In Search of the Magic Pudding
Achieving Institutional Change in Shipping and the Waterfront
'Fed says that when your foot is being crushed by
a wagon wheel, it is of little comfort to be told that
it is difficult to measure the weight of the wheel.'
---The Hon C.R Kelly, (now retired) Modest Member and farmer
I thought of this remark---one of many delightful observations from the pen of Bert Kelly---following the outrageous, and totally uncalled for, attempt by Senator Ray a couple of months ago to savage the messenger of unpleasant news: the Industries Assistance Commission in the context of its draft report on Coastal Shipping.
The setting up of that inquiry was a welcome, if long overdue, initiative as it appeared to signal a genuine determination by the Government to provide substance to its 'third term' commitment of seeking microeconomic reform. Indeed, in August 1987, the Prime Minister had told the Conference of Economists at Surfers' Paradise:
'Transport services account for a high proportion of costs in many Australian industries. Past transport policy and practice have not kept costs down, and this has exacerbated the disadvantages of Australia's isolation and our dispersed population. Accordingly, one of the major items on the agenda of this term of government is a sweeping reform of the nation's infrastructure.'
The delegation to Senator Ray of responsibility for achieving progress in the waterfront arena also seemed promising in view of his reputation as a no-nonsense 'fixer' of problems: perhaps at last here was someone to knock heads together and bring some sanity to the waterfront.
Why then the outburst at the IAC? Surely the Government was not expecting the IAC to bless and commend our coastal shipping practices and performance? Surely there was no suggestion that the IAC could adequately discharge its duty without even mentioning or alluding to the waterfront (treatment of which was excluded from its terms of reference) or hint at the direction in which policy solutions might be found (the report was designed as an information, not a recommendations report)?
Perhaps it was all a smoke-screen behind which the Minister could confront the maritime unions with the reality that the game was up and that if they did not cooperate with the Government, even more 'awkward' solutions would be imposed from outside. This is a charitable interpretation which, in all the circumstances, does not appear justified. Time will tell.
In this paper I intend to concentrate on coastal and trans-Tasman shipping, the waterfront and the transport of grain. I will first review some relevant principles, then examine a small fraction of the case-study evidence, and finally suggest what must be done if substantive improvements are to be effected.1
Shipping and Regulation---Some Economic Principles
The definition of regulation used by the Business Regulation Review Unit is that it comprises 'actions of Government which, whether by use of fiat or inducement, persuade business entities to pursue their commercial interests in ways they might otherwise not have chosen.2
The transport industry in Australia has been heavily regulated for many years. Forms of regulation which have an impact on shipping include:
- subsidised infrastructure;
- provision of subsidised government services;
- subsidies to operators;
- subsidies to users; and most important,
- barriers to entry.
Apart from purely historical or explicit political arguments, the economic case for such regulation has turned on the theory of public interest, through which it was felt that regulatory activity improved economic performance and prevented or offset market failure. Such market failure was seen to occur where information flows were inhibited, monopoly might occur, the legal system was too cumbersome to allow adequate protection of individual rights, or moral values overrode commercial ones. It was also seen to be present where distributive competition might otherwise have taken place. More generally, it was widely believed that Government possessed superior information and/or that the private sector would fail to act rationally without being forced to do so.
Over the past decade or so, this idealistic view of regulation has been mugged by a reality of numerous examples where regulation has exacerbated rather than improved underlying problems. While there may occasionally be market failure, the costs of government failure are generally far greater than those incurred by the private sector.
In the light of this experience, contestability theory has gained considerable and increasing favour. This theory suggests that, provided entry is unrestricted and exit is costless, the potential for competition is high and incumbent firms, even if comparatively few in number, will behave in precisely the same efficient manner as they would if actually competing with many other firms. In other words, in a contestable market, firms must take account of the possibility of new entrants, even if such firms do not actually commence business. As a consequence, market behaviour is competitive, implying that:
- monopoly rents are minimised;
- inefficiency and waste are minimised;
- pricing reflects marginal costs; and
- cross-subsidisation is eliminated.
