Back to the Waterfront
Ports and Shipping Reform in New Zealand
My brief is to say a little about the NZ waterfront
situation. I have just spent a week in NZ for the NZ
Business Roundtable and Federated Farmers of NZ looking
at the question of waterfront and shipping reform.
The task was twofold: to have a general stocktake
of the policy changes that have been occurring in recent
years and to identify the remaining tasks for reform
which in turn would provide the basis for further representations
made by the organisations to the Government. Let me
commence by quoting the New Zealand Minister for Transport.
He is talking about NZ but, of course, what he says
could apply equally to Australia and is rather an apt
'We are like the farmer on the far side of the river
who must work that much harder and rise that much earlier
on market day to bring his wares to town. We are not
conveniently located at the crossroads of international
trade, we are not on the mainstream of the global village.'
This is why the ports and shipping industries in NZ
have to be competitive.
When I arrived in NZ I had no prior knowledge. I
had done a little bit of reading, although much of
the terminology was initially confusing. However,
one didn't have to be there long to learn about all
the same old rorts, all the same old inefficiencies,
all the same old demarcation problems, all the same
old cost plus mentality, all the same old employer
weakness that exists in Australia and about which we
have heard earlier today.
This is at the surface. Going a little deeper, one
realises that, in fact, the comparison between Australia
and New Zealand is very stark. New Zealand is actually
doing something about its problems! It has had the
odd inquiry or two, but it doesn't believe in inquiries
as a way of life. Instead of having inquiries followed
by task forces, followed by committees, followed by
further reviews, let alone tripartite consensus and
gradualism, New Zealand has actually made its decisions
and is in the process of implementing them.
Pressure for Change in New Zealand is Greater than in Australia
Why is NZ going about this task so much more vigorously
than we are? I think there are three reasons. One
is, of course, consistency with the approach that the
NZ Government has adopted to structural change throughout
the economy---and we have its high priest with us today.
I think there is an awareness, a recognition, an expectation
that the NZ Government means what it says when it tackles
these problems. Everyone knows roughly the direction
in which it will go, and it now has an impressive track
record to enhance credibility.
In this there is no Senate and no States to get in
the way. The Government also has the political strength
to see it through when the going gets a bit tough.
By our standards the backlash, particularly from trade
unions, is almost non existent. There are, of course,
problems, the odd strike or two, but when you consider
the actions that have been taken on so many fronts
and observe the way in which those changes are being
received by the trade union movement, it is really
a breathtaking comparison to the situation here. So
consistency and strength is the first point.
The second reason is that NZ is poorer than we are
with a higher debt level and lower living standards.
It follows that the pressure in New Zealand to tackle
problems is that much greater.
Thirdly, NZ is increasingly conscious of the hot breath
of competitors like Chile. In industries like forest
products and horticultural products, Chile is very
much a competitor with NZ as it is with Australia.
Chile has been solving many similar problems and NZ
is experiencing greater competition in world markets
as a result.
Let me give one brief example. Chile had an even
more institutionalised waterfront than Australia with
a metal badge providing a tangible sign of waterfront
employment. That badge was the way in which the monopoly
rents attaching to waterfront employment were able
to be appropriated, and indeed passed on from generation
to generation. The badge formed part of the estate
of a deceased waterside worker, passing to his son.
The 'watersider' himself didn't do the work; he subcontracted
it out to anyone who was around. However, he maintained
the badge and drew the rent---rather analogous to taxi
plates if you like.
Recently the Chilean Government bought out that system
and did away with it completely. Productivity has
increased by somewhere around 75% as a result and,
in the words of the well-known Chilean economist Jose
Perera, this has had the effect of Chile moving 5000
miles closer to its world markets. That is the sort
of competition NZ is increasingly aware of.
Some NZ Waterfront Practices
NZ is not quite as container dependent as Australia
are but neither does it have the large bulk trades
over a wide range of bulk commodities. There are,
for what is a small country and a small total trade,
a large number of ports, something like thirteen.
