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Australian Federal Budget 2019 – released. Sort of.

Opinion – Andrew Hudson

The Federal Budget 2019 was formally released by the Federal Government on 2 April 2019. However, in an election year, the Federal Government took the unusual path of confirming that the government would not be seeking to pass new legislation implementing that Budget in the remaining Parliamentary sitting days. Instead, the Budget legislation would be left only to pass if the government is re-elected in the next Federal Election which is likely to take place in May 2019.
The Budget was largely positioned to appeal to business and individuals through additional funding, especially for infrastructure spending and additional income tax and other relief for low and middle-income earners. The Budget did not include a prediction of returning to surplus in the 2019-2020 financial year but foreshadowed a return to a budget surplus for the 2020-2021 financial year on the assumption that the current Federal Government is returned to office and that anticipated changes to economic conditions would enable the delivery of that surplus. Clearly, the Federal Government is claiming that it is the most responsible financial manager and that the only way that voters would be able to secure the promised advantages would be to re-elect the Federal Government.
Unfortunately, there was little of surprise in the Federal Budget in the international trade and customs sphere as many of the Budget initiatives had been released before last night’s announcement. However, it is worth reiterating a number of items that did appear in the Budget.

  • A reminder of the recent signing of the Australia-Hong Kong Free Trade Agreement (A-HKFTA) and the Indonesia-Australia Comprehensive Economic Partnership (IA-CEPA). The passage of the two Free Trade Agreements (FTA) (if they are passed by the new Parliament) would lead to some reductions in revenue collected from imports from those countries. It will be a real test of Parliament and its processes to see if these two FTA, together with the Peru Australia Free Trade Agreement, will move forward to commencement given the position of the opposition in relation to some provisions of those FTA.
  • There is welcome news for those involved in export with the confirmation of certain additional spending initiative as follows:
    • $68 million made available over three years from 2019/2020 to support exporters in particular additional funding for the Export Market Development Grant (EMDG) program. As readers would be aware I am a director of the Export Council of Australia and we have pressed Government on many occasions to increase this funding. This increase is welcomed and hopefully will lead towards additional funding for the program in future years in line with recommendations of Parliamentary committees.
    • $29.4 million over four years from 2019 to enhance agriculture, including work on the reduction of non-tariff barriers to trade, and assistance with technical market barriers in export destinations.
    • $66.9 million in funding over five years to enhance Australia’s engagement with near neighbours in the Indo-Pacific region of which a large amount is aimed at improving relationships with China on agriculture food safety and regulatory cooperation.
  • Confirmation that while government proposes to proceed with the biosecurity imports levy announced in the previous Budget, the date for implementation has been changed from 1 July 2019 to 1 September 2019. There is currently a review of the proposed levy being undertaken, but it would seem that government has assumed that levy in its current form (or similar) will proceed regardless of the current review and work of the Federal Government’s Steering Committee.
  • Significant increases in customs duty payable on tobacco imports. Readers would be aware of recent changes to proposed regulation for the taxation regime for tobacco including the requirements for permits to be secured before goods are imported and the requirements for import duty to be paid at the point of import. This removes the ability to place goods in bond and only pay customs duty once the goods are released from bond. This has been a contentious issue within industry and has been a subject of significant discussion during my recent forums with the Customs Brokers and Forwarders Council of Australia (CBFCA).
  • An anticipated reduction in customs duty from imports of motor vehicles given that motor vehicles from many of our Asian trading partners are already free from duty due to our existing FTAs. This announcement therefore seems to anticipate the likely completion of the FTA with the EU which, as a central inducement would remove customs duty payable on motor vehicles imported from Europe (and maybe even Luxury Car Tax).

