Grattan report advises increased port regulation


RFNSW backs recommendation in face of stevedore access charge hikes

Grattan report advises increased port regulation
The cover of the Grattan Institute report

 

Road Freight NSW has used a Grattan Institute competition report to take a new swipe at stevedore access charges and regulatory oversight of ports.

The economic think tank’s report, Competition in Australia: Too little of a good thing?, written by Grattan Institute productivity growth program director Jim Minifie, senior associate Cameron Chisholm  and Associate Lucy Percival.

The researchers advise toughening price and access regulation in ports.

"Some ports negotiate access and prices with a small number of commercial customers, and price negotiations that are not backed by the alternative of arbitration will reflect the often unbalanced bargaining power of customer and supplier," they say.

"Other ports set prices to a broader set of users, subject to a regulated cap or to competitive pressure from nearby ports.

"In either case, high prices can result if regulation does not sufficiently compensate for weak competitive pressure."

RFNSW general manager Simon O’Hara welcomes the report’s recommendation for "toughening price and access regulation in ports", saying it coincides with new analysis showing that carriers will be forced to pay up to $338,000 per annum to DP World Australia (DPWA) alone in proposed new port infrastructure surcharges.

From January 1, DPWA will impose a levy of $37.65 per container on trucks entering the Port Botany terminal – a rise of $16.49 on the earlier infrastructure tax of $21.16 announced by the stevedore in April.

"With the clock ticking until the new DPWA tax takes effect on New Year’s Day, RFNSW has again written to the ACCC, asking that it urgently intervenes to put a stop to the stevedores using their market power to impose these ongoing port surcharges on hard-working truckies. The new findings from the Grattan Institute justify why the ACCC must act," O’Hara says.

"The increased DPWA levy is an unjustified double whammy for truckies who are already struggling on tight margins.

"RFNSW is currently collating feedback from members on how the increased port charges will affect their bottom line. On their current volumes, one of our RFNSW members estimates they’ll be forking out $301,000 to $338,000 to DPWA alone. Again, that’s just for DPWA.

"The carrier is also paying Patrick for its own infrastructure surcharge of $25.45 per container.

"The cash flow of carriers will be constrained even further and it’s the smaller, family-operated businesses who will struggle to make quick payments to the stevedores through the Vehicle Booking Scheme, yet have to wait up to a month to get paid by their customers. It’s simply unsustainable."

Using IBISWorld analysis, the report shows ‘port operators’ as a sector have high barriers to entry while ‘road freight transport’ amongst the lowest.

However, in the ‘natural-monopoly sectors, port operators are seen to have returns within the ‘normal profit’ range, unlike ‘rail freight transport’ which is seen as gaining a slice of ‘super-normal profits.

Likewise among the ‘sectors with significant scale economies’, normal profits accrued to ‘stevedoring services’.

"Returns to port and water transport terminal operators are, on average, close to the cost of equity, although some port operators are earning substantially higher returns," the researchers write.

According to the Grattan Institute, the report shows that the market shares of large firms in concentrated sectors in Australia are not much higher than in other countries and that they have they not grown much lately.

But the report shows that where a few firms dominate markets, they earn higher profits.

Up to half the total profits in the supermarket sector, dominated by Coles and Woolworths, are ‘super-normal’ – that is, profits that exceed the cost of compensating shareholders.

In the banking sector, dominated by the 'big four', super-normal profits account for 17 per cent of total profits.

Other companies and sectors with substantial super profits include Telstra, some major city airports, liquor retailers, internet service providers, sports betting agencies, and private health insurers.

The Grattan Institute believes regulators "can put more pressure on electricity distributors, ports and airports, and on health insurers".

"There’s nothing wrong with profits – they play an important and legitimate role in the economy and society," Minifie says.

"But where profits become super-profits because firms face little competition, they can come at the expense of customers or suppliers.

"There are no policy silver bullets here, but governments can do more to improve competition in the private economy."

ATN has sought comment from the stevedores.

The full report can be found here.

 

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