payments within 30 days. Mr Peter Anderson remarked that the amendments were 'not going to really hold up as we go forward, but it's the first step'. An inquiry into the on-demand workforce commissioned by the Victorian Government and conducted by former Fair Work Ombudsman Natalie James recommended changes to Commonwealth and Victorian legislation to ensure protections and consistency in the employment status of the gig economy workforce.
3.63
Mr Gavin Webb, chief legal officer of the Transport Workers' Union of New South Wales contended that in New South Wales:
Currently there's no regulation at all of those rideshare drivers or those food delivery drivers. It's just a free market basically and they charge them whatever they want, pay them whatever they want.
3.64
Mr McMaster argued that 'gig workers should get reasonable reward for their labour, equivalent to if they were employed under an award' and access to 'a universal workers compensation scheme'.
3.65
Dr Rawling maintained that these workers should not be viewed or regulated as a separate part of the economy:
…the service being delivered by these gig workers and the labour performed by them is almost identical to the parallel more traditional work arrangements in the road transport industry. What I'm really saying here is that Uber drivers deliver the same service as a conventional cab driver et cetera, and freight drivers deliver the same service as those engaged by more traditional arrangements for delivering freight. So really it's false to look at this work as being in a separate gig economy.
Road Safety Remuneration Tribunal
3.66
The RSRT was a national workplace relations tribunal that set pay and conditions for road transport drivers between 2012 and 2016. The tribunal was created after a 2008 National Transport Commission report linked driver safety with driver payment levels and recommended a national scheme to set minimum safe rates for employee and owner drivers.
3.67
The RSRT made two orders during its operation. A 2014 road transport order for distribution and long distance operations set out requirements on employers, hirers and other participants in the supply chain including contract obligations, safe driving plans, training and dispute resolution. It also required that invoices be paid within 30 days.
3.68
A 2016 payments order established a national minimum pay rate and unpaid leave for contractor drivers. This order proved controversial when owner drivers argued that the payments order 'threatened the livelihood of small operators by pricing them out of the market and enforcing much higher rates of pay'.
3.69
In April 2016 the RSRT was abolished and its powers transferred to the National Heavy Vehicle Regulator.
3.70
The committee sought clarification from the Australian Trucking Association (ATA) about its involvement in industrial relations matters and its position on the abolishment of the RSRT. Its CEO, Mr Andrew McKellar defended the ATA and highlighted that its members did not see the benefit in returning to the RSRT framework. Mr McKellar noted that ATA members:
… believe that issue was dealt with by the parliament, that the system that was put in place was not working effectively and did not work according to its objectives. The parliament took a decision and abolished the RSRT. I think that's not something that should be relitigated. We think that debate is done. When it comes to safety, one of the things we would say is that we should look at: Where is the greatest return? Where is it that we will get the maximum benefit? Where should we put our focus in terms of policy outcomes, legislative, regulatory outcomes, that will deliver the greatest dividend in terms of lives saved and injuries prevented? We would say that reprosecuting that argument is not where that's going to go. There are many much higher priorities in terms of safety where we will get a much greater dividend. So my expectation is that, if we were to go back and ask our members on that, and we certainly will, in the context of the forthcoming federal election, I'm not aware that any of the major parties are advocating that we put the truck into reverse on that issue.
3.71
The committee pointed out that current and former ATA members had communicated a different view, and did not share ATA’s position on this matter as demonstrated be the below exchange:
CHAIR: Then may I ask you this question. Most of your membership has presented in front of this committee so far, and we understand that TWU are no longer part of the membership. I know that. When I heard from the Queensland Trucking Association in Queensland, I found that that's not their view. Mr McKinley, have you read the transcripts of the inquiry so far?
Mr McKinley: I'm familiar with the evidence that's been presented, yes.
CHAIR: Well, pull me up if I get something wrong and I will correct the record. So QTA aren't saying that. QTA are saying that something has to be done because of the squeeze at the top of the supply chain. Don't quote me word for word, because there have been that many times about this in the inquiry.
Mr McKinley: Of course.
CHAIR: [Road Freight] New South Wales, absolutely, have the same position. They don't share your position. Pull me up if I'm wrong. Western Roads Federation—what a presentation that was from Cam Dumesny! He doesn't support your position. Am I correct still, there, Mr McKinley?
Mr McKinley: That's what the evidence—
CHAIR: When I spoke with Mr Shearer and Ms Middleton of [South Australian Road Transport Association] —and please help me out, because my memory is a bit shady—they weren't opposed to something being done correctly, something done properly with consultation. Did I get that bit right?
Mr McKinley: That sounds right.