The theory has been deemed particularly relevant for analysing markets with natural monopoly characteristics, such as much of the transport sector. Provided these markets are contestable, the benefits of scale economics can be enjoyed without the allocative inefficiencies normally associated with a concentrated industry structure.
In practice, regulation has usually been unduly oriented towards the interests of existing producers. In the transport context, options for change, especially deregulation, have thus been viewed in terms of their likely impact on those firms already 'serving' the industry. As that impact may well have been adverse at least in the short term, and as the incumbents were usually able to muster considerable political power, the 'worries' or 'concerns' associated with change received disproportionate attention, relative to the benefits. This was all the more so where the existing players included significant public sector institutions. In such cases, relevant Departments became, unwittingly or otherwise, advocates for the institutions and political decision-makers and departmental advisors alike found it convenient not to have the appropriateness of past decisions tested in a more robust market environment. Needless to say, the interests of consumers scarcely received a look-in in such circumstances.
Monopoly rents, those special advantages that individuals can extract from a monopoly because of its institutionalised and non-competitive structure, result in potential cost savings from the improvement in management and the adoption of new technology accruing to the 'system' rather than being passed on as lower charges to consumers. Typically they accrue in the form of more favourable terms and conditions of employment, such as overmanning, inefficient work practices, over-generous superannuation schemes and so on. In the shipping industry, most of the monopoly rents have been appropriated by employers and unions in, and close to, the industry, backed where necessary by industrial muscle. 'Standards' have been created which are ludicrous in comparison with what is sustainable in Australian industry generally or in shipping industries in comparable developed countries overseas. These rents have been extracted from employers in the fairly secure knowledge that:
- the non-contestable market environment would 'encourage' an employer not to go to the barricades' in opposition ---that is, the employer itself is also very much a beneficiary of the system and keen not to rock the boat;
- the capital-intensive nature of the industry similarly would mitigate against a lengthy dispute;
- the managers involved, especially public sector managers and including those employed by port authorities, would rarely have their personal incomes affected by a decision which increases costs;
- costs would ultimately, if not immediately, be passed on to shippers;
- shippers would typically demand their product quickly rather than have it embroiled in a dispute; and
- rarely would civil remedies be sought against unions or employers.
These factors have served to reinforce the security of the system and its central focus, union power. What then have been some of the manifestations?
The principal regulatory agent for coastal shipping in Australia has been the Navigation Act of 1912. Through this Act, licences to operate on the Australian coast are only granted if vessels meet Australian wage and accommodation levels. As few foreign vessels, even from developed countries, have been able to meet these 'standards', the result has been cabotage---the restriction of coastal trade to a country's own vessels.
In many respects cabotage is the threshold issue--- to oppose it is almost to be unpatriotic; if a precedent were created there, where might it stop? And so on. Yet cabotage does not exist in a number of developed countries, including the United Kingdom, Ireland, Belgium, the Netherlands and Norway; and strict cabotage is rare.3 In any event, Australia should develop policy based on what is good for Australia. If that happens to diverge from the practices of other countries, we should not hesitate to adopt different policies here. It has never seriously been suggested, for example, that the Common Agricultural Policy in the EC should be the model for agricultural policy-making in this country.
Some examples of what have been negotiated behind this infinite tariff or zero-quota protective barrier include:
- excessive manning levels;
- excessive ancillary on-board crew members, such as up to seven cooks and stewards providing over-catered meals (e.g., a stipulation of two hot meals per day ---with alternative menus---even when a vessel is in port);
- excessive crews per vessel, requiring an actual entitlement of 2.2 staff per position, operating on a six week on, six week off basis, with the six weeks calculated from the time of departure from, and arrival at, home port, not actual time worked;
- highly rigid work classifications and minimal additional shipboard tasks performed by crews, (e.g. not even minor repair and maintenance tasks), in contrast with overseas practices;
- vessels forced to dry dock in Australian shipyards for repairs, at very high cost, typically two to three times higher than comparable countries overseas;
- strictly first-class travel and five-star accommodation, with costs further inflated by the necessity to replace crews each six weeks five star accommodation must be provided during dry docking;4
- 'noise' allowances in port (would port noises exceed the engine noise at sea?);
- an additional seven days' leave for an employee who is sick for more than seven days, even if the employee has recovered and has been fit for work; and
- the allocation of ratings to a vessel by the Seamen's Union, rather than by a particular company; ratings not required are paid attendance money which is financed by levies on Australian shipowners and operators; beyond the direct costs, the system militates against commitment or loyalty by the employee to the employer, and training by the employer of the employee.