There is no reference to any additional funding for implementing wider brown marmorated stink bugs (BMSB) measures even though the program will expand in the next season. Similarly, there is no additional funding for single-window or other trade facilitation initiatives which have been a key feature of collaborative work between agencies of the Federal Government and the private sector. There was no additional funding for the Anti-Dumping Commission so the promised ‘toughening’ of regulation regarding trade remedies from both the current Federal Government and the Opposition will need to be managed by the Anti-Dumping Commission (ADC) without any additional funding. This may exacerbate the current days and uncertainties associated with investigations through the ADC.
The Federal Budget makes no mention of other initiatives such as additional benefits through the Australian Trusted Trader Program although that may not be unexpected as financial aspects of the program such as the deferral of the payment of customs duty and the other initiatives had been funded in earlier Budget announcements.
It would appear that the Federal Government has taken the position that there are no significant political benefits to be gained by additional expenditure in the customs and international trade portfolio and through the operation of its agencies in that area. We await, with some interest, the response by the Federal Opposition to be delivered tonight and other announcements as to policies from both the Federal Government and the Opposition to be made in the movement towards our next Federal Election.
Andrew Hudson is the Customs & Trade Partner at Rigby Cook Lawyers. ©Rigby Cooke 2019. Reproduced with permission. All rights reserved. This article was first published as Australian Federal Budget 2019 – Released. Sort of. Dated 3 April 2019 on www.rigbycooke.com.au.

Biosecurity levy must not go ahead: industry

Australian industry groups have joined together rejecting the flawed biosecurity levy. They have issued the following statement:
The Australian Government announced a biosecurity levy in the 2018 budget due to be implemented this July that is significantly flawed.
As Australian industry participants we would like to formally register our deep concern regarding the proposed biosecurity levy and urge the Government to remove it from the 2019 Budget.
Industry welcomes the Government’s recognition on the need for an Industry Steering Committee to better inform Government on improving the proposed Biosecurity levy scheme design.
This announcement is acknowledgement the current proposal is flawed and fails to recognise the damage the levy would do to the competitiveness of the freight supply chain, key export industries and the cruise sector, as well as the higher costs for consumers.
While no announcement has been made regarding the membership of this Committee or its Terms of Reference, it is essential that participants represent all industry groups who form part of Australia’s biosecurity and that this Committee be given enough time to consider and present a workable proposal for the Government’s consideration.
To ensure the Committee has flexibility in developing a fair and equitable model, it is therefore imperative that this Biosecurity Levy be removed from the 2019 Budget to enable this work to be completed.
The protection of our natural and agricultural assets is vital to this country from both an environmental and financial perspective. The industries represented in this statement are part of Australia’s biosecurity system and take their roles seriously. Which is why we believe in impactful and informed solutions to strengthening Australia’s biosecurity system.
Industry’s main concerns with the process to date are:

  • The rushed nature of a tax designed without fully understanding the potential for far-reaching economic consequences.
  • Additional and unnecessary costs – particularly to Australia’s tourism, manufacturing, agriculture, mining, energy and construction industries.
  • Flow-on costs to consumers.
  • Confusion as to why a new biosecurity tax is required over and above the Australian Government’s biosecurity charges that are currently in place for sea-freight (extensively reviewed in 2015-16) and the passenger movement charge for the cruise sector.
  • That a biosecurity risk assessment and regulation impact statement has not been undertaken by the Australian Government to inform the development of the proposed biosecurity tax.
  • A lack of clarity on how the Australian Government would collect the proposed tax.
  • No guarantee that all revenue raised by the proposed new tax would be used to support Australian biosecurity measures.

We urge the Government to remove the proposed levy from the 2019 Budget and provide a genuine opportunity to industry to help design a fair and equitable model that improves Australia’s biosecurity ability.

Biosecurity levy "significantly flawed", according to logistics and transport industry

The Australian Government announced a biosecurity levy in the 2018 budget due to be implemented this July that is significantly flawed, according to a statement by fourteen transport and logistics industry associations. 
In a collaborative statement, the associations urged the Government to remove it from the 2019 Budget.
The statement declared that the industry welcomes the Government’s recognition on the need for an Industry Steering Committee to better inform Government on improving the proposed Biosecurity levy scheme design.
This announcement is acknowledgement the current proposal is flawed and fails to recognise the damage the levy would do to the competitiveness of the freight supply chain, key export industries and the cruise sector, as well as the higher costs for consumers.
The statement continued to express the protection of our natural and agricultural assets is vital to this country from both an environmental and financial perspective. The industries represented in this statement are part of Australia’s biosecurity system and take their roles seriously. Which is why we believe in impactful and informed solutions to strengthening Australia’s biosecurity system. 
The associations expressed their main concerns as:

  • The rushed nature of a tax designed without fully understanding the potential for far-reaching economic consequences;
  • Additional and unnecessary costs – particularly to Australia’s tourism, manufacturing, agriculture, mining, energy and construction industries;
  • Flow-on costs to consumers;
  • Confusion as to why a new biosecurity tax is required over and above the Australian Government’s biosecurity charges that are currently in place for sea-freight (extensively reviewed in 2015-16) and the passenger movement charge for the cruise sector;
  • That a biosecurity risk assessment and regulation impact statement has not been undertaken by the Australian Government to inform the development of the proposed biosecurity tax;
  • A lack of clarity on how the Australian Government would collect the proposed tax; and
  • No guarantee that all revenue raised by the proposed new tax would be used to support Australian biosecurity measures.

We urge the Government to remove the proposed levy from the 2019 Budget and provide a genuine opportunity to industry to help design a fair and equitable model that improves Australia’s biosecurity ability, concluded the statement. 
The announcement was signed by Ai Group, Australasian Rail Association, Australian Aluminium Council Australian Chamber of Commerce and Industry, Australian Logistics Council, Cement Industry Federation, Cruise Lines International Association, Fertilizer Australia, Freight Trade Alliance, Gas Energy Australia, Manufacturing Australia, Minerals Council of Australia, Ports Australia and Shipping Australia Limited.
 

Bust railway congestion in the budget: ARA

The Australasian Railways Association (ARA) is calling for the Australian government to play a more significant role in supporting and promoting passenger and freight rail infrastructure in the 2019-20 federal budget.
Australia’s population growth is making rail transport an essential component of addressing Australia’s growing public transport and freight needs.
“Cities are increasingly looking to integrated transport systems that link high-capacity metro systems with current rail networks, light rail, regional rail and other transport modes to encourage active and engaged community-based lifestyles,” said ARA CEO Danny Broad.
“Rail provides the backbone of public transport systems, for our growing cities.
“Similarly, Australia’s growing population requires an increased allocation of goods, adding pressure on our freight networks. Rail freight provides a cost-effective, safe and environmentally sound solution for reducing congestion from heavy vehicles on urban, regional and interstate roads. Rail freight will need to play a greater role in the future to meet Australia’s increasing freight task and to maintain our international competitiveness,” he concluded.
The ARA’s National Rail Industry Plan for the Benefit of Australia presents a compelling case for amore collaborative approach between Australian governments and the rail industry to overcome inefficiencies inherent in our federal system.
Specific programs that have been identified in the ARA’s submission for funding include

  1. Resourcing the Australian and New Zealand Industry Pipeline to provide a comprehensive list of rail projects to allow better industry planning for new rail infrastructure and rolling stock.
  2. Supporting a high-level task force of the rail industry, governments and education providers to address critical skilled labour shortages and provide ‘fit-for-purpose’ training in rail construction, manufacturing, maintenance and operations.
  3. Providing appropriate resources at the federal level to progress and implement measures contained in the final National Freight and Supply Chain strategy, including both infrastructure upgrades and the strengthening of regulatory frameworks.
  4. Implementing independent price regulation of heavy vehicle charges. For too long we have had unequal charging and regulatory systems, placing rail at an unfair competitive disadvantage.
  5. Support passenger rail operators to comply with Disability Standards for Accessible Public Transport (DSAPT).
  6. Tackling urban congestion by allowing Australians to salary sacrifice the purchase of public transport tickets, positioning public transport as a viable alternative to car travel.
  7. Taking steps to preserve and secure the corridor of land required to establish a high-speed rail link between Melbourne, Sydney and Brisbane.

The ARA also provided the government with a list of rail optimisation projects to consider, where existing rail services could be enhanced.
The full submission can be found here.