CHAIR: On Friday I will be talking to the [Tasmanian Transport Association], so I can't speak for Michelle and her team down there. Last week in Victoria with the [Victorian Transport Association] and Mr Anderson, it was one of the most powerful presentations, again, calling out that something needs to be done. I haven't got that one wrong either, have I?
Mr McKinley: No, and there were many aspects of Mr Anderson's presentation that we would completely agree with.
CHAIR: Sure. I know that your membership is vast and varied, and I get all that, and I'll have a chance to talk to the livestockies. I was speaking to all the livestockies in their states. The livestockies have clearly said that they don't want anything. They're on the same team, the same argument, as you, although they do realise there are some challenges. I think the Western Australians were saying it would be nice to be able to get our rates. They'll speak for themselves later today. NatRoad will be appearing today, and I'll ask the same question of them. When you say your membership is not supportive of going down that path, who are you talking about?
3.72
In response, the ATA clarified that it was putting forward the position of its general council and that:
… all of those members [referenced] have a voting seat in the general council. We know what happened with the legislation previously, and that's where the membership was. At no point in my short tenure has anyone come to me and said, 'We need to change this; we need to go back.'
3.73
The ATA concluded its remarks by stating that its position and the views of its members on policy matters are developed in consultation prior to a federal election.
Road transport industry awards
3.74
Minimum pay and conditions for the road transport industry are determined under the Road Transport and Distribution Award 2020 (the Distribution Award) and the Road Transport (Long Distance Operations) Award 2020 (the Long Distance Award). Both of these awards are governed by the Fair Work Commission.
3.75
The Long Distance Award covers interstate freight operations where the distance travelled exceeds 200 kilometres and all journeys over 500 kilometres. Road transport and distribution industry employers and employees not engaged in long distance or interstate operations are covered by the Distribution Award. The Distribution Award also excludes employers and employees covered by the Mining Industry Award 2020, Transport (Cash in Transit) Award 2020 and the Waste Management Award 2020.
3.76
Both the Distribution Award and Long Distance Award contain clauses on minimum rates of pay and minimum work conditions including hours of work, breaks, overtime, leave provisions, termination of employment and dispute resolution. A new pay rate schedule came into effect on 1 November 2020.
3.77
Under the Distribution Award, hourly pay rates range from $21.01 for a grade 1 transport worker to $24.74 for a grade 10. The grades used in the transport awards are largely based on the vehicle the driver is operating. The minimum rate for a semitrailer driver is $22.74 per hour.
3.78
Under the Long Distance Award, an employer of an employee engaged in a long distance operation must nominate whether the employee is to be paid by cents per kilometre or an hourly rate, with cents per kilometre the default rate.
3.79
Minimum rates of pay for full-time workers and the hourly driving rate under the Long Distance Award are listed in table 3.1. Casual employees must be paid an additional 15 per cent of the minimum hourly driving rate.
3.80
An employee engaged on a long distance operation using the kilometre driving method is paid for the driving component of a particular journey by multiplying the minimum cents per kilometre for the relevant grade of vehicle (see table 3.2), by the number of kilometres travelled. Casual employees must be paid an additional 15 per cent on the cents per kilometre rates.
3.81
Clause 16.4(b) of the Long Distance Award contains a schedule of agreed distances for a number of major capital city routes.
3.82
Where the employer has an accredited fatigue management plan in place, the hourly rate may be used to calculate a trip rate for any journey by multiplying the hourly rate by the number of driving hours specified in the fatigue management plan for that journey. Where an employee is engaged on loading or unloading duties, that employee must be paid for such duties at an hourly rate.
Table 3.1: Long Distance Award-minimum weekly and hourly rates of pay
|
|
|
|
|
3
|
$828.40
|
$32.31
|
|
4
|
$843.70
|
$32.90
|
|
5
|
$854.30
|
$33.32
|
|
6
|
$864.10
|
$33.70
|
|
7
|
$876.70
|
$34.19
|
|
8*
|
$902.10
|
$35.18
|
|
9**
|
$917.30
|
$35.77
|
|
10+
|
$940.00
|
$36.66
|
Source: Compiled from Road Transport (Long Distance Operations) Award 2020, clauses 16.1(a) and 16.5(b). *includes B-doubles with GCM 53.4 tonnes or less ** includes B-doubles with GCM over 53.4 tonnes + Driver of road train or triple articulated vehicle exceeding 94 tonnes GCM
Table 3.2: Long Distance Award - rates of pay - kilometre driving method
|
|
|
|
3
|
43.08
|
|
4
|
43.87
|
|
5
|
44.42
|
|
6
|
44.93
|
|
7*
|
45.59
|
|
8**
|
46.91
|
|
9+
|
47.70
|
|
10
|
48.88
|
Source: Road Transport (Long Distance Operations) Award 2020, clause 16.4(a). * includes B-doubles with GCM 53.4 tonnes or less ** includes B-doubles with GCM over 53.4 tonnes + Driver of road train or triple articulated vehicle exceeding 94 tonnes GCM
Adequacy of award rates of pay
3.83
The committee heard that there was a wide disparity in rates offered to drivers within the industry.