As a result of these cosy arrangements, it is not surprising that:
'Coastal shipping in Australia is uncompetitive and inefficient. High costs and a poor record of service have progressively reduced the industry to a position where the only goods currently shipped around the coast tend to be those for which alternative transport codes are either not available, or are not a realistic proposition.'5
The effects of these arrangements have been variously to:
- increase costs on user industries;
- cause transport to be undertaken where possible by other modes;
- fragment production of goods in several States without the benefit of economies of scale;
- deny opportunities for further processing in Australia, especially of mineral commodities; and
- even cause the substitution by imports of otherwise internationally competitive products.
Here are some examples:
- when the cabotage provisions of the Navigation Act were extended to Christmas Island in 1974--- by Ministerial fiat without reference to any user or Parliamentary debate---rock phosphate freight rates jumped by more than 50 per cent;
- industrial action in 1981 extended the grip of coastal shipping over rock phosphate carriage (including, in part, to Nauru),---the freight disparity with competitive international tonnage at one point was $20 per tonne, equivalent to a subsidy of between $80,000 and $100,000 for each of the ANL seamen employed in the trade;
- Australian Newsprint Mills has calculated that the cost to ship newsprint from Hobart to Japan is less than from Hobart to Brisbane;
- CRA has stated that it is less expensive to ship primary aluminium from Tasmania to a variety of Asian ports than to Sydney;
- the cost of shipping milk powder from Tasmania to Taiwan is $72 per tonne, compared with $82 per tonne from Tasmania to Melbourne;
- Adelaide Brighton Cement currently obtains supplies of cement clinker for its plant in Darwin from Japan rather than from its own operations in Adelaide; the relative freight costs are $12 per tonne from Japan, $20 per tonne from Adelaide (for a conventionally geared vessel) and $28 per tonne for the self-discharging ANL vessel 'River Torrens';
- Australia is a low-cost producer of salt, selling successfully in Pacific Basin countries in competition with Mexico and other countries; when it comes to domestic salt sales, it can be cheaper for users to import salt from Mexico because of the high costs involved in shipping the product around the coast;
- Comalco's high-grade kaolin deposit at Weipa has had difficulty in making sales to paper manufacturers because of the freight rates offered (extra costs being required for particular cleanliness of the holds); one operator has offered an acceptable service at $100 per tonne---three times the rates Comalco would pay international carriers (which already ship its export sales) for the same service;
- Ford found that freight charges for motor vehicles from Melbourne to Tasmania were 5 per cent less than from Melbourne to San Francisco; for GMH, freight costs from Melbourne to Japan were two-thirds those from Melbourne to Tasmania;
- ICI decided to abandon the Perth and Brisbane soda ash markets because it was more expensive to transport soda ash from South Australia to those markets than from the West Coast of the United States;
- the Australian Mining Industry Council told the IAC that coastal shipping was one of a number of important cost factors which would determine the level of minerals processing undertaken in Australia in the future--- for both domestic and export markets; and even the tripartite Australian Manufacturing Council warned that the high cost of transporting raw materials was a major weakness for the basic metals industry.
And so it goes on.
Trans-Tasman shipping bears many of the hallmarks of coastal shipping. There, the trade is reserved for vessels owned and crewed by the two countries, not as a result of the Navigation Act or other legislation but from an 'accord' concluded in 1974 by the respective waterfront and maritime unions. The results, of course, are the same: costs are high and service arrangements are not fully competitive. These results were well assessed in a recent joint study by the Bureau of Transport Economics and the NZ Ministry of Transport.6
Wheat is a prime example. For many years Australia enjoyed a 'preferential supplier' status and the NZ Wheat Board traditionally supplied all NZ's import requirements---up to 100,000 tonnes per annum---by purchasing from Australia. Australia's prices were competitive but the high freight costs could be passed forward to NZ consumers.