Budget must focus on freight: ALC

The Australian Logistics Council (ALC) has released its 2019-20 Federal Budget submission, saying this year’s Budget must establish the right framework to support the implementation of an effective National Freight and Supply Chain Strategy.
“The Federal Budget in April will be the last one delivered prior to the release of the National Freight and Supply Chain Strategy,” said ALC CEO Kirk Coningham.
“The ALC has been a long-term advocate for this strategy. Our members understand that a national economy needs to adopt a consistent national approach to freight movement.
“However, the best Strategy in the world counts for little if there are insufficient resources in place to support its delivery.
“Accordingly, ALC’s submission encourages the Federal Government to use this year’s Budget to establish the right frameworks to support the delivery of a Strategy that will meet the needs of our industry and the Australian economy as a whole.
“To help achieve this, ALC makes 19 recommendations addressing two core objectives – ensuring those responsible for implementing the strategy have adequate resources, and supporting specific infrastructure, safety and regulatory initiatives that will improve the performance of our supply chains.
“These include recommendations to support key Federal agencies, as well as state and local governments, in delivering significant reforms around planning, corridor protection, road pricing and data collection that will allow us to better monitor performance and more effectively target infrastructure investment.
“Additionally, there are specific recommendations to support crucial infrastructure and regulatory initiatives, such as better freight rail linkages to ports, infrastructure to hasten uptake of electric vehicles in the freight sector, maintenance of the industry Master Code for heavy vehicle safety, and development of a National Rail Plan that will finally deliver the regulatory consistency the industry seeks.
“Implementing these recommendations as part of the 2019-20 Federal Budget will significantly improve the efficiency and safety of Australia’s supply chains, and contribute to the delivery of a more effective National Freight and Supply Chain Strategy,” Mr Coningham said.
 

Will the 2018 budget help SME exporters?

“Overall, this is positive budget for SME exporters” said Heath Baker, head of policy at the Export Council of Australia (ECA). “But it’s an incremental step forward, not a major leap.
“The government has rightly been a champion of trade and has trumpeted its achievements in signing a number of FTA”, said Mr Baker. “But if you want to grow trade, FTA are only part of the answer. This budget goes some way to addressing SME exporters’ other needs — but there’s still more to be done.”
The ECA welcomes the $20 million allocated to establish an SME export hubs’ program, as well as extending funding for the export growth centres. These programs should help many SME make the jump into international business and the ECA looks forward to seeing the detail.
DFAT’s economic diplomacy efforts receive a valuable injection of $15 million. This will go towards expanding FTA outreach, helping businesses better access DFAT’s economic and security insights, as well as developing a strategy to address the ‘non-tariff measures’ that stop businesses from exporting. Austrade has received a small boost, including $3.2 million to develop a new national brand. Future budgets will need to commit significant money to implementing this brand if it has any chance of succeeding.
“Australia’s offshore agricultural counsellors play an essential role in facilitating trade in food and agriculture, and so adding six new counsellors is a wise investment,” Mr Baker said. “The ECA also welcomed additional funding for initiatives to increase agricultural access in key markets.
“Getting goods out of Australia should become a little easier with additional infrastructure spending, including the $400 million Port Botany line duplication. There’s also a $10.5 million commitment to complete a business case for a ‘single window’ for international trade — but this is slow progress given that implementing a single window was a 2016 election commitment.
“Aviation security will tighten, which could complicate exporters’ supply chains. While exporters accept the need to ensure aviation safety, these measures need to be implemented in a business-friendly way, and supply chain participants will need adequate time to adjust.
“On the downside, the Export Market Development Grant (EMDG) is still underfunded. This blunts some of the good measures in place to grow exports, as new exporters will only be able to fully realise international opportunities if they invest in building their brands overseas. Underfunding EMDG means they will lack the certainty and confidence to fully commit to building their brands.”
The ECA’s 2018 trade policy recommendations highlight practical steps the government can take to increase the number of SME exporting and the value they export. You can read the ECA’s recommendations here.