Four of those are container ports, two in the North
Island and two in the South, and the rest are conventional
ports, some of which are fairly seasonal operations
for exports such as dairy products and fruit. Some
of these conventional ports have become quite specialised
and in many respects quite efficient. The overall
scale is indicated by the fact that total NZ trade
would be equivalent to the amount handled through the
port of Sydney.
I won't list all the rorts and case studies that have
been prevalent in the past but, to give a little trans-Tasman
flavour to the subject, here are two or three that
highlight the innovative capacity of the NZ workforce,
just as the examples that have been quoted earlier
today and before do to their Australian counterparts.
There is a little rule called Saturday Afternoon Orders.
Under this arrangement---condoned by employers---if
the waterside workers can agree to complete loading
by a Thursday afternoon then they are paid as if they
are working up until Saturday afternoon and, of course,
Saturday is on double time. That is one reason why
the number of hours per week that NZ waterside workers
are paid is much higher than the number of hours they
Another example concerns our well-known live sheep
export industry. In one of the ports twelve people
are required to load live sheep for export; in all
other ports the figure is twenty-four. Federated Farmers
estimates that three men and a dog would be quite adequate
for the task.
The demarcation issue has been quite pronounced in
NZ and there is a nice Gilbertian example of the operation
of the NZ Labour Court, the equivalent of our IR Commission.
When a demarcation issue between the waterside workers
and the Harbour Board workers came up for hearing late
last year in one particular port, the Judge opted for
what in our petrol strike parlance would be referred
to as the 'odds and evens' system. Each alternate
day the employees of one union would have the work;
the next day the other union would be involved and
The final example concerns the experience of the petroleum
industry. Petroleum companies are involved in the
unloading of oil and petrol, which they do without
the use of waterside workers, and also chemicals, for
which they do have to use waterside workers. They
have therefore been able to obtain a direct comparison
on the relative costs involved. The figures indicate
that it is somewhere between five and seven times more
expensive when the waterside workers are used than
when they are not.
Recent Government Policy Change
These then are the types of waterfront 'industrial
realities' in New Zealand with which we in Australia
are already familiar. In terms of recent policy changes
enacted by the Government and their immediate effect,
Mr Douglas will be covering that field in some detail
during his address over dinner.
Very briefly, three things have been done. One, the
Government has moved to put the operations of the ports
onto a more commercial basis, separating commercial
from non commercial tasks, giving a commercial charter
to new port companies, and allowing up to 49% of the
shares of those companies to be privatised. Second,
it has legislated, with effect from 1 October 1989,
to normalise waterfront employment. Hitherto there
has been a national labour pool of waterside workers.
It will end on 30 September and normal employment
arrangements will commence. Third, the Government
has adopted a consistent position of non interference
in commercial and industrial matters around the waterfront.
These changes are still working their way through
and, in terms of normalisation of employment arrangements,
have not yet taken effect but already a number of benefits
have arisen. Again Mr Douglas will be giving a few
of those examples this evening.
Enhanced Shipper Strength
There is one important reason why some of the early
benefits have occurred and why I think things are looking
good for NZ for the future. This is that the employer
side of the equation has been 'taken over' by the shippers.
On the employer side three elements are involved:
- the shippers, that is the owners of the product being
- the stevedores, the companies who actually are the
employers in a direct sense or who soon will be (after
1 October); and
- the shipowners.
At present, the stevedoring companies do the work,
they are paid by the shipowners, and the shipowners
ultimately recover the costs from the shippers via
the freight rate. To date stevedoring companies have
been responsible or accountable to the shipowners.
Shipowners are the ones who traditionally have had
a costplus mentality. Ultimately they have been secure,
being able to recover higher costs through the freight
However, a meeting held on 25 April this year, which
has become known as the 'Anzac Day Hijack', the shippers,
that is the farmers, the dairy boards, the timber people,
the steel people, decided they would take over the
running for the negotiations leading to the new post
1 October waterfront arrangements. The stevedoring
companies would conduct the negotiations, but they
would be made accountable to the shippers and not the
shipowners. That, I think, is really the way to go
because, of course, it is the shippers who ultimately
have the greater incentive to have costs minimised
and efficiencies maximised.