3.84
A number of companies maintained that they offered above award rates in enterprise agreements. Mr Rodney McIntosh, human resources and compliance manager of O'Brien Transport Services, stated that the company had to offer above award rates to hold onto drivers. It offered an enterprise agreement for line haul drivers and an hourly rate for local drivers.
3.85
In the estimation of Mr John Berger, secretary of the Victoria/Tasmania Branch of the TWU, there were 'hundreds' of enterprise bargaining agreements operating in Victoria alone.
3.86
Mr Peter Biagini, branch secretary of the Queensland Transport Workers' Union, maintained that the award is not a living wage:
Lots of our major transport companies over many years have been doing enterprise agreements, and they pay a living wage now. A living wage, compared to the award, is approximately 30 per cent, so the difference is a semitrailer driver getting $28 an hour compared to the award's $21. That's quite a difference, so companies that pay the award have got a real advantage.
3.87
According to Mr Biagini, many of the companies that pay the award rates offer their drivers long hours of up to 60 or 70 hours a week, which the drivers need to pay their bills. This has an impact on their mental health and work safety.
3.88
Dr Michael Rawling from the Faculty of Law at the University of Technology Sydney asserted that in the last 30 years 'there's been a steady decline in pay rates in real terms' for contract drivers and that these low rates 'place downward pressure on the pay of the employee-drivers as well'.
3.89
Long-distance truck driver Mr Kelvin Cootes maintained that rates are not keeping up with changes in the vehicle fleet and the increased responsibility on drivers, and provided the following example:
I have been currently driving from Perth to Melbourne with 36 metres of truck, which is two trailers at 78 tonnes. We have just gone to these new what they call the BAB trains, which are 42½ metres and we have 99.5 tonne in weight, which we take into Adelaide, and shortly, they tell me, we'll be going into Melbourne with these long units … and we are going to be paid no extra—absolutely nothing to have these huge rigs on the road that we're responsible for. I find it quite disappointing. Wages, from a van driver to a truck driver to a road train driver, are minimal … They're probably only looking at 20 or 30 cents an hour extra for driving these big rigs.
Unpaid wages
3.90
The committee heard that workers being paid under-award rates and not receiving entitlements was 'rampant' in the industry.
3.91
Truck driver Mr Graeme Walker tabled payslips of a company that did not pay casual workers the percentage loading specified in the Long Distance Award or provide permanent drivers with rostered days off. He also reported changes to workplace agreements on the run, where employees were penalised if they did not load vehicles to the maximum weight.
3.92
Drivers' advocate Mr Trevor Warner reported that some employers rolled entitlements into the cents per kilometre rate instead of making them additional to pay rates, as stated by the award. In one instance that he referred to the Fair Work Ombudsman, the pay rate through an enterprise bargaining agreement was one cent per kilometre above the award but included 'all load/unloading, travel allowance, [rostered days off] and Public Holidays'. Mr Warner added:
To add insult to injury, the employer claimed [it] also paid $90 per night for travel allowance. This allowance was then deducted from the Gross Weekly Wage to reduce the withholding tax and then added back on after the tax was calculated. We estimated with each long distance truck driver, the Employer was saving some $16,000 per year in wages, PAYG and other obligations. The FWO reported back that “whilst the EBA was morally bankrupt, it was totally legal until an employee terminated it”
3.93
Mr Warner outlined the broader economic effects of unpaid wages:
These unpaid wages impact taxation, payroll taxes, workers compensation programs and the less money into the broader economy in general. Plus it applies operating pressures to companies wanting to compete fairly in the marketplace. Undercutting of freight rates can be directly linked to wage theft.
3.94
Other submitters pointed to unpaid work that is not covered by the awards including washing trucks, refuelling and conducting maintenance checks and repairs.
3.95
The loss of income experienced by drivers brought about by the poor maintenance of their employers' vehicles was also raised. Mr Andrew Bishop explained that with truck companies operating on tight margins, maintenance was allowed to slip. Yet when the truck finally went off the road with a major problem, drivers were not earning an income while they waited for it to be fixed.
3.96
Unpaid wages stemming from the loading and unloading of trucks and the cents per kilometre rate in the Long Distance Award are considered in more detail in the sections below.
Loading and unloading
3.97
The area where the most concerns were expressed over unpaid wages was the time spent queuing for loads and loading and unloading vehicles.
