State government legislation preventing the establishment of a container terminal at the Port of Newcastle not only hindered the port's development but also the efficiency of Australia's ports network, an Australian Productivity Commission report says.
The commission's draft report into Australia's maritime logistics system suggests that Australia's major container ports are under performing to the point of costing the national economy an estimated $605 million each year.
It notes that in NSW shipping lines have little choice but to use the entrenched port structure, which requires them to ship through Port Botany.
"Port privatisation processes have entrenched this power in Sydney by combining the ownership of Port Botany and Port Kembla and penalising any development of container capacity at the Port of Newcastle," the report says.
The Productivity Commission also said that moving cargo between cities to access alternative ports would be uneconomic.
This point is challenged by a 2019 HoustonKemp supply chain analysis. As part of a study commissioned by the Port of Newcastle the consultancy examined the impact of congestion on Sydney roads to calculate how long it would take to travel from Botany and Newcastle to the container warehouses in western Sydney.
They found that the travel time from Botany to western Sydney was on average 20 minutes quicker when traffic congestion was factored in.
However, the main impediment to the establishment of a container terminal remains the port commitment deeds, which were entered into as part of the privatisation of Port Botany and Port Kembla by the NSW government in May 2013.
The deeds oblige the government to compensate the lessee, the NSW Ports consortium, if container traffic at the Port of Newcastle exceeds an indexed cap, which presently sits at an estimated 57,000 containers per annum.
Productivity Commissioner Stephen King said there was an urgent need for more container terminal capacity on Australia's east coast.
"There is a clear need for increased container terminal space over the next 30 years. We are looking at a doubling or tripling of containers coming into Australia," he said.
"Artificial barriers like the ones faced by the Port of Newcastle make no sense and should be removed."
Port of Newcastle chief executive Craig Carmody said the report highlighted the injustice of the restrictions that prevented the establishment of a Newcastle container terminal.
"It's pretty clear from this report that the Productivity Commissioner believes that the port monopoly is harming our state's economy, raising costs for both importers and exporters," he said.
"With both the ACCC and the Productivity Commission now lining up to support Newcastle's right to its own container port, it's time for the state government to act and lift the embargo."
Despite the state government imposed restrictions, community and political support for the establishment of a Newcastle container terminal remains at an all-time high.
All of the region's state and federal MP have publicly backed the plan.
Sensing a challenge to its monopoly, NSW Ports recently invited the region's state MPs to individual meetings where it would seek to convince them that a Newcastle container terminal was not needed.
The commission's draft report has been provided to the industry to comment.
The final inquiry report is scheduled to be handed to the Australian government by the end of December.
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