Minerals Council of Australia Opening statement to Senate Rural and Regional Affairs and Transport L

The Minerals Council of Australia supports the reforms contained in the Shipping Legislation Amendment Bill 2015 and urges the Senate to pass the Bill without delay.

More than 200,000 Australians are employed directly in the minerals industry, many in regional and remote communities.

Our industry underpins Australia’s coastal shipping industry (including jobs in the industry) because we are its biggest customer.

Bulk commodities such as iron ore, bauxite and alumina account for 70 per cent of Australia’s coastal shipping trade.

The Australian minerals industry makes use of Australian coastal ships whenever it can. For example, Rio Tinto Bauxite & Alumina owns and operates four ships with Australian crew as part of its integrated operations.

At the same time, coastal shipping needs to be competitive – not be propped up by artificial barriers that raise costs and damage productivity.

The dynamic nature of modern supply chains – and the small scale of Australia’s coastal fleet – means that minerals producers cannot always source Australian vessels when they need them.

The fleet of major licensed Australian ships has been declining for decades.  It has gone from 30 in 2006-07 to 15 in 2013-14.

The problem of undersupply has been exacerbated by the burdens of the Coastal Trading Act.

Under the Act, extensive and onerous conditions are imposed on foreign vessels – including the requirement to undertake five voyages in a permit year and to provide detailed information about those planned voyages up to a year in advance.

The current Act also gives Australian ships the power to contest voyages proposed by alternative foreign ships.

These anti-competitive and bureaucratic rules have done nothing to revitalise the Australian coastal shipping industry.

What they have done is impose significant costs and inflexibility on Australian industries.

This is what protectionist measures do.  They may preserve a few jobs in one area, though even on this score the long-term record is dismal.

Far more important is the cost on other Australian industries employing Australian workers and consumers.

That is why the ACCC, the Productivity Commission, the Competition Policy Review Panel and the Commission of Audit all agree that cabotage licensing should be abolished entirely.

For some dry bulk commodity producers, the cost of shipping final product around Australia is now about the same as shipping from Asia.

Further, the ability of a general license holder to contest a temporary license application reduces productivity and increases uncertainty.

Just-in-time production and delivery is part and parcel of modern supply chains – including in the minerals industry – but the current regime throws rocks into the process by restricting the transport options of producers.

It is estimated that deregulating coastal shipping would yield a net benefit of $786.2 million to the Australian economy and an annual deregulatory saving to business of $27.9 million.

The government’s preferred option – introducing a single coastal trading permit linked to domestic workplace requirements – goes part of the way there. It is expected to deliver a net national benefit of $667.4 million and an annual deregulatory saving of $21.4 million.

This is a sensible, pragmatic national interest reform, precisely the sort of reform urged on our Parliament by those who attended the National Reform Summit a couple of weeks ago.

The Minerals Council of Australia strongly endorses the bill.

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