3.98
Loading and unloading rates are covered in clause 16.6 of the Long Distance Award which states that where 'an employee is engaged on loading or unloading duties, that employee must be paid for such duties at an hourly rate'. The hourly rate can be calculated according to a formula (dividing the weekly award rate by 40 and multiplying by 1.3) or a fixed allowance covered in a written agreement between the employer and employee. There is a minimum of one hour loading and one hour unloading per trip and casual employees must receive an additional 25 per cent. No specific provisions for loading or unloading appear in the Distribution Award.
3.99
Road freight drivers consistently reported to the committee that companies generally don't pay, or don't pay adequately, for the time waiting on docks, at distribution centres or freight despatch points. In some cases the time expended can be considerable. Mr Kelvin Cootes told the committee that he worked 82 hours a week driving between the eastern states and Perth and '30 hours of that at least would be downtime, waiting for the loads, that I don't get paid for'.
3.100
A consequence of unpaid wages, according to Dr Rawling, is that 'drivers are using rest breaks to load and unload, causing drivers to become fatigued and possibly engage in hazardous practices on the road'. One driver who did receive an hour's pay to load, remarked that if it took four hours to be loaded:
We've made our $36 to load …; we're now on nine bucks an hour for that period. So to make a dollar you've got to drive the maximum number of hours for the maximum number of kilometres in the shortest possible time to get to the other end.
3.101
Mr Ian Wild, president of the Livestock and Rural Transporters' Association of Queensland, also questioned the animal welfare implications of long delays at sale yards.
3.102
Inquiry participants explained to the committee that a reason for companies not recompensing drivers for the loading and unloading delays was the difficulty in charging clients. However, they also made the point that the tolerance for unpaid waiting and loading time exacerbated inefficiencies in the system. Owner-operator Mr Chris Roe remarking during hearings, if 'there was a charge initiated and enforced on that time, I guarantee you that the bottlenecks that occur would stop within a week'. Mr Walker observed that inefficiencies were increased by the loading facilities themselves, which have not kept pace with truck technology:
They were built when they were bringing them in J Series Bedfords, little tiny eight-tonne trucks. We're rolling in the gate with a 40-tonne truck, and it's taking two hours to get it off because their equipment is so out of date, but they don't pay demurrage for it.
3.103
Some witnesses pointed out that unforeseen delays on the road could result in drivers being 'punished' for missing a distribution centre time slot or driving unsafely to get there on time. Driver Mr Kean Austin argued for greater leniency in the timeslots while the Trucking Support Agency of Australia advocated for a 'demurrage rate for unnecessary loading and unloading times' so that contractors 'value' the time of a driver or transport company.
Calculation of rates of pay
3.104
The cents per kilometre rate in the Long Distance Award was seen as problematic by a number of witnesses, primarily because drivers were not being paid for the full distances travelled. While clause 16.4(b) of the award contains a schedule of major capital city distances, drivers can be asked to do pickups and deliveries at either end but only be paid for the distances specified in the schedule.
3.105
Drivers of non-capital city routes expressed similar concerns that the calculation of distances was from GPO to GPO. Mr Walker provided an example to the committee, saying that:
… in the line of business that I'm working in, which is bulk commodities, we're loading and unloading on farm, we're delivering to port, and we're delivering to capital cities. What they've done is move that capital-city-to-capital-city theory to Newcastle to Dubbo or Newcastle to Narromine. They're working on the post office theory. I've yet to tip anything at a post office or load anything at a post office.
3.106
Drivers of B-doubles and road trains also pointed out that the calculation of kilometres often did not take into account the restrictions on routes imposed on vehicles with higher mass limits.
3.107
Mr Walker provided the committee with a spreadsheet of his wages in 2016–17 with the difference between the kilometres travelled on the speedometer and the distances for which he was paid, resulting in an average fortnightly variation of 429 kilometres. Mr Walker calculated that:
… based on the current B-double rate, which is roughly 47c a kilometre, that's $201 a fortnight that I'm not getting paid. If you want to extrapolate that out even further, if you had a company and you owned 30 trucks and the average across the fleet is 400 kilometres a fortnight, based on my figures the wages saving per fortnight for 30 trucks would be six grand; annually that's $156,000 … On top of that you've got savings in payroll tax, PAYG tax, workers compensation, annual leave—all the add-ons.
3.108
The formula for superannuation for workers on a cents per kilometre rate was also queried by Mr Walker. Mr Walker asserted that superannuation is calculated on a base rate of 38 hours per week when someone on a cents per kilometre rate may be working hours far more than the base rate but the super paid 'is on about 50 per cent of that'.
