Chapter 4Committee view and recommendations

4.1In this chapter the committee provides its views drawn from evidence collected in submissions and over the course of the three public hearings and makes recommendations for potential reform and improvement of the Tasmanian Freight Equalisation Scheme (TFES,the scheme).

4.2These recommendations are designed to support the broad objectives of ensuring that the scheme is fit for purpose and conducive to the original policy intent of alleviating the freight cost disadvantage incurred by shippers of eligible non-bulk goods between the mainland and Tasmania.

4.3At the outset, the committee acknowledges that the scheme is integral to the equitable participation of Tasmanian businesses in the broader Australian economy and mainland markets. It is the committee's view that any changes to the scheme should benefit, and not further disadvantage, Tasmanian businesses.

4.4Further, the committee recognises that not all of the issues raised in evidence are within the remit of the Commonwealth Government, as the administrator of the scheme, to address. In this regard, the committee is encouraged by the demonstrated willingness of the Tasmanian government and the local councils of the Bass Strait Islands to engage constructively with the Commonwealth on improving the scheme and nurturing the competitiveness of freight across theBass Strait.

Realigning the policy intent of the scheme and addressing ‘class slip’

4.5As noted earlier in this report, the original policy intent of TFES was to alleviate the freight cost disadvantage incurred by shippers of eligible non-bulk goods between Tasmania and the mainland, in the absence of more cost-effective road and rail transport options.

4.6The committee sought a costing from the Parliamentary Budget Office (PBO) to address class slip and to restore the statistical median of all eligible claims to sit at the exact centre of the class structure.

4.7The PBO has costed this request, which is available as Appendix 3 to this report. The proposal would be expected to decrease the fiscal and underlying cash balances by around $156 million over the forward estimates period, which would represent a significant investment on the part of theCommonwealth.[1]

4.8The committee understands that simply increasing TFES assistance without taking a whole of system approach to identifying where competition and productivity gains can be made will not sustainably alleviate or resolve the challenges faced by Tasmanian businesses that rely on freight to get their products to mainland markets. Further, increased subsidies alone will not guarantee lower freight prices if they continue to be built into industry’sexpectations.

4.9However, there is no denying that a stagnant rate of reimbursement under the scheme is not conducive to the original policy intent of the scheme. There is a real concern among Tasmanian producers that, without an increased rate of assistance alongside improved administration and use of Tasmanian ports, many Tasmanian businesses will struggle to remain viable.

Streamlining and simplifying the claims process

4.10The committee acknowledges that there is an expected degree of administrative burden to claiming any government assistance and it is important that all recipients of taxpayer funded subsidies provide evidence to support the claim and are subject to appropriate checks and balances.

4.11However, over the course of the inquiry the committee received a range of evidence highlighting the challenges that prior and prospective claimants to the scheme continue to experience when interacting with the scheme.

4.12The committee is concerned to hear that a range of Tasmanian businesses, but particularly small and medium sized producers, are opting out of claiming assistance under the scheme, despite being eligible, citing the expected reimbursement is not worth the time and resource cost of lodging a claim.

4.13There is an opportunity for Services Australia, as the delivery agency of the scheme, to develop clear and concise guidance and tools to support Tasmanian businesses to better understand their likely eligibility under the scheme and lodge accurate and timely claims.

TFES must work for Tasmanians

4.14The TFES is integral to the equitable participation of Tasmanian businesses in the broader Australian economy and mainland markets. It is the committee's view that any changes to the scheme should benefit, and not further disadvantage Tasmanian businesses.

4.15The scheme has been often reviewed, but seldom improved, with only minor tweaking of the scheme since its inception. BITRE conducts a 4-yearly review of all TFES components. While these reviews provide a useful snapshot of the operation of the scheme, they do not comprehensively review whether the scheme is fit for purpose and operating in line with the original policy intent. Additionally, this review timeframe does not reflect the vast changes that can occur over the course of four years, for example the impact of COVID-19 pandemic on freight operations. In the committee’s view, this is a missedopportunity.

4.16The committee considers that the TFES isn’t broken. However, it is clearly out of date and not delivering on the original policy intent of equalising freight disadvantage incurred by Tasmanian businesses that do not have access to the mainland national highway and rail networks. To address these concerns the committee makes 5 recommendations.

4.17The committee recommends that the Australian Government undertake a review of the Tasmanian Freight Equalisation Scheme with consideration given to:

the original policy intent of the Scheme and whether it remains fit for purpose;

options to alleviate the freight cost disadvantage incurred by shippers of eligible non-bulk goods between Tasmania, inclusive of the Bass Strait islands and the mainland; and

the rates of assistance available and the class scale system.

4.18The committee recommends that, in the review of Government Business Enterprises currently being conducted by the Tasmanian Government, the following factors be considered in consultation with key port stakeholders:

the primary role of TasPorts be; to provide the most efficient and cost effective facilitation of trade; and

the role of TasPorts as a shipping operator given the National Competition Policy complications and additional costs generated.

4.19The committee recommends that Services Australia develop clear and succinct guidance material and support services, including audiovisual user guides and instructions, and a dedicated phone line, to support claimants to better understand their likely eligibility under the Tasmanian Freight Equalisation Scheme to lodge accurate and timely claims.

4.20The committee recommends that Services Australia develop an online claims calculator tool with the functionality to estimate the approximate value of prospective claims to assist prospective claimants to better understand their likely eligibility under the Tasmanian Freight Equalisation Scheme.

4.21The committee recommends that the Australian Government commission the Australian Competition and Consumer Commission to review the competitiveness of trade on Bass Strait and to the Bass Strait islands, considering both sea and air freight, including the rationale behind commodity pricing for the fresh produce sector.

Footnotes

[1]See Appendix 3.