We have talked earlier today about the Australian
Association of Waterside Employers. Paul Houlihan
or Peter Barnard was suggesting that reform on the
waterfront in Australia could mean that that organisation
becomes redundant. The equivalent organisation in
New Zealand is in the process of becoming redundant
because not only has there been the change in accountability,
but the NZ Association of Waterside Employers has not
even been asked to co-ordinate the negotiations. That
task has been given to the Employers Federation, the
general employer organisation.
Future Ports Reforms and Commercial Developments
After these changes come into effect on the 1st October
and the new system has settled down, there will be
quite a number of issues which still need to be tackled.
The main responsibility lies with the industry although
there are some remaining legislative changes that the
Government should make.
First, when the Government formed the new port companies,
it stipulated that they must be at least 51% owned
by the relevant local authorities. Initially the entire
shareholding was vested in the local authorities and
so far no outside entity has purchased shares. There
are quite a number of groups interested in doing so.
They are reluctant, not because they necessarily want
total control or total ownership, but because while-ever
at least 51% remains with what could be seen as parochial
local interests, genuinely commercial decisions may
not be taken. Therefore there is an immediate requirement
for the 51% rule to be relaxed.
Once that is done some quite exciting consortia are
likely to emerge to own ports, either in whole or part.
Most will be combinations of shipper interests. The
Dairy Board has indicated a desire to buy equity in
at least two ports. The timber industry and some of
the fruit organisations are similarly interested. If
there is a direct ownership of the ports by the commodity
that is the principal user of those ports, the chances
of those ports acting contrary to the interests of
the commodity---or shippers generally---will be greatly
The direct parallels between NZ and Australia in this
may not be very close because NZ is more compact geographically,
and there is, in certain regions, a greater degree
of commodity specialisation at particular ports. Australia's
major ports are more general purpose. Nevertheless,
the principle is obviously clear, and its extension
to Australia would, if it could be achieved, be desirable.
Similarly, there are quite a number of groups looking
at establishing new stevedoring ventures to give the
existing stevedoring companies some competition. Several
existing stevedoring companies are joint ventures between
the Union Shipping Company---which is the main NZ shipping
group, and a subsidiary of TNT---and the waterside
workers union itself. It is heartening seeing competition
in stevedoring emerging. In the long run, I don't
think it is likely for a joint venture stevedoring
company involving a trade union to be successful in
the face of genuine competition provided no 'monkey
business' is involved.
A further requirement, if the benefits of reform are
to be maximised, is for all costs, as far as possible,
to be expressed, measured and paid for on an individual
port basis, rather than pooled nationally. In Australia
we have had some experience of this in both the wool
and the meat industry where changes over the past few
years have seen a substantial element of land-based
costs removed from the (pan Australia) freight rate,
to be charged directly to the shippers, on a port by
port basis. Once again, such changes are conducive
to greater efficiency and productivity. If land-based
costs can be paid up-front by shippers, rather than
built into an overall freight rate.
- competition for land transport services is more likely;
- shippers will realise where the bumps and the opportunities
are, and will demand appropriate improvements; and
- greater competition between ports will occur, thus
lessening the chances of monopoly rents being re-appropriated.
I see no reason why in time virtually all of the port
operations cannot be paid directly by the shippers
rather than being paid by shipowners and ultimately
recovered via the freight rate.
On the industrial relations side, the NZ Labour Relations
Act, the equivalent of our Conciliation and Arbitration
Act, has still a number of features in it which results
in an uneven playing field. NZ has, for instance,
a provision that the minimum number of members that
can belong to a union is 1,000. As a result quite
a number of small unions are being forced to amalgamate
to reach the threshold. This seems to be quite inimical
to the interests of decentralisation and, of course,
some rather odd and non rational amalgamations are
taking place. A statistic which I came across when
in NZ, and I think it rather telling one, is that in
Japan there are 70,000 unions, the average membership
of which is 170. Small unions have not caused too
many problems to Japan, or Japanese workers, over the
Also in the Labour Relations Act, the question of
union coverage is very much tilted in favour of the
status quo. If a particular group of workers want
to change the union they belong to it is extremely
difficult under the Act for them to achieve that change
even if it is both sensible and virtually everyone
wants to do so. Similarly, the question of desegregation
of awards from a national down to a regional level
is very heavily biased against desegregation. National
union secretaries understandably are the fiercest defenders
of the national award system because regional awards
threaten their power base quite explicitly.