Following deregulation of the NZ Wheat Board in February 1987, Australia's preferential position is no longer guaranteed and, consequently, transport costs will become decisive in determining Australia's overall competitiveness in the NZ market. Canada already has some of wheat on trial in New Zealand and the Americans are similarly interested. It follows at the high trans-Tasman shipping costs now have to be absorbed by the Australian Wheat Board---hence Australian growers---in setting a competitive landed price in New ZeaLand. According to the trans-shipping report, these costs were a staggering 31 per cent of the f.o.b. value in 1985-86. It will be interesting to see if Australia's wheat growers are prepared to tolerate either this continuing rort, or the loss of the once captive NZ market.
Perhaps in all these circumstances it was no wonder that the ACTU and all relevant unions decided to boycott the IAC Coastal Shipping inquiry. Where else but behind such government-imposed monopolies could such arrogance against the Australian community be perpetrated without a deafening roar of condemnation? Imagine, for example, the principal players at the Fitzgerald inquiry in Queensland getting away with a similar attitude.
Of course, not all the problems which afflict the provision of coastal shipping services are so-called 'blue water' problems---that is, would be resolved by the application of commercially realistic standards on ship, or the introduction of international shipping to the Australian coast. Many occur on and around the waterfront. It is to these issues that I now turn.
On the waterfront, the story is much the same. There may be no Navigation Act, but there is limited competition, barriers to entry (in practice if not always in theory), some elements of natural monopoly, restrictive works practices, other unsavoury union practices of various types, frequent employer acquiescence (the most charitable explanation for which is industrial vulnerability to the high capital investments involved), an appalling and compliant record of arbitral authorities pursuing short-term industrial peace at any price, numerous inquiries which have successfully described the problems and their effects but which usually have been unwilling or incapable of prescribing effective solutions, and total lethargy on the part of successive State and Federal Governments. The latest in the inquiry line is the Interstate Commission's so-called Waterfront Strategy inquiry. No doubt its members have taken note of Senator Ray's observations directed at the IAC.
Many may have forgotten it, but we should recall that the most promising investigation, in terms of spelling out the mischief which occurs around the waterfront, was the Costigan Report into the Ship Painters and Dockers Union. Unfortunately, that inquiry became diverted and so the mass of very valuable--- if frequently appalling ---evidence it unearthed has been all but overlooked.
For many years, the waterfront and the waterside worker were seen as synonymous, the latter being depicted as the archetypal Australian worker---unproductive, strike-happy, overpaid and so on.7 Since containerisation, of course, the number of these traditional waterside workers has declined by over three-quarters. But there are many other players and unions in the ring and one common characteristic is an uncanny ability to cause the maximum amount of commercial leverage with the minimum direct inconvenience to the public or stardom in formal strike statistics.
Some specific instances of waterfront practices include the following:
- the practice of nick-off days, where members of a gang draw straws to see who can return home for the day on full pay; more sophisticated variants on the theme are published rosters and auctioning of entitlements;
- 54 foreman and supervisors are employed in Newcastle for the 186 waterside workers employed at the port;
- the 30 WWF members at Wyndham in Western Australian average approximately 8 hours work per week;
- the WWF insists on two members (one on board the vessel and one on the dock) watching while a crane-driver and a truck-driver move a container from truck to vessel; neither are necessary, but because there are two, a supervisor and a foreman are also needed; similarly, two unnecessary employees observe wheat being poured into the holds of a vessel;
- as a result of union pressure, a gangway watchman is engaged 24 hours a day when a vessel is in port, although no work needs to be done or, alternatively, the job could be done by a crew member;
- waterside employees receive a number of particular allowances for 'unpleasant' work, such as 'dirt money', 'stooping money', 'rain money' and 'cold money';
- employees on night shift frequently work for a short time and then draw straws to see who will remain to clock-off all members of the gang, while the remainder go home;
- a union/employer agreement limits the packing and unpacking of LCL cargo to union-approved establishments; another confines transport and handling of certain cargo to approved road hauliers; both are contrary to the Trade Practices Act;
- container-handling rates in Australia are typically half or less than those overseas; Australian grain terminals handle approximately 14,000 tonnes per employee per year, whereas North American terminals average 60,000-120,000 tonnes;