3.109
Mr Warner pointed out that the hourly rate as specified in the award is also compromised by the schedule in clause 16.5(c) for capital city times. So in the case of a driver undertaking a 10 hour trip from Sydney to Melbourne, Mr Warner argued that:
… the way the award stands now with the definition of loading and unloading and the long-distance operation means that the driver can spend six hours in Sydney loading, do his 10 hours, have a sleep when he gets to the other end and then go and do that delivery ... to do my job legally it is a 26-hour shift, but I only get paid for the 10 hours …
3.110
In its submission, the Victorian Government pointed to inherent dangers in the cents per kilometre rate because of the need for drivers to make up time:
Previous literature has found that kilometre rates and low rates of remuneration provide an incentive to drivers to maximise hours driven and to speed … This induces fatigue, promotes the use of stimulants to overcome fatigue and increases the chance of accidents.
3.111
Many inquiry participants advocated for the removal of the cents per kilometre rate. Some argued that as fatigue is managed by the hour, payments should match logbooks and also be calculated on hours worked. One driver concluded:
I think the kilometre rate for a driver has had its day. I think we should be looking at hourly rates for drivers. It impacts on road safety because every driver is rushing to get the kilometres under their belt. They will push and will sometimes use the work diary as a book of lies if it means getting there more quickly and getting home. It's actually the way they are paid, so, if they break down or they're loading and unloading, sometimes they get paid for it and sometimes they don't. But I'm a firm believer that a kilometre payment to an employee should probably be looked at being put out the door now. Safety is the priority.
Enforcement of awards
3.112
The Fair Work Commission is a national workplace relations tribunal established under the Fair Work Act 2009. Its functions include setting minimum wages and conditions in awards and hearing collective and individual workplace disputes. Clauses in the Long Distance Award and Distribution Award outline the process for resolving a dispute. An employee must first attempt to resolve the dispute with their supervisor and senior management before referring the matter to the Fair Work Commission for mediation, conciliation or consent arbitration.
3.113
The Fair Work Ombudsman (FWO) is an independent statutory agency that regulates Australian workplace laws and deals with disputes in the workplace including for underpayment, non-payment and breaches of conditions. The Fair Work Ombudsman can undertake a range of actions including assisting in workplace conversations, commencing mediation, referral to an inspector for issuing a compliance notice or broader investigation, lodging matters for claims of under $20 000 in the small claims court and using statutory enforcement tools such as litigation for matters involving serious or widespread non-compliance.
3.114
Mr Steven Ronson, executive director of enforcement at the Fair Work Ombudsman, explained the process for issuing a compliance notice:
The way they work is, if the inspector begins the investigation and can form a reasonable belief—it's a fairly moderate threshold—that there have been contraventions of the award or the act, we can issue a compliance notice on the employer … and require that they rectify the worker or his or her entitlements and provide us evidence of rectification. Failure to comply with that compliance notice is called a civil remedy provision. We will take that employer to court for failure to comply with a compliance notice.
3.115
His colleague, Mr Anthony Fogarty, executive director of policy, added that the success rate of compliance notices was 96 per cent. He further reported that while an employer might be given three or four weeks to comply with a compliance notice, breaches that required court action could be a lengthy process involving the 'gathering of evidence, witness statements and a record of interviews'. In total, the Fair Work Ombudsman had received 25 000 requests for assistance in the 2019–20 financial year and recovered $123 million in underpaid wages.
3.116
There was agreement among inquiry participants that the industry needed enforcement of awards and enterprise agreements, to place businesses on a level footing, with Mr Biagini stating:
Many companies have now grown really big because they don't do enterprise agreements or, if they do an enterprise agreement, it gets knocked back by fair work, because it doesn't pass the better off overall test, the BOOT. In other words, all they want to do is pay the award. The company that believes they should be paying workers a fair wage instead of a safety net are not able to compete anymore.
3.117
A number of inquiry participants raised concerns about the perceived lack of enforcement of award provisions and the barriers to road transport workers reporting underpaid wages and entitlements.
3.118
Witnesses reported instances where employees were reluctant to come forward with complaints out of fear of reprisals and the lack of cooperation from employers in engaging with aggrieved employees. For Mr Biagini, lack of anonymity was a major disincentive to exposing egregious behaviour. He explained that for the union to go in and investigate:
… we need a written authorisation from that member to go and do a wages inspection. What do you think happens once we show the employer that Joe Blow has given us the authorisation to look at his times and wages because he thinks he's not being paid properly? He gets weeded out.
3.119
One witness suggested that some of the under reporting of breaches was due to a lack of awareness of the avenues available, with one driver remarking that most drivers 'wouldn't even know how to access the Fair Work Commission website, let alone understand the legislation behind it'. Other drivers were deterred by an assumption that they would need to take any complaints to court, an outcome that would be financially beyond the reach of many transport industry workers.
