Port of Newcastle (Extinguishment of Liability) Bill 2022

13th October 2022

Port of Newcastle (Extinguishment of Liability) Bill 2022

Greg Piper – Member for Lake Macquarie

Mr Speaker I’m pleased to bring the Port of Newcastle (Extinguishment of Liability) Bill to the House.

It’s a simple bill with a simple intent, but that simplicity belies the fact that it’s passage will provide profound benefits to NSW into the future.  The intent is to fix a very bad deal brokered by a former government to the great detriment of the State’s economic potential and in particular that of Northern NSW and the Hunter Region.

It was a deal that has become a deadweight on the State’s future, and it was a deal that put the Hunter’s potential into a straitjacket in order to deliver a short-term windfall.

Mr Speaker I need to take the House back to 2013 where it all began. That’s when then Premier Mike Baird set out to privatise all three of the State’s public-owned ports at Newcastle, Port Kembla, and Port Botany.

It was a deal which netted the Government an extraordinary $6.82 billion. It was a staggering result, but as is often the case with these things, the devil was in the detail.

A consortium called NSW Ports, which included a sovereign wealth fund of the Abu Dhabi government, purchased a 99-year lease deal on Botany and Kembla for $5.07 billion in 2013.

The following year, a 99-year lease on Newcastle was sold to a consortium called Port of Newcastle for $1.75 billion.

What wasn’t clear at the time was the reason NSW Ports was willing to pay so much for Botany and Kembla was because they were essentially given a monopoly on container trade in and out of the State for the next 50-plus years.

This didn’t happen by accident. It later emerged that NSW Ports had lobbied the Government for the sweetest of deals, locking out competition on containers until 2065. It drove up the sale price for obvious reasons and it was gladly accepted by a government with dollar signs in its eyes and little regard for the long-term impacts on the State, on regional NSW, on regional industry and farmers, and on the world’s biggest coal port in Newcastle.

The deal put a cap on the number of containers which were allowed to come into and out of Newcastle. Anything over 30,000 units a year at that time would trigger a compensation clause which is estimated to cost about $100 per container. That money was to be collected by the Government and paid to NSW Ports as compensation.

It's my very firm view, and certainly the view of most in Newcastle and beyond, that that clause constitutes a considerable restriction on free trade, is anti-competitive and creates a monopoly for NSW Ports to the detriment of the Hunter and other regional areas north of Sydney.

The competition watchdog, the ACCC agrees. It began preparing a legal case but for the next four years it was unable to name the State Government as a party to the case because of a technicality in competition law. That case remains under appeal in the Federal Court today with the ACCC arguing that the anti-competitive parts of the deed should be ruled illegal.

ACCC chair Rod Sims said, and I quote: “We consider that the purpose of the compensation provisions entered into at the time the State privatised the ports of Botany and Kembla was anti-competitive.

“We remain concerned that the Port Commitment Deeds will effectively hinder or prevent the development of a competing container terminal at the Port of Newcastle for 50 years (and that) is a matter of significance for the Australian economy.” Unquote.

The Productivity Commissioner went further. The recent draft report on our maritime logistics by Commissioner Stephen King estimated that inefficiencies in Australian ports are currently costing more than $600m a year, with more than half of that directly related to inefficiencies in NSW and specifically around Port Botany.

Commissioner King said, and I quote: “Artificial barriers like the one faced by the Port of Newcastle…make no sense and should be removed.” Unquote.

Mr Speaker, we have ample evidence to show that delays, shortages, and high costs are biting this State and local communities hard.

All those reports you read about a shortage in building products and supplies are due in large part to port delays. All those Christmas presents and goods you buy online from overseas take months to arrive because of delays at our ports and the transport logistics around them.

All those exporters you hear from in your local electorates who are having trouble getting their produce or products to international markets are largely in that position because of inefficiencies at our ports.

This Bill will go a long way towards fixing those problems.

What the Federal Court of Appeal may say about the Government’s ability to do the deal it did in 2013 remains unknown, but there is likely no doubt among the fair-minded people of NSW that the deal was done deliberately to drive up the sale price of Botany and Kembla to the disadvantage of Newcastle, market competition and the ability to ensure the most efficient container logistics in NSW.  This sadly, was about the short-term.

This short-term thinking has had significant impacts on primary producers, on regional manufacturers and other businesses who are trying to get products to international markets.

While coal exports remain very strong in the Hunter Region and continue to deliver billions of dollars’ worth of revenue to the State accounts every year, everyone knows that those billions are not going to keep rolling in forever as demand for thermal coal overseas diminishes in the decades ahead.

That’s why the Government has a responsibility to the people of Newcastle, Lake Macquarie, and the Hunter Region to enable existing industry to diversify, transition, and prepare for the future.

And that is what Port of Newcastle is trying to do.

Port of Newcastle has proposed a new container terminal which will accommodate ships that are too big to dock at existing ports, but investors are unwilling to commit because of uncertainty over the existing deed and the penalty clauses which could make building the terminal uneconomical.

Mr Speaker, along with other members here, I’m not going to sit back any longer and watch thousands of jobs disappear in the Hunter Region because of a dubious deal which puts a handbrake not just on the Hunter’s future, but the future of this State.

