Editors’ picks for 2022: ‘Australia needs more than a strategic merchant shipping fleet’
2 Jan 2023|

Originally published 2 November 2022.

We often think about national resilience at times of crisis or conflict. However, the foundations for resilience are built with every decision we make before a crisis begins to unfold. Resilience is a nation’s ability not only to withstand expected disruptions but also to better position itself for an unknown disruption.

An Australian merchant shipping fleet, operating day to day on coastal or international trading routes and able to be drawn upon in times of crisis or conflict, would make a positive contribution to national resilience. However, policy and legislation have failed to address the disadvantages Australian ships experience and deterred the growth of the Australian fleet.

In a time of economic, climatic and security disruptions, it’s more important than ever to foster diverse ways of moving goods around Australia. Enhanced sovereign coastal trading would reduce the nation’s dependence on road and rail infrastructure, which is regularly affected by major flooding as we’ve seen across large parts of eastern Australia this year.

Coastal trading is the movement of cargo or passengers on ships between ports in different states and territories. It has been a live issue for the shipping industry for some time, which has from time to time prompted the federal government to enact a series of amendments to the Coastal Trading (Revitalising Australian Shipping) Act 2012, most recently in 2017. Those amendments were ‘intended to arrest the decline in the number of the Australian ships operating in the domestic maritime sector’ by ‘creating incentives for business to utilise coastal trading’ and thus reduce freight costs. It was expected that the number of Australian vessels undertaking coastal trading voyages would grow and that this ‘increased capacity would foster more competition [and put] further downward pressure on freight costs’.

However, five years on, those amendments have failed to halt the contraction of the Australian fleet. The complexity of the operating environment has allowed foreign-flagged vessels to cloud this policy failure.

In the lead-up to the May federal election, which it won, Labor acknowledged that ‘less than one per cent of Australian seaborne trade is carried by Australian ships, forcing our nation to rely on foreign governments and companies for our essential imports’. The party committed to ‘appoint a Taskforce to guide it on the establishment of the [Strategic] Fleet as quickly as possible. The Fleet is likely to include up to a dozen vessels including tankers, cargo, container and roll-on-roll-off vessels.’

Labor said that while ‘these ships will likely be privately owned and operate on a commercial basis’, it would ‘ensure they will be available for use by the Defence Forces in times of national crisis, whether that be natural disaster or conflict’.

That taskforce is now being established and its membership is expected to be drawn from the shipping industry, major charterers, unions, Australian businesses and the Department of Defence.

However, the Productivity Commission’s draft report on Australia’s container ports, released in September, presents an alternative view. The report found that the proposal for a strategic fleet ‘requires further evaluation as on present evidence it is not the best remedy for concerns about domestic shipping capacity and training’. It also notes: ‘A privately owned, Australian-registered strategic fleet would have limited ability to mitigate the types of issues that have recently affected Australia’s international freight task.’

The commission suggests as an alternative that:

Capacity could be acquired as needed from the international market without the costs involved in supporting a strategic fleet. The shipping charter market provides access to a wide variety of vessels that could be used to address specialist case-by-case needs. And the Australian Government could access international resources—including the charter market—in times of natural disaster and emergencies.

Australia has no requisite expertise in engaging with the shipping charter market and, in times of crisis or conflict, it’s unlikely Australia will find international ships available to support it. That’s because these vessels are owned or registered in countries that may have their own requirements and supporting Australia may not in their national interest.

There are several issues of national significance to consider in evaluating the potential solutions.

Fostering a sovereign coastal trading sector could deliver benefits beyond availability in emergency situations. While addressing industry-specific issues of competitiveness with foreign-flagged vessels and maintaining a skilled Australian workforce are important, we need to think bigger. On a positive note, there appears to be consensus on the need to address barriers to establishing a sustainable Australian fleet, though the views of industry and unions diverge about how that should be done.

Another issue relates to the focus on a ‘strategic fleet’ that would be co-opted by Defence to support its preparedness and mobilisation in response to national disasters and conflict. Here, the assumption is that voyages undertaken by the strategic fleet one day are not needed the next. It doesn’t recognise that, in times of mobilisation, civil society must also continue to function in some way and at some level and contribute to national mobilisation requirements. This would be the case irrespective of the nature of the disaster or conflict.

It’s also important to recognise that the assumption that civil society can be co-opted for defence purposes doesn’t sit well in a democratic society. A better understanding is needed of the minimum level of support that Australia, not just Defence, needs in times of mobilisation to sustain Australia’s economy and its physical and social infrastructure.

If a conflict or extreme natural disaster occurred today, civil society would suffer immediate and severe disruption, compounded by reliance on foreign shipping. In the case of conflict, many of these ships are from nations that would have a direct or indirect incentives to avoid it.

The response to a disruption would involve the government requisitioning Australian ships to relieve the impact of the immediate crisis on Australian interests. This is the approach adopted by other OECD countries. At the time of requisition, any other activities these ships were involved in would be secondary or irrelevant to our needs.

There are also sovereignty concerns inherent in mobilising for national security and defence purposes both foreign-flagged and Australian-flagged ships crewed by foreign nationals. History tells us this is an issue for Australian-crewed vessels. In 1967, for example, the Seaman’s Union boycotted the merchant ship Boonaroo in opposition to Australia’s involvement in the Vietnam War and waterside workers refused to unload the munitions ship Jeparit. Viewed through today’s lens, these actions are understood in the context of growing public opposition in Australia to the Vietnam War. However, it raises a questions about how the concerns of foreign nationals would play out today.

When the Victorian town of Mallacoota was surrounded by fire on 31 December 2019, fuel company Esso deployed a Norwegian ship and helicopters to the area. The ship arrived on 1 January and was a second registry vessel operated and crewed in Australia by Australians. It wasn’t until the morning of 3 January that the Royal Australian Navy’s HMAS Choules arrived and commenced evacuations. The quick response by Esso was likely driven by its proximity to Mallacoota, but it’s important to appreciate that it was a diversion from other nation-sustaining activity. What we’ll never know is how long the Esso ship could have continued to be deployed in this manner before it had significant economic impacts on other sectors.

There’s no suggestion Esso should have done otherwise, but in these times of concurrent and cascading crises, for a strategic fleet to be a sustainable option it needs to be accompanied by measures that support Australian international trading vessels. That requires us to address the imbalance favouring foreign-flagged vessels over sovereign vessels.

Perhaps a different way to consider the issue is from the perspective of a ‘coastal trading highway’—not a novel idea for Pacific island nations. For an island nation, a coastal trading highway would complement the national road and rail freight sectors. Such an approach would create a broad sustainable base that can better accommodate diversion of some ships into a strategic fleet.

Some benefits need quantifying but could include cost savings on road maintenance arising from the impact of heavy trucks and reducing the road toll on our national highways.

But there are also known benefits, particularly in terms of achieving the government’s commitment to a 43% cut in greenhouse emissions below 2005 levels and net zero by 2030. Road freight results in three times the emissions of sea or rail freight. The shipping sector is rapidly moving to clean fuels, and now appears to be ahead of other sectors in the race to net zero.

Australia needs more than a domestic strategic fleet; we need a framework that encourages a mix of coastal and international trading ships. Solutions solely for a small coastal strategic fleet don’t address the real strategic problems Australia has created for itself in this sector.

The many attempts to tackle the issues facing sovereign coastal trading highlight that this is a complex and challenging problem. However, the push to establish a strategic fleet is yet another example of focusing on a symptom rather than solving the core problem.