Delivering Victorian Infrastructure (Port of Melbourne Lease Transaction) Bill 2015


Mr BARBER (Northern Metropolitan) — As members in this chamber well understand, the Greens are opposed to the proposed sale of the port of Melbourne. Much of the information that Mr Rich-Phillips started to bring forward explained rather well why there is no case for selling the port of Melbourne.

First of all, the approach of selling the port to the highest bidder for the largest amount of money possible, while natural for a politician who wants to build up a war chest to get themselves re-elected, is in direct contradiction to the long-term economic interests of this state. Just on the weekend government members came out and announced they thought they were going to get an even higher price than previously estimated. I said, 'That is even worse news for Victoria', because the higher the sale price they obtain for the port the more a private investor is going to need to claw back through either reduced investment or higher fees in the future, and that will be a burden on exporters.

The port regularly returns a dividend to the state of tens of millions of dollars year after year. When we look at the work done by the Productivity Commission and others, however, we see that they say there is no fancy profit being extracted from the public monopoly and that its rates of return are comparable with that of other ports around the Australian coast, so how is it that some private investor believes they are going to come along, pay over the odds and then squeeze more juice out of the orange? If they think they have some efficiencies in the way they are going to operate, what I want to know is why the Port of Melbourne Corporation has not been implementing those efficiencies itself. If we hear from the Port of Melbourne Corporation in Mr Rich-Phillips's proposed inquiry, we will ask Treasury what it is Treasury thinks a private investor can do with this port that has not been done so far, and if there are proposed efficiency measures, we will ask the Port of Melbourne Corporation why it has not implemented them already.

Unfortunately there has been very little debate and scrutiny about this question of the port sale. That is because back during the state election it seemed that the port sale was a done deal. In government the coalition was proposing it, and in opposition Labor had agreed to do it, so it went through the election with minimal scrutiny. I do not recall the now Premier going out there to hoist up any billboards saying, 'Vote for me; I'll flog off a public asset', but apparently he is now claiming some sort of mandate for it. The scrutiny of this question has only just begun.

It is an unfortunate bit of timing for the Premier that the port decided to jack up rent for certain of its tenants. My understanding is that because of sales achieved in relation to the proposed expansion of the port's container capacity which went for what some people have seen as a ridiculously high price, the corporation thought it would turn around and fatten itself up for privatisation by applying those same rents to existing port users. This led to proposals for skyrocketing rents which would have put many dollars onto the price of each container and for whole sectors of the economy introduced no doubt tens of millions of dollars of extra cost that would have damaged their export competitiveness.

Apparently, it did not work; we read in this morning's paper that the Port of Melbourne Corporation had to back off and will not be raising rents the way it said it would. Yet another question arises: what has that done to the Treasury estimate of what it will get for this port? Remember that the government put its dollar figure representing what it already expects into this year's budget. Government members are already counting their chickens and working out how to spend the money and promising it to all and sundry. They announced a relatively puny amount for rural infrastructure — and they have belatedly recognised that rural areas need infrastructure as well — but unfortunately they have blackmailed those same communities by saying, 'If the port sale doesn't proceed, you can forget about all these wonderful bits of infrastructure we're promising you'. By the way, four or five different MPs were out on Sunday, Monday and this morning. It is like they have promised this $200 million five times over already.

Meanwhile we have seen a little more commentary about this proposed rent rise issue popping up on Fairfax online in the last hour or so. An article by Jenny Wiggins and Michael Smith has the headline '“Silly move” to push up DP World rent will hurt $6 billion port of Melbourne sale'. Interestingly they sought out some potential buyers for the port and asked them what they think of it all, and those buyers have commented off the record. The article states:

'There was an opportunity to get [the rents] up if it was finessed over time rather than just jammed in a single hit … but you have to do it gently', said one institutional investor who is considering a bid for the $6 billion port when it is privatised.

They have now somewhat given the game away — get hold of the port and then just start inexorably jacking up rents rather than trying to do it all in one go. The article continues:

It was a silly move by the state, they went so hard and put such a ridiculous number on the table.

And it goes on further — —

- - Interjection - -

Mr BARBER — These are potential bidders who have already been crawling all over the Labor Party. Let us face it: they did not wake up one morning and say, 'Let's sell the port'. It was Ralph Willis and the money men on all those superannuation funds crawling all over the Labor Party in opposition saying, 'Come on, you've got to sell this thing. We need another transaction'. The merchant banks and the lawyers would have been beating down the then opposition's door saying, 'You've got to sell something. We need the fees'.

The Labor Party scratched its head and said, 'Privatisation of public assets is a dog; the voters hate it. Let's dream up some sort of way to make this palatable. Oh, well, we'll do level crossings. We will do the 50 worst level crossings'. Or is it 50 of the worst? I have heard the Deputy Premier say that it is the 50 most deadly level crossings. Was it the RACV's list? Was it an independent analysis? Is it related to casualty accidents? Was it throwing darts at a map of marginal seats? Could that have been possible? It did not hit as far as Eastern Victoria Region or Northern Victoria Region members, so I can see the Shooters and Fishers Party in the starting blocks getting ready for their go in this debate, although they probably will not make it before 10 o'clock. The government did not suggest the 50 worst level crossings; it suggested maybe 25 from that list and then started throwing darts at a map of marginal seats. But that is all right; we can analyse that as part of the inquiry as well. I believe it is within — —

- - Interjection - -

Mr BARBER — Perhaps we will get the Department of Economic Development, Jobs, Transport and Resources in as well to talk about the cost-benefit analysis that has been done on the 50 level crossings that were produced by throwing darts at a map of marginal seats. The article continues:

Lawyers said the deal removed uncertainty over the pricing of the port when it is privatised. 'There was uncertainty over what value they'd realise over the longer term', said Martyn Taylor, a partner at Norton Rose Fulbright.

