PRESENTER:

This is AM, I’m Peter Cave, good morning. A Productivity Commission report into the waterfront has found that Australia lags behind the rest of the world’s best practice for stevedoring. But it lays the blame not only at the feet of the Maritime Union but also the stevedoring management, high state government and port charges, poor planning and even inefficient quarantine and customs practices. Waterfront charges, for example, it found to be up to three times higher than at other overseas ports. Our chief political correspondent Matt Peacock asked the Federal Treasurer, Peter Costello if it were fair just to blame the Union for Australia’s woes.

I think the important thing is that the Productivity Commission is a dispassionate, analytic report on the state of Australia’s waterfront and I would recommend to all commentators, journalists, people that are interested to get a copy and read it. As you said it says that there are multiple problems including lack of competition amongst employers which is something that we’ve long identified as a problem down on the waterfront. But it comes to the inescapable conclusion that whichever way you look at it, productivity on Australia’s waterfront is below international standards and whatever way you look at it, it is a cost to our exporters. Whether you measure it by crane rates, whether you measure it by lifts per employee, whether you measure it by work practices. On all of those measures, productivity on Australia’s waterfront lags behind and that’s why it’s necessary to reform and improve efficiencies.

Let’s have a look at some of the causes, I mean the Commission does acknowledge something that the Drewry Report also acknowledged this week, which is Australia’s unique circumstances. We have very thin shipping routes in the sense that the volume is low and the distances are long and generally the ships stop at many ports. Now that in itself is going to make us uncompetitive, isn’t it?

The interesting thing about this report, and there have been reports before done by the Bureau of Industry Economics, is that for the first time what it did is it tried to follow the ships around the world and to make allowances for distance, for liners and for volumes. Now this has always been the argument that one of the reasons for poor productivity on Australia’s waterfront is that we have small volumes. But this is the first report that makes allowances for volumes and it makes allowances for volumes by tracing the ships themselves. And the unmistakable conclusion is, even allowing for volumes and allowing for multiple ports which reduce volumes, you still have lower productivity, substantially lower productivity. And what the report then does is as part of a second volume, is it looks at work arrangements in container stevedoring and it actually goes in and analyses some of these work arrangements, very, very interesting. And it fingers particular practices which contribute to low productivity on the waterfront, particularly the order of engagement practice which specifies the order in which people can be employed. And the order in which people can be employed basically is designed to ensure that employees have the opportunities to work double shifts before you bring in supplementary labour. What this does from a waterside workers point of view, of course, is that it increases remuneration because they go onto high shift penalties but it has a lot of downsides, one of which is cost and the other is occupational health and safety.

But even if you improve labour productivity by 20 per cent, say, the actual percentage saving to the total stevedoring cost would be small, would it not?

Oh no because it’s just not labour, it’s also the times. I think the Commission also found that there was one shipping line that actually employed an extra ship just to cover delays on the Australian run.

Yes but those delays were caused by documentation, lack of logistic planning, quarantine, those sorts of things.

Low productivity, health and safety problems, labour arrangements and all of these contribute. Now let me make this clear if you’re going to clean up the Australian waterfront and improve productivity you have to improve labour arrangements. But you also have to improve management, make no mistake about this. One of the objectives of this is to get more competitive management in place in relation to the Australian waterfront but ….

And yet we have P&O doing, what, 75 per cent at the moment?

Well can I use that point to illustrate one of the great successes on the Australian waterfront. One of the great successes on the Australian waterfront, as the Productivity Commission found, was in relation to wheat. Productivity had improved multiple times in relation to wheat, why, because the Australian Wheat Board had actually taken over the management of stevedoring. Once you had the Australian Wheat Board in there, not only did it have a better incentive but it was organising the labour arrangements in a much more productive way.

So your problem is management just as much as the union?

Well as the Productivity Commission found, one of the reasons why management is so poor is that management hardly manages on the waterfront. The real manager on the waterfront is the MUA, as the Productivity Commission found. But if you can get to a stage where management can manage and can improve work practices and improve management as well, you’ll get real reform on the Australian waterfront.

Let’s talk about Mr Corrigan’s management. Mr Reith says he didn’t take advice on the Corrigan company restructure that the courts have found as arguably illegal, do you as Treasurer support what he has done, Mr Corrigan’s done?

Well as the Government made clear all along, one, we want to see improved productivity on the waterfront, two, we think that it has to be done in accordance with the law and three…

But is this sort of Cobar option in accordance with the law, do you think Treasurer?

Well three, this is now before all the courts of the land that will in due course no doubt give their judgement on that particular point.

How confident are you about it?

Well it’s going to take months before they give a final judgement in relation to that particular issue and I’ll read the court decision with great interest like everybody else.

Do you think Mr Corrigan’s kept the ASC and the Stock Exchange informed and fully paid his taxes? I mean they’ve acknowledged, I understand, that they haven’t paid all the employee liabilities and tax.

I think that in relation to employee liabilities you’d have to see what the liability is. Nobody is quite sure what the status of the employees is at this stage and as I said earlier once the courts determine that, then Patricks like any other company will be expected to pay its fair share. That’s the Government’s position, that any company should abide by the law, just as any union should incidentally. We would also be hoping that the MUA would be giving assurances that it will abide by the law, not only picketing law but in relation to its financial liabilities. Look at the end of the day the Government expects employers and employees to abide by the law. The courts are there to determine what the law is but from an economic point of view, regardless of this particular episode, the rights or wrongs, the legal liabilities, let me make this point clear; as the Productivity Commission, an independent Commission, after taking submissions from everybody including the MUA, has found that the Australian waterfront is working against the Australian national interest because it is harming our exporters. And it is in the interests of every Australian, consumer, producer, grower, manufacturer to get a more efficient Australian waterfront and it is in the interests of the Australian nation to get the waterfront productive, efficient and up to world standards.

And what’s this dispute doing to our reputation at the moment, it’s in its third week, there’s liable to be a long court inquiry, a Senate inquiry, is it a good time for this given the Asian uncertainties?

Well look it would have been good if the Australian waterfront had been reformed years ago but it’s got to be done, doesn’t it? And sure there will be some short term dislocation as there now is but if the outcome is long term improvement it will be worth it. You can’t sit around and say we’ll handicap ourselves in world markets forever because we’re too afraid to take on the reform incentive. The reforms have got to be done so that our country gets the best go that it can in world export markets.

Thanks, Treasurer for joining AM.

Thank you very much Matt.