Infrastructure wins in Federal Budget

Australia’s associations and industry have welcomed the major support for Australian infrastructure in the 2017–18 Federal Budget.
The Australian Logistics Council (ALC) commended the Government’s $8.4 billion support of Inland Rail,  commitments to construct the Western Sydney Airport and duplicate the Port Botany freight rail line and support of Infrastructure Australia.
“The Budget’s strong focus on infrastructure is timely, coming less than six months after the Federal Government agreed to ALC’s request to develop a National Freight and Supply Chain Strategy,” said Michael Kilgariff, Managing Director, ALC. “We welcome the measures announced tonight as a positive first step in continuing efforts to deliver a safer, more efficient supply chain.”
Aurizon Managing Director and CEO Andrew Harding reported that he was pleased to see the Government commit to investing in freight rail infrastructure, adding that he believes Governments – at both the federal and state level – have key roles to play in implementing sound policy and regulatory frameworks to support a competitive rail industry.
“To improve the competitiveness of rail freight, the Inland Rail project and linked supply chains will need more than the correct design and construction, they will require major transport policy reform,” Harding said.
“Rail freight companies need to be able to compete on equal footing with other transport modes and allow rail to do more of the heavy-lifting in Australia’s freight transport task.”
Rail freight operator Pacific National and the Australasian Railway Association (ARA) also spoke out in support of the Budget.
“More than thirty years since the ambitious rail link was first suggested, the 1,700km rail line is now well on track to become a reality following the $8.4 billion commitment in last night’s Federal Budget,” Pacific National said in a statement.
“Pacific National believes the Inland Rail project will be transformative for Australia, helping revitalise regional communities and providing a boost in national productivity that will deliver for generations to come.”

Danny Broad, CEO of the ARA, said, “Linking Victoria and regional NSW with Queensland will help get freight off the road and onto rail, address rising congestion in Sydney and will deliver thousands of jobs, many in regional Australia.”

Victorian Transport Association (VTA) CEO Peter Anderson welcomed the Inland Rail investment and other long-term infrastructure commitments.

“The $500 million allocated for Victorian regional rail is also welcome because it will give rural commuters additional travel options to consider, which is good for road freight because it will alleviate congestion on rural road networks,” said Anderson.
“We are also encouraged that the Budget considers a variety of perspectives that are integral to the freight task, other than infrastructure. For example investments earmarked to continue Black Spot, Roads to Recovery and other vital programs are critical for encouraging better driver safety, which is welcome news for operator and road safety in general.”
The Maritime Union of Australia (MUA) stated that it felt some of the money earmarked for the $8.4 billion Melbourne-to-Brisbane Inland Rail project could be better spent on investment in Australia’s coastal shipping sector.
“Port infrastructure already exists in Australia and coastal shipping leaves the lowest carbon footprint when it comes to moving goods around our coast,” said MUA National Secretary Paddy Crumlin.
“This package from the Government looks a lot like pork-barrelling by the Coalition to protect their inland seats through regional Victoria, NSW and Queensland as they desperately try to stave off the threat from One Nation and other parties.”

Pacific National responds to Federal Inland Rail commitment

Rail freight operator Pacific National has welcomed the Federal Government’s commitment to fund the Inland Rail project.
“More than thirty years since the ambitious rail link was first suggested, the 1,700km rail line is now well on track to become a reality following the $8.4 billion commitment in last night’s Federal Budget,” the company said in a statement.
“Pacific National believes the Inland Rail project will be transformative for Australia, helping revitalise regional communities and providing a boost in national productivity that will deliver for generations to come.”
Pacific National CEO David Irwin said, “Australia has a growing problem that can’t be ignored – we are trying to move too much freight on our increasingly congested road and rail networks along our Eastern seaboard.
“Inland Rail is a true game changer and we commend the Government for its commitment to such an important nation-building project.
“We look forward to working with the Government and all the communities along the route to see Inland Rail become a reality and ensure it’s a huge success once operational.
“We want a swift and smooth construction program and a clear path to the day the first freight trains can start using the route – and this will ensure potential investors and rail operators can plan for the future with greater certainty,” he added.

