FTA interview with the Hon. David Hodgett MP

Tuesday, February 23, 2016

The Victorian Treasurer Tim Pallas has conceded the sale of the Port of Melbourne will not proceed this year, if the Government cannot secure the passage of enabling legislation. As the battle over one of Australia's most valuable infrastructure assets continues into 2016, Travis Brooks-Garrett (Partner, Freight & Trade Alliance- FTA) speaks to the Hon. David Hoddgett MP, Victorian Shadow Minister for Ports, to discuss what the future holds for the Port of Melbourne.

Left to right - the Hon. David Hodgett MP, the Hon. Michael O'Brien MP, Travis Brooks-Garrett (Partner, FTA)

1. TRAVIS BROOKS-GARRETT - The Port of Melbourne Lease Transaction has been a tough political dogfight from the outset with no end in sight. How different would things have looked if the Liberals had won the 2014 election?

It is remarkable that the Coalition and Labor went to the election with very similar policies. We both committed to a medium term lease of the Port of Melbourne and we both supported the development of a second container port for Victoria. We differed in opinion on the location of a second port but not on the need for a second port. Labor switched its earlier support for Hastings to Bay West and used this as jobs pitch to Geelong voters during the 2014 election campaign. The port lease that we were developing in Government was premised on there being a second, deep water container port at Hastings. The port lease that Labor presented to Parliament seeks to halt the development of a second port through an anti-competitive arrangement that would expose the State to billions of dollars in compensation payouts. Then, of course, there is the issue of port rents. Through the State-owned Port of Melbourne Corporation, the Labor Government sought to increase stevedore rents by 767%. It then introduced enabling legislation for the Port of Melbourne lease which singled out port rents and said they were not to be regulated. I mean this was just astounding. This would not have happened under the Coalition. I think what it comes down to, as so often it does, is money. The Victorian budget has already taken a huge hit under Labor. Treasurer Tim Pallas delivered Victoria's first budget deficit in more than two decades. In his first budget the Treasurer piled in more than $6 billion of recurrent spending and I think he is using the port lease to prop up the State's finances. What would have looked different had the Coalition won the 2014 election? The Victorian budget would have looked different and the Port of Melbourne lease would not have looked like a cash grab.

2. TRAVIS BROOKS-GARRETT - The Port of Melbourne lease transaction is a national interest issue, despite the Port being a State-owned asset. Surprisingly, we have barely heard anything from the Department of Infrastructure or the Coalition Government. Why are your Federal counterparts not getting more involved?

I think the Feds view the sale of a State asset for what it is. There is already a lot of cross-over in State and Federal politics, much of it counter-productive. I would say though that the intervention by Rod Sims, Chairman of the Australian Competition and Consumer Commission, was positive and significant. The Labor Government tried to slap him down but he pursued the case against the proposed port rent hike and the case for port competition vigorously. His advocacy was excellent and I commend him for it.

3. TRAVIS BROOKS-GARRETT - The Port of Melbourne Lease Transaction Inquiry heard consistent views from across industry, particularly in regards to the need for rail and the issue of compensation for a second container port. However, many of those ideas were then ignored by the Government. Do you believe the process had any material effect on the legislation? How can industry achieve greater engagement outcomes?

Treasurer Tim Pallas approached the port lease with hubris. He threatened for months that he would by-pass the Parliament if he didn't get his way. This has not served the Labor Government well and I'm sure they realise this. The need for rail in and out of the port, the matter of compensation, a second container port, port competition, soaring port rents, the prospect of further blasting and dredging at the Port Phillip heads, these are all issues which Labor should have been open to discuss. Rather than talk through the issues they trotted out to Blackburn, in Melbourne's eastern suburbs, to launch a campaign against us and the Greens on rail level crossings. The Parliamentary Inquiry into the port lease has had a significant effect on the port lease. The Government has been forced to negotiate and we have been working with them to see the Inquiry's recommendations adopted. Good progress has been made but there is still a significant divide between us and the Government on the matter of compensation. We don't like the compensation but we offered to support it for a limited period of 15 years in the interest of breaking an impasse. The Government is insisting on compensation for the full 50 year term of the lease. We're not interested in that and will not support it. Obviously, there is more to play out here but I think an agreement is possible if the Government wants one. Engagement by the freight and logistics sector on the port lease has been strong and very effective. I think the port rents issue mobilised industry at the outset and this has had flow on effects for the other issues at stake. Obviously, in business everyone is busy looking after their customers and looking for new customers, new markets, new partnerships and new opportunities. I understand that it can be difficult to put time and effort aside to participate in the political process but I think that what the debate on the Port of Melbourne lease has shown is the positive impact industry can have. Industry is at its best and most effective in the political process when its voice is heard, when it is prepared to call a spade a spade and when it is prepared to see an issue through to its end.

4. TRAVIS BROOKS-GARRETT - Rail is something that has been discussed at length, particularly the concept of discretionary freight moving away from the PoM because of a lack of rail shuttle services. How can we put politics aside to make rail happen, outside of the Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Bill 2015 process?

Look, I think rail at the port just needs to happen. The current expansion underway at the Port of Melbourne will roughly double container handling capacity and the Government is saying they think it can treble to 7.5 million TEU. Now without rail all of that is just the stuff of fantasy. The Port of Melbourne is on the doorstep of the CBD. There is already significant community concern in the inner-western suburbs around truck movements. The double handling of freight that currently arrives into Melbourne by rail is costly. In 2014 the Coalition set aside $20 million for the Port Rail Shuttle suburban intermodal terminal project and we secured a $38 million funding commitment from the Federal Government. Preparations were being made prior to the November 2014 election to tender the project but Labor, when it came to office, put a halt on the project. I just don't understand that. Last year we saw Qube Logistics pull out of rail partnerships in Melbourne to focus on its Sydney developments because it considered that Victoria has no strategy to get freight onto rail.

5. TRAVIS BROOKS-GARRETT - What is your vision for the Port of Melbourne?

The Port of Melbourne has been a source of great prosperity for Melbourne and Victoria. As a Government, we invested in the port's expansion because we believe in the port and we understand its importance. The Port of Melbourne has a great role to play over the medium term but longer-term, with Melbourne's population forecast to overtake that of Sydney and head toward 8 million by mid-century, I think ultimately port activity will move from the Port of Melbourne, away from the CBD, to make way for Melbourne's expansion.

6. TRAVIS BROOKS-GARRETT - On behalf of FTA and our members, thank you for taking the the time to participate in this interview.