Unionism is compulsory in NZ, at least under the Act.
While the question of compulsory unionism appears
to be one of the more sacred political cows in NZ,
the issue should be put back on the agenda for debate.
I found it quite ironic that in one particular port,
where there is about three or four hours work per day
to be done by the watersiders, the same people spend
the afternoon unloading fishing vessels as non unionised
labour. NZ watersiders are supposedly just as fervently
pro-union as they are in this country but, given some
choice, people will vote for choice rather than dogma.
The final issue needing change in NZ is in the area
of civil remedies. This is one field where Australia
is ahead in terms of experience and I suspect also
in terms of the robustness of the legal provisions.
There is certainly nowhere near the body of case law
in NZ as there is here with common law or section 45D
actions. Whenever I raised these issues there was
a lot of interest in what had been done here and what
might be possible in NZ. There is not a great deal
of awareness within business of even what the options
might be. It is quite clear that, as in this country,
the watersiders are not going to give up all the privileges
they have enjoyed over the years, without a fight.
It follows that civil remedies will play a very important
part as they have done in Australia in ensuring that
employers can embark on sensible action designed to
improve competitiveness with a degree of equality before
Let me briefly make some comments on the shipping
side, a secondary part of my brief in NZ. Coastal
shipping provides a similar picture as in Australia---effective cabotage, a declining economic role and,
of course, the necessity for some inter-island traffic.
The Government has announced an inquiry which the
Minister has insisted is not a trojan horse to get
rid of cabotage. Nevertheless, unless that issue is
effectively addressed, genuinely contestable markets
will never be produced.
Indeed, partial deregulation can actually make the
situation worse. For example, in the case of the grain
industry in NZ where grain grown in the South Island
is processed into cereal products in the North Island,
South Island farmers have utilised for many years a
coastal shipping service to Auckland. When the Government
deregulated the wheat industry about two years ago,
abolished the Wheat Board and allowed processors to
buy wheat from anywhere they liked, not only did it
make Australia's job more difficult in maintaining
its virtual 100% share of the import component (because
of the high costs of trans-Tasman freight versus international
freight rates), it also had the perverse effect of
making life more difficult for the South Island grain
producers. They were forced to compete for market
share in the face of a very costly coastal shipping
situation, whereas their customers could purchase wheat
from third markets more cheaply.
So much so that a number of farmers switched to barley
rather than wheat because barley could be exported
using an international shipping service to Japan.
In turn the Union Shipping Company, which was providing
the coastal service, found that the quantities of wheat
were no longer large enough to make the service viable,
so it was withdrawn. Now there is the ridiculous situation
of wheat from the South Island being shipped to the
North Island in containers by rail at a freight cost
of somewhere over $NZ100 per tonne. The frustration
of the grain farmers at the way in which partial deregulation
works and the lack of action in the coastal shipping
area, can be well imagined. It is heartening that
they see further deregulation as the solution, not
re-regulation of wheat purchasing.
As to the trans-Tasman trade I think there is a pretty
fair understanding in New Zealand of the situation,
in common with the Australian perspective. The obvious
solution either by government or commercial action
is to repudiate the maritime 'accord' which exists
across the two countries and to encourage cross-traders
to offer competitive services. I don't see any wild
enthusiasm in NZ to take the lead publicly in such
action, although many people are supportive of confronting
the maritime unions. Perhaps it will need to be triggered
from the Australian side where the incentive for change
Finally there is the question of NZ's involvement
in state-owned shipping. The Shipping Corporation
of NZ, which has been owned for a number of years,
has recently been sold. The total cost of NZ's investment
over a number of years was $170m, whereas sale proceeds
were not more than $40m; the investment never paid
a dividend; a few minor benefits were obtained; but
the Minister in announcing the completion of the sale
stated it could only be considered 'an appallingly
He might equally have been speaking of ANL in that