3.120
There was also support for enforcement to be widespread and proactive, so that an issue isn't only fixed for the person who makes the complaint, but also for 'the other 20, 30 or 50 people who have been cheated as well'.
3.121
Mr Warner reported that in his experience in contacting the Fair Work Ombudsman, if there is an issue which affects the entire payroll, the FWO requires employees to make individual requests, which means multiple investigations with the same employer and wasting resources:
They claim to be an 'impartial mediator' and cannot act for anyone else, except the Individual requesting assistance. They refused to acknowledge their 'campaigns department' does indeed have the power to investigate an Employer without a formal complaint being made.
3.122
Mr Ronson confirmed that the FWO did not usually conduct company-wide audits 'unless there is something suspicious or there is evidence indicating that the issues would be broader'. Mr Fogarty added that if the FWO was approached by a group, it would look more broadly, but 'it's about the access to the evidence and the efficiency of that'.
3.123
Other drivers expressed frustration at being unable to pursue pay disputes if they are considered contractors:
Fair Work has chosen not to support me in my case … I've just been told: 'You've got to prove you're not a contractor. It's up to you to do that, not us.' They [the employers] owe me about $40,000, so this is not a minor issue.
3.124
Transport industry consultant Mr Mark Williams took the view that minimum award rates were not enforceable 'unless you're operating in a closed loop or in a metropolitan wharf cartage type of area'. He argued that in line haul operations where '70 per cent of the rate will be going northbound and 30 per cent will be coming southbound', supply and demand factors would push rates down.
3.125
Dr Rawling advocated for the role of a 'tribunal form of regulation that can make orders for both employees and independent contractors', arguing regulation should not focus on an individual work contract where 'the burden then falls on the individual driver to litigate or enforce that right'. Instead enforcement of awards should bring about a 'programmatic response', where a tribunal can 'rollout standards for classes of workers in the road transport industry'.
3.126
The need for a sector-wide investigation of compliance by employers with minimum award rates, allowances, conditions and superannuation was mooted by the Australian Livestock and Rural Transporters Association (ALRTA). The ALRTA emphasised the value of education for inadvertent breaches and the ability for employers to seek advice without 'disproportionate recrimination'. However, ALRTA was also supportive of 'surveillance and investigative powers, prosecution and a penalty regime sufficient to deter non-compliance' for deliberate breaches.
3.127
The National Road Transport Association (NatRoad) submitted that where wages and conditions were being undercut, such as due to competition from independent contractors, greater enforcement of the current law was required rather than new laws.
3.128
Mr Ronson also took the view that compliance did not require a 'legislative fix', stating that it 'just boils down to the fact that there are 13 million workers, two million businesses and only so many hours in the day'.
Cost recovery measures
3.129
Concerns about the viability of businesses within the road transport industry featured heavily in evidence before the committee. The committee heard that for the road transport industry to thrive, there needed to be an opportunity for all business owners in the supply chain—'employers, principal contractors, fleet owners, subcontractors, owner-drivers and gig workers in the industry'—to achieve cost recovery and profit.
3.130
Inquiry participants informed the committee that at the top of the supply chain are 'major clients which contract out work and set the prices for transport operators and drivers across the transport industry'. Due to a market imbalance, road freight operators have difficulty negotiating sustainable rates that take into account fluctuations in costs such as fuel and vehicle maintenance.
3.131
The TWU observed that the industry had experienced 'a lowering of transport contract values and more onerous contract terms (such as 120-day payments) which result in tight margins and low capital flows'.
3.132
Mr Simon O'Hara, chief executive of Road Freight NSW, was emphatic that there had to be viability for small businesses and that the freight industry 'can't become the purview of only those large, large companies that have economies of scale and can survive’.
3.133
Mr Gordon Mackinlay of the National Road Freighters Association told the committee that there was now a need to 'make things better':
We're not making money out of transport. The best operators are not making money out of transport. Whilst the wage thing is important, you can't get blood out of a stone. The person who owns the vehicle has to be remunerated properly.
3.134
Mr Arthur Tzaneros, managing director of ACFS Port Logistics, concurred:
… it's very evident that the transport industry is under attack in so many different ways. The objective is constantly to drive costs down with no regard to employee wages, conditions, safety, environment and/or any other costs. The strong and compliant blue-ribbon companies with strong enterprise agreements, new fleets, are under threat like they've never been before. I can tell you that there needs to be an intervention soon. Otherwise, I can stand here and say that we'll be one of those companies reducing our fleet size, and we'll be resorting to subcontractors and/or the gig economy ourselves in order to compete for the long term.