Aurizon calls for competition in Inland Rail development

Aurizon Managing Director and CEO Andrew Harding has reported that he was pleased to see the Government commit in last night’s 2017–18 Budget to investing in freight rail infrastructure, and he believes Governments, at both the federal and state level, have key roles to play in implementing sound policy and regulatory frameworks to support a competitive rail industry.
“To improve the competitiveness of rail freight, the Inland Rail project and linked supply chains will need more than the correct design and construction, they will require major transport policy reform,” Harding said.
“Rail freight companies need to be able to compete on equal footing with other transport modes and allow rail to do more of the heavy-lifting in Australia’s freight transport task.”
Harding said the previously announced decision taken by the Federal and State Governments to introduce heavy-vehicle pricing and investment reform over five years was welcome, however Aurizon wanted to see a strong focus on the detailed implementation of a new pricing methodology and governance to ensure the outcome of reform would be a consistent pricing framework applied across the haulage of both heavy vehicles and rail freight.
“Currently heavy vehicles are charged indirectly by government through diesel excise and registration to recover an historical average of spending on road infrastructure,” said Hardling. “Whereas rail freight operators are directly charged for access to, and use of, rail infrastructure, with prices that are more cost-reflective and overseen by an independent economic regulator.”
“The design will need to allow longer and heavier trains and double stacking of containers on the network and efficiently integrate existing freight supply chains to enable customers to move their freight to, and from, major export ports,” he added.
“The announcement is a big step in the right direction, and should be used as the basis for a major modal shift from road to rail along the east coast, while delivering substantial economic, community and environmental benefits along the way.
“In our grain haulage business, for example, we estimate a fully loaded train carries up to 1,750 tonnes of grain to export, which is the equivalent to 44 trucks on the road. Adopting rail over road for long-distance haulage of freight offers improved safety outcomes for the community by helping to prevent and reduce road fatalities and road trauma. Rail freight also produces an estimated 10 times less carbon dioxide than road freight per tonne-kilometre travelled.”

ALC welcomes Budget supply chain boost

The significant infrastructure investments contained in the 2017–18 Federal Budget have the potential to deliver substantial improvements to supply chain efficiency and significantly boost economic growth, according to the Australian Logistics Council (ALC)
“The Government should be commended for making clear commitments to two significant infrastructure projects crucial to the freight and logistics industry,” said Michael Kilgariff, Managing Director, ALC.
“The transformative potential of the Inland Rail project has been talked about for decades, with incremental progress being made over the past several years, including a positive assessment of the business case by Infrastructure Australia. The $8.4 billion commitment announced in the Treasurer’s speech tonight will finally allow its construction. At long last, we can stop merely talking about this project’s potential, and instead begin to witness it.”
Kilgariff added that the establishment of a safe, reliable port-to-port rail link for freight between Melbourne and Brisbane is the only way to simultaneously meet Australia’s burgeoning freight task, alleviate congestion on existing freight networks, create regional jobs and boost growth.
“To fully unleash the benefits of this project, the line must run to the ports of Melbourne and Brisbane, and comprise efficient rail linkages to the ports of Botany, Kembla and Newcastle in NSW,” he added. “We must also support the development of intermodal freight hubs at appropriate intervals along the route.”
Kilgariff also hailed a $5.3 billion commitment to construct the Western Sydney Airport and $75 million to duplicate the Port Botany freight rail line, noting that the projects would bring to fruition “critical” freight infrastructure projects that would further support economic activity and job creation.
“The Budget’s strong focus on infrastructure is timely, coming less than six months after the Federal Government agreed to ALC’s request to develop a National Freight and Supply Chain Strategy,” he added. “We welcome the measures announced tonight as a positive first step in continuing efforts to deliver a safer, more efficient supply chain.
“It’s also pleasing that Infrastructure Australia has been provided with an additional $11.9 million to deliver its core functions of assessing projects and producing an infrastructure pipeline.”
He noted that the proposed new Infrastructure and Project Financing Agency within the Department of Prime Minister and Cabinet would need sufficient technical expertise to aid the national leadership in making sound infrastructure funding decisions.
“This includes a willingness to make Commonwealth funding for projects conditional on the implementation of appropriate strategies to protect freight corridors, and minimise urban encroachment on freight infrastructure,” Kilgariff concluded.

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