Infrastructure investors said the agreement also removed the risk that bidders would make unrealistic assumptions —

unfortunately I do not think it will —

about how much they could generate in rents after the port is privatised, which could push bidding prices up.

And so on and so forth.

'Port assets have been developed by the states and the entire east coast hasn't had the returns they should on those assets …

That is an interesting quote from a potential investor. Clearly they think there is an undervalued asset there and they are going to get hold of it. It will be a fixer upper's delight and they will be rolling in cream.

Then there is the other question that Mr Rich-Phillips started to raise, which I do not think the government has answered or will answer, and that is, 'What are the future options here?'. When will the port be at full capacity? Mr Rich-Phillips does not want to narrow it down to something like a 30-year range. It depends on a lot of factors, of course, such as economic growth, trade growth and the Australian dollar.

- - Interjection - -

Mr BARBER — If I knew what the Australian dollar was going to be doing over the next 20 years, I would probably be investing in that rather than spending my time here.

There are issues like the growth of China, stuff going out, stuff going in, droughts, tariff barriers and the transpacific partnership. We do not know all those variables. That is why we cannot determine when the rate of growth will cause the capacity of the existing port to fill up. That is not really a problem unless you are privatising the port, because in privatising it you want to offer a monopoly, or at least you want to be able to cut off certain other options, either for expansion on site, nearby or simply to delay those investments to a time when it is really, truly necessary to make them.

We have a diabolical problem now simply because the government is in a rush and it wants to sell the port. An economist will point out the almost impossible moral dilemma for a politician who wants to get the maximum amount of money now against the long-term economic impacts. It is for that reason that if we were to bring this bill to a vote on the second reading, the Greens would oppose it, but I gather some discussion is happening across the table here as to what is an appropriate date when the bill might be deferred to line itself up with the purported inquiries that might be debated at the time of general business tomorrow. In any case under those circumstances it is appropriate that we do not go too much further into the merits of the bill with a transaction as big, as important and as wideranging as this one. It is essential that the house inform itself before it proceeds any further in this debate, either in the second-reading or committee stage, and therefore it is most appropriate that all members here support a motion that is coming down the line to establish that inquiry and perhaps defer this bill.

The Victorian Farmers Federation (VFF) is out there saying it is in love with the $200 million that the government is going to give it. It is the change down the back of the couch that will get lost during this transaction, but for some reason the VFF is thrilled about it. If the VFF were serious about it, and in fact if the government were serious about it and not simply doing this at the behest of the big money end of town and whatever populist reason they dreamt up, then they would be looking at the whole question of investment of the entire supply chain into the port — all the way from the bits of level crossing out there west of Warrnambool, where containers of dry dairy products are loaded and taken all the way through to the port itself.

As far as I am aware at the moment it is not actually possible to lift a container off a train and directly onto a ship. There are some grain terminals that operate at the port of Melbourne, where trains come all the way into the terminal, and then from the opposite side of the silo the containers are fed onto the ship when the train arrives, but at the moment all the way along that supply chain there are many small barriers — works that need to be done and serious investment that is required, and not only is there no money in our future for those but in fact there is not even a plan for them.

The logistics chain is kind of like a whole bunch of sausages connected to each other. Whatever is the slowest point in that logistics chain in fact determines the speed of the chain all the way along. Rail freight is trying to compete with road freight, and pretty much everybody understands the benefit of shifting more onto rail. The problem is that productivity in the road freight industry grows every year.

Trucks get bigger and faster, and they get their own curfew-free facilities and all the rest of it, but there is little to no productivity improvement in the rail system. Even a few extra tonnes per axle load or a few extra kilometres an hour average travel time makes a huge difference in moving a commodity from Mildura all the way to the wharf front itself, yet those small, incremental gains are not really being made in the rail freight system, so trucks keep winning the arms race every year, with all the costs that we all now understand, particularly those of us who have had some experience in rural areas or who have talked to mayors and councillors whose roads and bridges are falling apart. They will not be getting many bridges for the $200 million that was thrown at them yesterday.

I hope this sale is ultimately scuttled, because it will force the government to go back to the drawing board and say, 'Right, we have a long-term investment need for the entire freight system as it feeds into the port of Melbourne'. It is that investment question and those investment needs that should be our primary consideration, from which other questions such as prices, fees and charges, investments, the length of the term of leases and alternative or supplementary options for port development would all be answered in that context.

I hope those issues start to get a bit of an airing as this committee process unfolds, assuming the government is willing to cooperate and make that process flow smoothly. I guarantee that there will be a large number of people wanting to make submissions to the inquiry and to be heard by it. Anybody who is an exporter or who is interested in regional development, which of course local governments are, have a big stake in this. They have not been given a huge amount of information about the proposal so far.

When I first read the bill it came as a bit of a shock. I was bracing myself for something pretty poor, but it was actually quite shocking the way the government is willing to lock us into these long-term monopolies and cut off other options, at huge expense to the taxpayer over the longer term. It is for that reason that we think the bill needs to be delayed for the period necessary for the house and the Victorian community to inform themselves about what is being proposed.