And I’m not going to sit back and watch billions of dollars’ worth of new investment be lost to the Hunter Region so we can enshrine a monopoly in Sydney and Wollongong, and nor should anyone else in this House.

As I said earlier, this proposed Bill is quite simple. It simply creates a level playing field for each of the State’s ports by removing the penalties clause in the Newcastle Port Commitment Deed.

It doesn’t impact on any other part of the Newcastle deed, it simply removes the requirement that Port of Newcastle pay a penalty to its competitor, via the State Government, for every container it handles above the current cap.

It’s a fair and balanced outcome which will have all three of the State’s major ports competing under the same rules. And let me be clear that this competition doesn’t bring benefits just for those economies north of Sydney. It will benefit the entire State. Importers and exporters in Western Sydney, for example, would be given a choice in their container shipping, and I’m advised the increased competition alone could lower costs for those businesses in Western Sydney by as much as $40m a year by 2026.

This Bill does not address the question of how NSW Ports will be compensated, and I know that’s a valid concern held by some Members. This Bill leaves that to the discretion of the Government, whether to negotiate a settlement of the equivalent deed of NSW Ports or negotiate an option.

And I say to those Members, that there are options that don’t involve a one-off large compensation payment. There are options which don’t have to cost taxpayers anything.

Mr Speaker, either way, getting out of this deal now is going to be a cheaper option for taxpayers, our agri-businesses, our exporters and importers and indeed the State of NSW.

The world has changed quite significantly since those deeds were signed a decade ago. What might have seemed fair then, even though it certainly wasn’t, hasn’t worked out so well.

While I stand here now backed by the likes of the ACCC and the Productivity Commission, and I outline all the problems and billions of dollars that this deed is costing NSW now, I ask Members to think about how much worse it’s going to be while we remain straitjacketed in the same bad deal for the next 43 years.

Mr Speaker, let me detail some of the impacts that the current arrangements are having right across NSW, but particularly in the Hunter and northern parts of the State.

Other Members of this House might be surprised to learn that vast numbers of this State’s primary producers are now shipping their produce overseas through the Port of Brisbane because of logistical bottlenecks at Port Botany, and the cost of going through Port Botany, or Newcastle for that matter.

I encourage those Members, particularly those here in the city and in the State’s south to listen to NSW Farmers in the north, to listen to this state’s primary producers, to listen to this State’s major manufacturers in the north and north-west when they say they’re having to negotiate costly bottlenecks and significant logistical challenges in getting their products to export markets because they can’t ship through Newcastle without bearing the extra costs imposed on Port of Newcastle.

Let them tell you about the extraordinary costs of sea freight which has skyrocketed six-fold since the start of the pandemic – that’s the equivalent of a Big Mac jumping from $6 to $36 in a couple of years. That’s what they’re facing right now.

Add to that the cost of logistical challenges in the NSW freight rail system and supply chains, and of course the penalties associated with shipping through Newcastle.

Ask Walgett grain farmer Ed Colless who last year exported chickpeas through Gladstone in Central Queensland because it was cheaper than going out through Newcastle and obviously Port Botany. He can get chickpea from Walgett to Gladstone for about $130 a tonne but going out through Newcastle would currently cost more than $200 a tonne, despite Gladstone being almost twice the distance from Walgett than Newcastle.

It's an extraordinary and ridiculous situation. We must put Newcastle and any other competitor on a level playing field before we can even think about getting the level of investment needed in port facilities and supply chains in the northern half of the State.

And I should hasten to add that these logistical challenges can’t be easily resolved at Botany or Kembla because of the existing traffic issues, population densities and restrictions.

Only when we have a level playing field will we see things improve for grain farmers and exporters and a lowering of the exorbitant cost of getting product to international markets.

If we take out the container penalties in Newcastle, a farmer from the State’s north-west would still save an additional $16-$22 per tonne by shipping out of Newcastle instead of Brisbane if the facilities were in place.

Mr Speaker that equates to about $3 billion in savings over the next 30 years for those farmers alone. It would decrease freight travel distances by 40 per cent, create thousands of new jobs in areas where they’re desperately needed and generate about $800m in additional exports every year.

It works the same on the flipside – containers coming into NSW and destined for the State’s north coast come in largely through Botany. That puts more freight on the northern rail line and adds more costs for the importers or consumers at the other end.

Mr Speaker the fix starts right here with this bill. We must unshackle Port of Newcastle from a lazy deal that is good for no one except the shareholders in NSW Ports and their monopoly at Botany and Kembla.

Our primary producers and exporters, and the taxpayers of this State cannot remain shackled to the terms of this questionable deal for another 43 years. It was a bad deal, and it will be far cheaper to get out of it now than face the restraints, losses and limitations that will cost us billions over the next 43 years.

Mr Speaker, I believe there are very few Members of this House who wouldn’t agree that the deals done back in 2013 and 14 were genuinely deficient and anti-competitive. On that note, I acknowledge the work that the Member for Northern Tablelands Adam Marshall and the Member for Newcastle Tim Crakanthorp have done in this area over recent years, and I also acknowledge the Member for Upper Hunter Dave Layzell who understands the impacts that the current deed is having on his constituency.

Mr Speaker, again I say that this is a very simple bill with a very simple and clear intent.

I commend the Bill to the House.








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