JOHN AUSTEN. Newcastle port restriction – action not words please!

Instead of handwringing politicians should act to reverse the outrageous restriction on Newcastle port.

The anti-competitive restriction on Newcastle port, secretly set by the NSW Government during its port privatisations, recently hit the headlines again.

The restriction requires Newcastle to pay a fee for each container it handles over a modest amount, deterring it from establishing a container terminal. The fee is to go to Port Botany which is Newcastle’s competition! https://johnmenadue.com/john-menadue-media-catch-up-on-newcastle-port/

There are two reasons for the headlines.

First, the NSW Government was seeking submissions on a draft ‘freight strategy’. But it is impossible to have a freight strategy without consideration of the most important freight places – ports. Yet the Government’s draft avoided the Newcastle issue, a remarkable omission.

https://future.transport.nsw.gov.au/draft-plans/draft-nsw-freight-and-ports-plan 

Newcastle port’s submission made a killer point: by virtually forcing all containers to move through Botany the restriction on Newcastle adds to road costs in Sydney. It cited a Deloitte study which claimed up to $75m pa may be involved in costs such as the extra road distance travelled by containers bound for Newcastle and beyond. 

That the restriction adds to costs in northern NSW and causes road problems in Sydney is not new to Pearls and Irritations readers. Now a quantum is on the table. https://johnmenadue.com/john-austen-trouble-in-infrastructure-paradise-nsw-revisited/

Deloitte figures included a congestion cost estimate – $4.5m pa – based, as is usual, on averages estimated by NSW. 

However, congestion caused by Botany trucks is anything but average as anyone on roads like the M5, Pennant Hills Rd and M1 would attest. Narrow tunnels and lanes, steep grades, traffic lights on hills and traffic weaving means trucks contribute substantially to congestion on those roads. 

A quick calculation suggests avoidable congestion costs due to Botany trucks bound for Newcastle on the M5 alone was at least $15m in 2011 [1]. The real cost is likely to be much higher after taking into account the further 150km to Newcastle and motorway traffic build-up over the last 7 years – even given recent road building!

A second reason for the headlines is the new-found interest of the Australian Competition and Consumer Commission in the  Newcastle port restriction. Previously the Commission appeared to take the view that privatisation is legally not a business transaction and therefore the restriction was outside its ambit. This attitude may have changed and the Commission is seeking relevant information. https://www.theherald.com.au/story/5334258/two-operators-interested-in-running-newcastle-container-terminal/

The State Government has been silent on these developments – not surprisingly since its Premier was a defender of both the arrangements and the secrecy. 

The State Opposition said it welcomes the Commission’s interest. Yet as the outcomes of investigations – which may involve prosecutions – are probably years off. But just ‘welcoming’ somebody looking into something is not good enough. 

https://www.smh.com.au/business/the-economy/restrictions-on-privatised-ports-adding-to-sydney-s-gridlock-deloitte-report-20180411-p4z91q.html 

Also concerning is the failure of the latest official freight review to even bother mentioning the  Newcastle port issue despite its awareness of the matter and the acknowledgement of big and growing problems of freight and congestion in inner Sydney. A later post  in Pearls and Irritations will reflect on that review which, as usual, lacks rigour and is all over the place.

https://infrastructure.gov.au/transport/freight/freight-supply-chain-priorities/index.aspx

Most concerning is the Commonwealth’s inaction.

The Commonwealth can act. The Newcasle restriction affects international trade, a matter assigned to it by the Constitution – unlike many of the less important things Canberra prefers doing like rolling out the pork barrel for roads, football grounds, agency relocations and endless freight reviews.

There is every reason to act: to ease traffic congestion in Sydney; improve the competitiveness of industries reliant on containerised goods; help the necessary diversification of Newcastle’s economy; stop this dreadful policy becoming a precedent. It is an appalling anti-competitive policy that must be reversed.

The Commonwealth should act now. It should shift any burden of ‘compensation’ to the NSW Government which is to blame for this debacle.

John Austen is a happily retired former official living in the Macarthur area of Western Sydney. He was Director of Economic Policy for Infrastructure Australia from its inception in 2008 until his retirement in 2014.  

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One Response to JOHN AUSTEN. Newcastle port restriction – action not words please!

  1. Greg Cameron says:

    Industry super funds kept secret their anti-competitive leasing arrangements for Port Botany and Port Kembla. IFM Investors, Australian Super, Cbus, HESTA, Hostplus and Q Super own 80 per cent of the lessee of Port Botany and Port Kembla, NSW Ports. The remainder is owned by “Aubu Dhabi Investment Authority” of the Arab Emirates

    The “strictly confidential” leasing arrangements require the NSW government to pay NSW Ports for containers shipped through the Port of Newcastle, unless NSW Ports:

    (a) developed container handling capacity at the Port of Newcastle; or,

    (b) operated any material container handling capacity at the Port of Newcastle; or,

    (c) managed or leased the Port of Newcastle, or any material part of it.

    The Newcastle Herald published the “strictly confidential” 2013 “Port Commitment – Port Botany and Port Kembla” (Port Commitment), on July 28 2016.

    After leasing ports Botany and Kembla in April 2013, NSW Ports did not proceed to lease the Port of Newcastle’s container terminal site, or the port itself.

    The Port Commitment confirms that in 2013, the government contractually required a private company, Newcastle Stevedores Consortium (NSC), “to make the State whole for any cost the State incurs to NSW Ports under the Port Commitment”. The previous (Labor) government selected NSC as its ”preferred proponent” in 2010 for developing a container terminal at the Port of Newcastle, with capacity of at least 1 million TEUs a year.

    By having recourse to NSC in respect of “future container capacity development”, the government contradicted its public policy that the state’s next container terminal would be developed at Port Kembla.

    The state’s next container terminal will be at either Port of Newcastle or Port Kembla.

    The government having recourse to NSC was a likely breach of the section 45 anti-competition provisions of the Competition Act.

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