Tasmanian Shipping and Freight Draft Report

The Productivity Commission recommends improvements to current Federal arrangements supporting Tasmania's freight and passenger maritime services, in a draft report released today. The Commission comments, however, that the proposed changes and indeed the schemes themselves cannot meaningfully address Tasmania's underlying competitiveness and fundamental economic challenges. Initial thoughts on this policy imperative, albeit limited by the inquiry's short time-frame, are included in the draft report.

The draft report - Tasmanian Shipping and Freight - examines the competitiveness of Tasmania's shipping and freight services, and assesses the effectiveness of Tasmania's freight and passenger subsidy schemes, the alignment of their objectives and outcomes, and their relationship to broader Tasmanian transport and economic issues.

The Commission found deficiencies in the design and operation of the Tasmanian Freight Equalisation Scheme (TFES), Bass Strait Passenger Vehicle Equalisation Scheme (BSPVES) and the Tasmanian Wheat Freight Scheme (TWFS).

Commissioner Karen Chester said: 'The design and administration of the current subsidy schemes are out-dated, resulting in outcomes not well-aligned with the schemes' underlying objectives. The embedded administrative complexity also gives rise to anomalies and some perverse incentives.' The Commission found the scheme encourages processing of some Tasmanian products to shift to Victoria, in order to qualify for the freight subsidy - an incentive widely acknowledged by business in initial submissions to the inquiry.

In view of the Australian Government's stated intention to retain the TFES and BSPVES, the Commission's preliminary recommendations for improvement include:

• TFES payment rates be based on contemporary data and regular parameter reviews
• TFES payments be made on a flat rate basis per 20 foot equivalent unit
• A threshold be required for the minimum value of claim line item
• Expediting the Government's foreshadowed review of coastal shipping regulation to reduce the cost of Australian shipping and the impost on business, especially Tasmanian business.

The Commission also proposes that broader policy initiatives and reform are needed to address the widening gap between Tasmania and mainland jurisdictions and address lower income growth and labour productivity, higher unemployment rates and social disadvantage. State issues related to the efficiency of Tasmanian shipping and freight, such as rationalising infrastructure assets, should be addressed in the integrated Tasmanian Freight Strategy, an initiative recently referenced in the Tasmanian Government's interim response to the Freight Logistics Coordination Team Report.

The Commission is seeking comment on this draft report and invites written submissions by 7  February 2014. A final report will be submitted to the Australian Government in early March 2014.

• Preliminaries
  • Cover, Copyright and publication details, Opportunity for further comment, Terms of reference and Contents
• Overview
• Draft recommendations and information requests
• Chapter 1 Introduction and scope
  • 1.1 A matter of geography
  • 1.2 What the Commission has been asked to do
  • 1.3 Conduct of the inquiry
• Chapter 2 Tasmania's freight in context
  • 2.1 Tasmania's economy at a glance
  • 2.2 Tasmania's freight task
  • 2.3 Freight cost disadvantage
  • 2.4 Tasmania's passenger vehicle task
  • 2.5 The cost for passenger vehicles
• Chapter 3 Current and alternative arrangements
  • 3.1 About the schemes
  • 3.2 Impacts of the schemes
  • 3.3 Effectiveness of the schemes
• Chapter 4 Sea freight
  • 4.1 Key features of Tasmania's domestic and international shipping
  • 4.2 Efficiency drivers of Tasmania's shipping
  • 4.3 Key features of Tasmanian ports
  • 4.4 Efficiency drivers of ports
• Chapter 5 Land freight
  • 5.1 Land freight movements
  • 5.2 Road freight
  • 5.3 Rail freight
  • 5.4 An integrated Tasmanian freight strategy
• Chapter 6 An economic development approach
  • 6.1 A better way to support economic and social development
  • 6.2 Meshing with existing plans and programs
  • 6.3 Review and evaluation
• Appendix A Conduct of the inquiry
• Appendix B Recommendations of the PC 2006 inquiry into Tasmanian freight subsidy arrangements
• References

Please note: The following appendix is only available online and is not in the printed copy.

• Appendix C Coastal trading regulation