Senate Economics Committee Inquiry into Manufacturing

Opening Statement

Appearance before the Senate Standing Committees on Economics - Inquiry into the Australian manufacturing industry

Jamie Newlyn, Assistant National Secretary, Maritime Union of Australia (MUA)

Monday 6 December 2021

• The MUA wishes to thank the Committee for the opportunity to appear before this Inquiry.

• The Australian shipping and maritime industries are a vital component of national transport infrastructure, integrated with the functionality and productivity of other industries such as manufacturing. It is a service industry.

• Ships transport the inputs for manufacturing processes and the outputs for distribution, including for export.

• Australia is overly dependent on foreign ships for its sea transportation and maritime support needs.

• There is an urgent need for the nation to mitigate its dependency on foreign shipping in both domestic and international trade, and to build economic advantage from Australia's heavy use of ships and maritime services.

• One pillar of the current Government's Modern Manufacturing Strategy is to focus on areas of advantage.

• It is our submission that the shipping and maritime sectors exhibit all the features of national comparative advantage due to the long tradition of provision of shipping and maritime services in Australia, our highly developed freight transport and logistics system and highly skilled maritime workforce.

• Another pillar of the Manufacturing Strategy is to build national resilience for a strong economy, particularly through the Supply Chain Resilience Initiative.

• We propose in our submission that the shipping and maritime components of manufacturing supply chains be integrated into the Modern Manufacturing Strategy and that key policy initiatives such as the proposal for a national strategic fleet, the development of maritime hubs associated with the emerging offshore wind energy sector and port-located hydrogen hubs form part of the Supply Chain Resilience Initiative, funded from the Modern Manufacturing Initiative.

• The need for Australia to reduce its dependency on foreign shipping has again been highlighted by the disruptions being experienced in global supply chains over the past 6 to 12 months.

• The recent ACCC Container Stevedoring Monitoring Report 2021, which we criticised for the conclusions it drew, nevertheless highlighted a range of anti-competitive, inefficient and disruptive practices exhibited by container shipping lines that deliver inputs to manufacturing processes and transports the nation's manufactured exports to overseas markets.

• Examples of those practices are:

• Diversion of services from Australia to higher value routes with higher volumes;
• Omitting port calls to restore schedules;
• Rolling over cargo (to a later voyage);
• Cancelling bookings;
• Implementation of move count restrictions on vessel exchanges;
• Failing to meet berthing slot windows, creating a cascading impact across the supply chain;

• Massively increasing freight rates that cannot be explained by supply and demand factors alone - it is purely price gouging enabled by the near monopoly power of the container shipping lines;
• The arbitrary imposition of congestion charges;
• The use of larger ships than are required in the Australian trade aimed at manipulating port investment strategies and its contracts with stevedoring companies.

• We believe that one way mitigate the growing bargaining power of international shipping lines is to increase competition in the freight market.

• The key to creation of that competitive tension is the creation of a national strategic fleet, including a fleet of container ships, to develop Australia's domestic and international shipping capability.

• Our view is consistent with the views expressed by the Deputy Prime Minister and Minister for Infrastructure and Transport the Hon Barnaby Joyce, where in an interview reported in the media in July when he returned to Cabinet said that he:

• Backed the creation of a fleet of Australian-flagged merchant ships to make the nation more self-reliant;
• Stated that Australian needs Australian-flagged ships to have full sovereignty; and
• Stated that Australia needs its own shipping capacity.

• We are yet to see the terms of reference for the Productivity Commission Inquiry into the efficiency of the maritime logistics system foreshadowed in a speech by the Prime Minister last week, but we hope those terms of reference are sufficiently broad to enable the issues raised by the DPM to be addressed.

• Australia is not capturing the benefits from being a shipping dependant nation. There is considerable innovation occurring in ports and inland terminals, in ship design, in transport fuels, in ship building, in logistics technologies but it is not being supported by government, nor is it coordinated.

• Australia should be extracting economic benefit from the shipping aspect of supply chains to build the nation's comparative advantage in shipping for national economic gain, and to reduce the drain on the balance of payments from purchase of overseas shipping services.

• In 2018-19 purchase of foreign shipping services was the 7th largest Australian import costing the nation $10.12 billion. At the same time Australia's export of shipping services was valued at just $177 million. That needs to be addressed.

• It can be done if we take advantage of emerging manufacturing and supply chain opportunities.

• The growth, expansion and transformation of Australian manufacturing is intimately linked to emerging opportunities for Australian ships, notwithstanding the national shipping and maritime industry policy framework is not geared to take advantage of emerging sea transportation opportunities that could provide a role for more Australian ships, with substantially greater maritime employment.

• Those opportunities, arising from industrial transformation, being driven largely by the decarbonisation imperative, but also new technologies such as automation and digitalisation, and from business development in areas such as expedition cruise shipping, aquaculture and bunkering of alternative marine propulsion fuels, need to be captured.

• The emerging industrial transformation trajectory in Australia could see a renaissance of shipping over the next several decades with the right policy support.

• Support for Australian ships is good for Australian jobs. Every additional Australian crewed trading ship creates a minimum of 34 direct seafarer jobs and through the multiplier effect, an additional 30-40 jobs in onshore ship support services, and jobs along the transport supply chain.

• MUA analysis shows that if government is willing to provide a modest yet targeted industry policy support package for the Australian shipping industry, around 2,500 direct seafarer jobs would be created over the next 5-10 years, around 3,600 indirect onshore maritime jobs and around 6,000 new maritime jobs in total.

• My final point is that it is important that policy and programs to support the revival and transition of Australian manufacturing are fully integrated with supply chain policy and program support.

• Not only will that create a more efficient and productive manufacturing industry but will extract economic benefit along with supply chain security and resilience by creating a national shipping industry.