- six additional painters and dockers were employed by the WA Government in 1986 when idle time by the existing 29 employees already exceeded 50 per cent; in the September 1986 quarter, idle time by painters and dockers at the Port of Fremantle was 98 per cent; the WA Government has imposed a compulsory tonnage levy on all vessels calling at the port to fund the continued existence of a painter and docker workforce in the port;
- overmanning is rife among tug operators and, as with coastal ships, there is a second crew for each tug (even though tugs do not leave their port); strict criteria for the number of tugs required per vessel are based on worst, rather than actual, weather conditions; there is excessive union interference in determining tug requirements; and excessive lead-times are required to book tugs;
- waterfront employees in Devonport sought to prevent the unloading of grain from the self-discharging ANL vessel 'River Torrens', in defiance of an Arbitration Commission ruling that no waterside workers need be employed on the vessel during unloading; the dispute, which lasted 9 days, was resolved only when the Port of Devonport Authority initiated action under S45D of the Trade Practices Act;
- a picket by Melbourne painters and dockers prevented all shipping services to Tasmania for 11 days in 1987; the picket was a protest at criminal proceedings against a painter and docker member who, when requested by a female Customs officer to undergo a search (apparently a regular occurrence), responded by stripping naked, for which he was sacked and charged with indecent exposure;
- the preliminary list of restrictive work practices prepared by the Maritime Services Board of NSW runs to three pages; and theft and pilferage is widespread; for example, Ford told the IAC Coastal Shipping inquiry that theft and damage resulting from transporting motor vehicles to Tasmania was forty times greater than when using road and rail in mainland Australia.
According to NFF's submission to the Interstate Commission inquiry into the Waterfront Strategy, waterfront services cost 30-40 per cent more than they would under efficient operations. At least 12 prior inquiries have concluded that waterfront productivity is unacceptably low, industrial relations are unacceptably poor and costs are unacceptably high. The primary deficiency---whether due to overmanning, restrictive work practices, industrial disputes, or high costs---is the interaction between port services providers and organised labour where neither is subjected to effective competition.
Research by the Royal Commission into Grain Handling, Storage and Transport showed that shore-based costs associated with the export of grain amount to about $1 billion annually, or $58 per tonne, which is equivalent to around 36 per cent of the f.o.b. value of wheat. At least $3.50 per tonne could be saved by abolishing restrictive work practices and disputes.8
Some examples of excessive costs or restrictive practices identified in ACIL's submission to the Royal Commission include:
- the State Railway Authority of NSW still changes the crews of its modern diesel electric locomotives at the same time and places as it did for its long-gone steam engines (i.e. at the points for taking on coal and water); the result is an unnecessary reduction in the effective operational hours of trains and corresponding loss of productivity;
- train crews are paid for a 7-hour shift, even if they only have to work 1-2 hours; there is also the enormous cost of ferrying them around the country in taxis;
- if railway maintenance practices were updated to those now used in the aircraft industry (which are appropriate to current railway technology), reductions of the order of 35 per cent could be made in the number of staff at railway shops with no lowering in the quality of maintenance---a potential national saving of over $150m annually;
- road transport is restricted by legislation granting rights to rail within a State or region; by practices, such as in South Australia, where additional charges can be levied on road transport of grain; by road receival facilities at some port terminals being non-existent; and by some terminals working only an effective 6.5 hour day which prevents two truck round voyages per day being made from silo to terminal, hence requiring additional trucks, increasing costs and reducing productivity;
- cheaper and more flexible private sector port terminal and loading facilities have been opposed because they conflict with the entrenched position or future plans of the railways, bulk-handling authorities or the Wheat Board;
- established manning levels at ports remain undisturbed even though modern ships can be loaded fully automatically with only one monitoring supervisor; the position remains because costs are not visible---shipowners incorporate the labour costs into freight rates which are passed on to growers who are unaware of what they are paying;
- one ship charterer was charged $17,000 for stevedoring: $7,000 was for the actual cost of stevedoring labour (itself excessive) and $10,000 was for 'special debits' and payments to various 'funds', both union-related; and
- when continuous running of grain-loading facilities was introduced at Sydney in May 1986 (thereby offsetting the problems of staggered working hours, 'smokes', etc.) productivity rose by 35 per cent, the gain being equivalent to Newcastle's traditional grain shipments; however, because it reduced overtime worked, the unions kicked up a fuss and the policy was discontinued after only two months.