3.135
A grim picture of the financial health of the industry was presented by the Queensland Trucking Association (QTA). It reported that over the five years from 2012–13 to 2017–18 the total national freight in vehicle tonne kilometres increased by 8.1 per cent, total national road freight industry expenses increased by 8.4 per cent, expenses relating to the purchasing of goods and materials increased by 36.4 per cent while the total national road freight industry revenue increased by only 7.1 per cent. The QTA concluded:
When adjusting for changes in total tonne-kilometres total road freight industry revenue has actually fallen by 0.9 per cent and total road freight industry operating profits before taxes have fallen by 8.5 per cent.
In summary, over the last 5 years for every $1 increase in revenue there has been on average for each operator … a $1.81 increase in expenses. As a result, 13,754 Australian transport operators have ceased to exist over the past two years as business viability has been eroded. Furthermore 14 per cent of the industry are now anticipated to be operating at a loss.
3.136
QTA chief executive Gary Mahon told the committee that freight rates 'have not changed much in the last 15 years' but 'as a sweeping generalisation, I would suggest that most road freight businesses would have had a good year if they're in the vicinity of 4c to 5c on the dollar net'.
3.137
In the experience of members of NatRoad, '2–3% profit margin is common, albeit not a sustainable level'. NatRoad observed:
A significant number face business viability issues associated with their lack of power in the market and poor profit margins. Further, these small businesses lack economies of scale and suffer increased safety and operating costs.
3.138
Mr Campbell Dumesny, chief executive officer of the Western Australian Transport Industry Association, noted that for an industry that 'runs at between a three and five per cent gross margin', operators are reporting that they can be undercut by 18 per cent, even for the 'same vehicle combinations on the same routes'. With little ability to get fuel costs down, 'You can either squeeze maintenance or you squeeze wages'.
3.139
The Victorian Transport Association described the result of the 'slow death' of a 'business model that is unable to sustain the cash flow and margins':
In Australia in 2017–18 we had more than 369 businesses revert to bankruptcy in the transport industry. Mainly small businesses but indicative of what the industry is facing based upon the inability of the industry to set minimum cost standards that would ensure sustainability for a transport business.
Operating costs
3.140
Capital costs in the road transport industry are high, with the average price of an efficient prime mover and B-double combination in the region of $650 000. The committee was informed by trucking company owners that it cost $16 000 annually for a road ready truck, including registration, insurance, permits and accreditation. Insurance premiums alone could total over $10,500 per employee per year.
3.141
Submitters and witnesses argued that there needed to be a 'level playing field' on registration costs and that it was unfair that independent contractors paid the same for registration as major fleet vehicles which travelled greater distances and in some jurisdictions, with greater loads. The National Road Freighters Association argued in favour of a nominal registration fee, regardless of the number of trailers, and that operators pay additional road user charges based on fuel consumed.
Port charges
3.142
Evidence was provided by Mr Simon O'Hara of Road Freight NSW, of port infrastructure and access fee increases by stevedore companies since 2017 of between 350 and 750 per cent. He argued that operators get no increased productivity for paying these fees, and that the costs are difficult to pass onto clients.
3.143
Mr Arthur Tzaneros added that when transport companies passed the port fees on to clients, the clients went 'straight to tender'. Mr Tzaneros explained that in the renegotiations following the port fee increases, as the port fees are fixed, the transport fee 'is the fee that is actually tumbling whilst the overall charge to the customer is still increasing'. Mr Tzaneros also reported on the introduction of a 'long-vehicle fee' aimed at high productivity vehicles accessing ports. As a result, his company had 'doubled the number of trucks on the road, just so we don't attract this fee'.
3.144
The Australian Competition and Consumer Commission (ACCC) in its 2019–20 monitoring report on container stevedoring found that despite the effect of COVID-19, in the second half of the monitoring period the total revenues of the stevedores it monitored 'increased by $38.9 million, or 2.8 per cent, despite a significant drop in container volumes'. The ACCC attributed this to the increases in terminal access charges, which had increased 'by $87.6 million, or 51.9 per cent, since 2018–19'.
3.145
NatRoad submitted that landside port charges 'must be consistently regulated by the independent price regulator and recognised as a cost to the heavy vehicle sector in any [road reform] proposals'.
Tolls
3.146
Tolls were singled out by industry stakeholders as a major burden on the industry. A small family regional transport company reported that it's 'nothing to spend $400 a week in tolls'. For Australia's largest mover of freight, Toll Group, the cost of tolls run to $15–$20 million per year. Many companies struggle to recoup toll fees from their customers and independent contractors do not generally have toll fee recovery as part of their rates.
