In effect, it is hardly surprising that Shipping Australia Limited (SAL) the owners’ association has voiced its opposition to the creation of a Strategic Fleet, given that the Government Taskforce proposing the policy aims to make foreign owners pay for the fleet.
What may be surprising is the failure, by SAL, to mention that its members, mainly foreign container line operators, are likely to foot the bill. Instead, it focuses its opposition on past policy failures and assertions while also pointing to the Productivity Commission report “Australia’s maritime logistics system”, published in January.
Key recommendations in the Strategic Taskforce Final Report published last week were that Government should establish a levy based on tonnage to fund the fleet and another charge that will meet the cost of training for fleet crew to STCW levels.
The fleet levy would be calculated on a net tonnage basis but would be sufficient to match the cost gap between the Australian flagged Strategic Fleet and foreign flagged vessels, which constitute the vast majority of ships calling at Australan ports, and also the vast majority of SAL members.
The levy placed on vessels calling at Australian ports would, say the Taskforce, “defray the cost of registering a strategic fleet ship on the AGSR”.
The training levy is proposed to fund the training of seafarers to meet the more stringent requirements of the AGSR. It would be imposed on, “Maritime industry participants that are beneficiaries of STCW qualified seafarers,” that will provide financial assistance to employers for trainees to obtain STCW qualifications.
In a seemingly contradictory statement, the Productivity Commission itself a government body stated in January that crew and training measures are: “Best addressed through immigration and cadetship programmes without additional government intervention”.
Howver, the Productivity Commission report’s focus is entirely on container ports, as is stated in the report.
"When asked to nominate issues in Australia’s maritime logistics system, inquiry participants overwhelmingly pointed to problems in container shipping. Consequently, that is where the inquiry has focused, and maritime logistics chains incorporating the five largest container ports — Brisbane, Sydney (Botany), Melbourne, Adelaide and Fremantle — have received most attention.”
However, some 56% of Australian port calls are for bulk carriers, while container calls were only 13.9% of the total vessel calls to Australia.
Registering the strategic fleet
Another recommendation is that all Strategic Fleet vessels are registered on the Australian General Shipping Register, but that Government should amend the requirements to bring the AGSR requirements “closer to those practices in place in competitive flag-state jurisdictions”.
Government argues that its policy of developing a strategic fleet is to secure access to essential imports and is committed to strengthening Australia’s “economic sovereignty” and “national security”.
Catherine King MP, Minister for Infrastructure, Transport, Regional Development and Local Government decided, in the autumn of last year, to appoint a Strategic Fleet Taskforce that would develop a plan to achieve those goals.
Recycling an old policy
A year later the plan has been published and it has come in for major criticism from ship owners in particular, who claim, through SAL: “The Strategic Fleet is just the recycling of a policy that we already know has failed in the past.”
Questions about whether the policy is workable and whether it can be effective remain, but the logic as discussed by the taskforce is straight forward and could, in theory, be applied by other major economies.
According to the Taskforce report 1.64 billion tonnes of imports and exports In 2021–22 were moved at sea, some 99% of Australian goods by volume, and about 79% by value.
While trade was handled by 6,170 foreign flagged vessels, which made 26,400 calls to Australian ports. Some 56% of these calls were bulk carriers while container ships accounted for 13.9% of the calls.
In December 2022 there were just 11 Australian-flagged and crewed vessels of over 2,000 dwt operating in Australia’s coastal trade.
The report identified imports as the most critical strategic components, which included fuel and agricultural items and industrial chemicals as well as containerised goods. Nevertheless, the report conceded that some items, including crude oil, oil products and containerised goods, would be beyond the capability of a strategic fleet to move on a large enough scale.
Purposes of the strategic fleet
Instead, the Taskforce identified three key purposes for a strategic fleet; to respond to disruption events; support sovereign manufacturing industries; and to support the Defence Forces.
In addition, the Taskforce raised the issue of costs as a major challenge that would need to be overcome if the maintenance of a strategic fleet were to be viable. Chief among these costs was the expected outlay for crew on Australian flagged vessels, with all the regulatory requirements that come with that.
To meet the various challenges outlined no less than 16 recommendations were made including the introduction of a new tax regime that will bridge the cost gap between foreign and Australian shipping’s crew costs.
“The Taskforce considers that a Government assistance program provides the mechanism by which to bridge the cost gap and allows the Government to target capabilities consistent with the prime strategic needs identified by the Taskforce,” said the report
Tax breaks to those investing in Australia’s Strategic fleet will help to bridge any investment and operational gap remaining.
In effect Canberra is looking to secure its imports through a Strategic Fleet paid for by charging foreign vessel operators a levy on port calls. The biggest charges will fall on those with the biggest ships and those that make the most calls, that is the bulk industry.
Questions over whether a 12-ship fleet, proposed by the Taskforce, can play any meaningful role in preserving Australia’s economic sovereignty or national security remain. But as the piper, in this case, will be paid by foreign vessel operators, who will likely offset that extra cost through additional charges to their clients, it seems the whole policy is out of tune.
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