The Options for Achieving Change
In terms of where should we go from here, it seems that we have two main options. The first is the gradualist approach---involving inquiries, conferences, consensus and small changes at the margin. This tends to be the preferred approach of governments and bureaucrats and it has certainly been the approach adopted by the present Government.
The second approach is more bold---to seek to reshape the entire framework so as to achieve major change quickly; in some senses, it may be equivalent to going for broke.
There is, of course, a third group of people, again substantial in number, who, while recognising that change might be desirable in an ideal world, believe that it is all too hard. These are the people who are prepared to toss in the towel, regretfully perhaps but out of a view of perceived reality. Certainly, the task of achieving change is difficult; if it wasn't, it would have been achieved long ago. Some of these people---individually or as organisations---write eloquent submissions describing in detail the problems and costs of the present mess. Perhaps they hope that someone else will 'do something', but not themselves. But, at the end of the day, they are content to remain with the status quo and with the progressive slide down the relative living standard ladder which accompanies it.
As for the gradualists, they derive satisfaction from the progress which is achieved, however microscopic it might be. Their benchmark is the immediate past and hence progress might appear to be beneficial. They ignore the real benchmark, which is what our competitors are doing and against which positive absolute progress may be---and, in the case of ship crewing levels, for example, is negative relative progress.
Inevitably the gradualists work within the system; for them, the system itself can never be the problem or even part of it. Hence the focus is often, if not usually, on symptoms rather than underlying causes of problems. The capacity to make progress is correspondingly reduced.
The consensus environment around which the gradualist approach revolve is as strong as its weakest element. Weakness on the employer side can result in further concessions to reinforce a non-contestable market or fully offset gains made elsewhere (e.g., the absurd notion in this industry of compensating employees through higher pay for apparent productivity improvements.) Weakness also results when one party, invariably a trade union, does not like what is in prospect and pulls out or otherwise imposes a veto. The consensus machinery is rendered impotent when this happens.
Take a recent specific and delightful example. The problems of wheat shipments to New Zealand, previously referred to, caused a 'tripartite' committee to be established comprising maritime union, Department of Transport and Wheat Board representatives. The aim was to explore options for improving the competitiveness of wheat shipments. The maritime unions consulted with their colleagues across the Tasman and reaffirmed their belief in the sanctity of the 1974 'accord'. With that, no progress was possible and the committee was disbanded. This did not stop our good friend Senator Ray writing ---presumably with a straight face---that:
'the exercise has, I believe, achieved a greater level of awareness by all parties of the difficult and complex issues involved.'
Complexity is always a hallmark of the gradualist approach. Progress can only be slow because the issues are so complex. In one of his more endearing observations, the former President of NFF, Ian McLachlan, stated that 'industrial relations in the shearing and meat industries used to be considered complex, until we simplified them somewhat'.
The question is: can waterfront and shipping industrial relations be simplified in similar fashion?
It is, of course, not sufficient to say that just because the gradualist approach may have failed, a bolder approach will necessarily succeed. Going for broke obviously has inherent risks.
But it seems to me that half the battle is in simply recognising that:
- naked union power (aided at times by employer compliance) is the sole reason why the rorts and rip-offs are able to continue;
- power is sustained only by a non-contestable market environment; the existing forms of so-called countervailing power---whether they be Governments (acting in a consensus mode), the Arbitration Commission, the Prices Surveillance Authority, the Trade Practices Commission, the Interstate Commission, designated shipper bodies, other government inquiries, committees and taskforces or whatever--- for one reason or other lack the capacity or determination to do anything effective;9
- a group of strongly motivated individuals, companies and/or organisations, backed by a more contestable market environment and, where necessary, access to civil remedies under common law, can provide the strength and cohesion necessary to break the union power which currently exists; and
- when and if a specific contest does arise, a well-informed and reasonably objective media will have no difficulty in conveying to the wide public who is on the side of the angels.
