Pallas says Port of Melbourne lease will happen

The privatisation of the Port of Melbourne will happen with or without parliament approval, Victorian treasurer says

Pallas says Port of Melbourne lease will happen
Victorian treasurer Tim Pallas backs port lease.


Victorian treasurer Tim Pallas has strongly defended his government’s decision to lease the Port of Melbourne at the Victorian Transport Association’s (VTA’s) ministerial breakfast event in Melbourne this morning.

Speaking to transport industry executives, Pallas says the privatisation will go ahead with or without the backing of parliament as it is essential to fund a number of required infrastructure projects.

"We have a mandate to lease the port… and we will lease the port," Pallas says. "We don’t need legislation to lease the port."

"I can do it via Administrative Order, but I won’t get the level of value I would otherwise have got for it because it will take longer and create a level of uncertainty in the minds of investors."

Return from the lease is key for the government to pay for the removal of 50 level crossings across the state and the $200 million Agriculture Infrastructure and Jobs Fund, which will update the Princess Freeway.

Taking aim at "myths" surrounding the deal, Pallas says it will be beneficial for both the state and for industry operators.

"The Port of Melbourne is restricted to being a landlord, its responsibilities, essentially, end at the port gate," he says. "A leaseholder will be less constrained."

Victoria’s treasurer says the leaseholder will have an vested interest in new customers; strong incentives to snare business from other ports, including Sydney; aim to increase the port’s efficiency; have access to best-practice methodologies; and be able to invest in new rail capacity, both inside and outside the port.

Pallas also pointed to the preservation of the state’s AAA rating and the Commonwealth asset recycling incentive.

However, Pallas’ main point took aim at the pockets of attendees.

"Most significantly of all, 86 per cent of all port charges will be regulated and export costs will be subject to a discount scheme that the government has put in place as a requirement," Pallas says.

"The price capped on port charges will apply for at least 15 years… this is the toughest form of regulation in the country."

"Prices on loaded international container export charges have been frozen, and will be progressively reduced by 2.5 per cent annually for the next four years.

"By 2020, we expect loaded international container export charges will be 22 per cent lower than equivalent import charges."

Leaseholders will be actively encouraged to maximise container numbers, he says, and required to submit a plan every five years to keep the government informed of their future projections.

In terms of lease length, the treasurer says the government is taking a 50-year agreement to market, with the option of an additional 20 years should the government of the day wish to extend it.

"There is no obligation to extend," he says and "no rights exercisable by a port operator."

Pallas says a second container port is a requirement but it will be up to Infrastructure Victoria to make a recommendation to its location.

This will unaffected by the Port of Melbourne leaseholders, he says, and there are no non-compete clauses or rights for the Port of Melbourne leaseholders to monopolise through the development of a second port.

Pallas says the current redevelopments at the port to expand its capacity will allow it to handle international containers by 2017.

VTA stance

Supporting port privatisation, VTA CEO Peter Anderson says funds are required to tackle industry-stifling congestion.

"Congestion plays a huge part in productivity losses by Victorian freight operators, which is why we are all so anxious for projects that will make getting from A to B a whole lot more efficient and cost-effective," Anderson says.

But, while Anderson believes the removal of level crossings "will help to create efficiencies on our road network", he says the funding must come at the right price.

"Victoria only gets one chance to privatise the Port, so it’s vital that the lease-enabling legislation contains the necessary protections for port users against excessive cost increases being imposed by the new monopoly owner," Anderson says.

The government’s other major beneficiary, the Agriculture Infrastructure and Jobs Fund, also has the backing of the industry body as it will provide "urgent" upgrades to freight routes between the Port of Melbourne and Geelong.

"High Productivity Freight Vehicles represent the future of the large volume freight task and it is encouraging that the government is factoring this into its plans to renew and upgrade road infrastructure."

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