3.147
To NatRoad, heavy vehicle operators were effectively 'paying for road network improvements through increases in tolls without experiencing the promised efficiencies'. Toll Group also argued that there was no evidence of value for money in higher tolls:
An analysis of one of Toll’s Victorian based manufacturing customers found that toll charges have doubled, increasing by $500,000 since April 2017, with little to no travel time savings. An analysis of 12 routes found that travel times increased by 1.3 per cent, while fees increased by 100 per cent.
3.148
Some transport companies chose work locations or used suburban streets that allowed them to avoid paying tolls. However, increasingly drivers had no choice but to use toll roads. Toll Group reported that the New South Wales Government announced that with the opening of NorthConnex, 'trucks and buses (over 12.5m long or over 2.8m clearance height) travelling between the M1 and M2 will need to use the NorthConnex tunnels unless they have a genuine delivery or pick up destination only accessible via Pennant Hills Road or meet certain exclusion criteria'. Gantries on Pennant Hills Road monitor heavy vehicle use with fines for buses and trucks that do not comply.
3.149
To Mr Simon O'Hara, drivers should be incentivised, rather than deterred from or forced to use toll roads, especially in non-peak periods:
There are a range of ways. The first would be that you give them reduced tolls, that you look at a tolling system that rewards off-peak travel or that you deliver it through registration costs … From our perspective, there's a safety component here as well; it's not just about saving money.
3.150
The increasing government reliance on the private sector to build roads, in the view of Toll Group, turned 'new roads into unregulated monopolies'. Toll Group argued that with the problem of congestion and more toll roads increasing, industry needed assistance from government through an industry code administered by the ACCC. Such a code would 'set out minimum obligations for suppliers when engaging a transport operator so that safety is not compromised, unfair contract terms are removed and the race to the bottom on price is halted'.
3.151
NatRoad identified a lack of transparency, uniformity and fairness in setting toll fees for heavy vehicles and argued for the creation of an independent price regulator that would regulate and monitor toll fees and port charges.
Fuel
3.152
Operators explained that while there were some economies of scale for larger fleets, there is little scope to reduce fuel costs, which were estimated to comprise around 30 to 35 per cent of an operator's cost structure. Even one cent per litre increases had a huge impact on the running costs for trucks travelling hundreds of thousands of kilometres a year. Several stakeholders reported that when fuel prices were at the lower end, some national carriers enforced a 'negative fuel charge' where they reduced rates to subcontractors so that they could not benefit from the lower prices.
Primary producer concessions
3.153
Discounted registration fees and fuel tax reductions are available for primary production vehicles so that a 'genuine primary producer, moving their own produce in their own vehicle, is able to do so at a significantly lower cost than a competing commercial carrier'.
3.154
The committee heard that vehicles registered under primary producer schemes had been observed operating on a commercial basis and thus driving down freight rates and competing unfairly with commercial carriers.
3.155
Mr Wild of the Livestock and Rural Transporters Association of Queensland, ventured that the registration saving to primary producers was around $10 000 annually, and noted that it would 'take a huge fine or a very high likelihood of being caught to overcome the economic incentive to break the rules when the registration and fuel discount are worth so much'.
3.156
ALRTA told the committee that a primary producer in Victoria only paid 20 per cent of the $14,759 registration cost of a B-double combo and that in New South Wales, 'due to a special exemption, that cost is actually zero'.
3.157
ALRTA argued in favour of tightening up the scheme as '[persistent] non-compliance risks discontinuation of such schemes which would disadvantage legitimate users'. ALRTA recommended that vehicles operating under primary producer concession schemes be required to display 'appropriately marked registration plates' and be subject to enforcement to ensure appropriate use.
3.158
To Mr John Mitchell of Mitchell's Livestock Transport it was important to structure tax benefits for depreciation of transport assets and fuel rebates in a way that recognised and excluded companies that were not transport companies.
Insolvencies
3.159
An indicator of a sector in crisis is the rate of insolvencies, which according to the TWU is the ‘strongest and clearest indicator of the economic pressure’ experienced by transport operators and workers. These transport operators and workers are confronted with a difficult choice ‘between having to unsustainably and dangerously intensify work or be run out of business’.
3.160
Statistics gathered by the Australian Securities and Investment Commission (ASIC) show transport operators have one of the highest rates of insolvencies of any industry and small firms in Australia. Between 2013–14 and 2018–19, ASIC recorded 2543 companies in the sector that had entered external administration, with bankruptcy primarily caused by ‘inadequate cash flow or high cash use’. According to the TWU, this indicates ‘the twin problems of low rates and late payments for transport operators’. The TWU also noted that insolvency figures are likely to be underestimated, with the vast majority going unreported.