Australia’s ports continue to be a ‘wicked problem’ – Ai Group Paper released

“It is clear from an Ai Group Discussion Paper released today that significant issues associated with our ports persist which could undermine our resilience, competitiveness and COVID recovery, should we fail to address them,” Innes Willox, Chief Executive of the national employer association Ai Group said today.

“Australian port and shipping policy has been described in the past as a ‘wicked problem’[1] and this situation remains today. As an island nation, 98% of Australia’s trade goes through our ports and most Australian jobs rely on ports in some way through import/export trade[2]. Despite our dependence on them, Australia has followed many other countries by largely privatising our ports to fund other state infrastructure projects and reduce debt. However, privatisation has brought risks: undervaluation of port assets, increasing port charges, competition issues, less port investment and less concern for long-term public interest.

“Almost a decade on from a landmark Shipping Australia report that showed Australia was ‘losing ground’ in terms of productivity and competitiveness in almost all areas of shipping similar concerns are still being raised. These issues appear to be exacerbated by instances of industrial action, like the acute pain being felt in Sydney. Similarly, the COVID-19 pandemic has created even more chaos, demonstrating a need to plan for disasters or unexpected global disruptions in all areas of the economy, including in our ports.

“As nearly all our trade is through ports, these issues need close government attention and action where appropriate, to ensure Australia, and our supply chains, are competitive, productive and resilient into the future.

“The 20/21 Budget announced five different initiatives, involving 28 Federal Agencies at a cost of over $350 million to improve the trade system for importers and exports. The impact of these overdue reforms could be lost if the ports are not similarly reformed,” Mr Willox said.

The issues raised in the Ai Group Paper include:

  • Australia is under-investing in infrastructure and the skills required for handling Ultra Large Container Vessels (ULCVs) – those with capacity of more than 14,000 TEU (twenty-foot equivalent units) – which already make up around half of all newbuild capacity.
  • If Australia wishes to develop a truly world class port system, logistics higher education and skills more broadly will be an essential component.
  • With foreign competitors increasing their use of cheaper freight via ULCVs, we run the risk of losing competitiveness if we fail to keep up with the world class ports being established around the globe.
  • Ai Group members are reporting that, in some ports at least, prices charged are becoming increasingly uncompetitive. Concerns have been raised about additional congestion fees charged by numerous shipping companies.
  • An underlying concern is that private port operators essentially have the market power of unregulated monopolies.
  • The high concentration of foreign ownership of Australian port assets has given rise to additional community concerns regarding Australia’s national security and interest.
  • Industrial relations disputes on the waterfront are typically very costly and disruptive and the CFMMEU has an excessive amount of power in enterprise bargaining negotiations.
  • Australian governments should conduct detailed investigations (involving port owners and other stakeholders) on what port infrastructure will be needed to keep us globally competitive into the future.
  • A Community Service Obligation could be an option for use by governments to ensure that our port infrastructure operates to public benefit.

The Ai Group Australian Ports discussion paper is available at this link.

[1] Ports & Shipping Policy in Australia in the 21st Century – a ‘Wicked Problem’, Macquarie Lighthouse lecture series (March 2019)

[2] Value of Ports, Ports Australia

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