There are times when a gradualist approach can be and has been successful. The efforts of John Kerin and John Button over the past five years in convincing their relevant constituencies as to how progress must be made are outstanding examples of this. But when it comes to combating naked industrial muscle, consider the evidence:
- the 1978 live sheep export dispute was won by out thinking and out-flanking the unions and convincing the public where the merits of the argument lay; t
- the wide comb dispute in 1983 in the shearing industry was won because shearers were better off having access to wide combs, contrary to the views of their union; this industry, the crucible of unionism in Australia, now has a union coverage of only around 10 per cent as a direct result of that dispute;
- the Mudginberri dispute was won for the same reason plus widespread public support and the effective use of civil legal remedies;
- the Robe River dispute was won because of the determination of management to achieve the huge productivity benefits available, which were then shared with the company's more productive employees;
- and the SEQEB dispute was won because of determined management (and, on this occasion, a supportive State Government), employee benefits and the prospect (and subsequent realisation) of cheaper electricity prices for consumers.
Given this evidence, it is certainly worthwhile for serious consideration to be given to adopting the same approach in the shipping and/or waterfront area.
The NFF submission of the Interstate Commission Waterfront Strategy inquiry has proposed a radical set of waterfront reforms involving:
- a separate port authority for each port, controlled by users and operating with a commercial charter (thus, for example, eliminating cross-subsidisation within or between ports);
- port services provided by private firms following tenders which would be judged on price and quality attributes and reassessed each 2-3 years (to avoid complacency); and
- deregulation of waterfront labour arrangements; abolition of labour pooling; and establishment of normal employment conditions including the freedom to negotiate legally binding agreements.
There are similar opportunities given careful thought and planning in the coastal and trans-Tasman shipping areas to make these activities genuinely contestable. For starters, and consistent with the principles of CER, the trans-Tasman 'accord' should be explicitly repudiated by the two Governments and overseas operators given the green light to compete. Similarly, given the flagrant abuse which has occurred over the years, the cabotage provisions should be withdrawn and the whole Navigation Act---currently hundreds of pages in length---simplified down to a handful of relevant clauses.
The beauty about the bolder approach is that if and
when success has been achieved, there will be no need
for the myriad of committees and inquiries to search
agonisingly for conditions under which this or that
incremental change may be made. It will all happen
autonomously, the competitiveness of the entire economy
will improve, and we will wonder why it all took so
1 In particular I intend to draw heavily on: National Farmers' Federation, Submission to IAC inquiry into Coastal Shipping, November 1987 (prepared by ACIL); National Farmers' Federation, Submission to Interstate Commission Inquiry into Waterfront Strategy, (not prepared by ACIL); ACIL Australia Pty Ltd, Submission to the Royal Commission into Grain Handling, Transport and Storage, May 1987 (funded by subscription); and IAC, Draft Report on Coastal Shipping, 1988.
2 A J Moran, 'Productivity Gains from Deregulation', address to Australian Graduate School of Management, September 1987.
3 IAC, op. cit., Appendix H.
4 The award states first-class travel for flights of more than two hours' duration; in practice, all flights are first class.
5 IAC, Draft Report on Coastal Shipping, Part A,p.(i).
6 BTE and NZ Ministry of Transport, Review of Trans Tasman Shipping, AGPS, 1987.
7 On the very day that the earlier version of this paper was delivered, Senator Button told an audience in Western Australia that he had identified Australia's greatest bludger---a wharfie who, for twenty years, had been transported to and from work by taxi, had clocked on, clocked off, done no work and drawn full pay.
8 Time lost at Newcastle through stop-work meetings alone added 8 cents/tonne to the cost of grain exported through the port; industrial disputes added a further 46 cents.
9 Since writing the first version of this paper, I have been contacted by a senior officer of the Trade Practices Commission who told me that the TPC recognises the problems in this area, is currently reviewing its policy and is prepared to act if it receives concrete examples of rorts contrary to the Act. This is an encouraging development.