Rough seas for grocery prices under new Fair Work laws

Posted by Josette Dunn on 4th August 2010

Australian families and consumers face higher food and grocery prices for Australian-made products under new Fair Work Act provisions which are affecting shipping costs, the Australian Food and Grocery Council (AFGC) warned today.

Money for budget

Under the Federal Government’s Fair Work legislation, higher operating costs have been imposed on leading Australian food and grocery manufacturers in terms of paying local wages to foreign seafarers carrying domestic freight between Australian ports.

AFGC Chief Executive Kate Carnell said several leading food companies are being heavily impacted by the new workplace laws which came into effect on July 1 and face no choice but to pass on the significant freight and wage costs – ranging in the millions of dollars – to consumers.

“There has been a significant increase in the cost of carrying cargo around the Australian coast so many food and grocery companies will be forced to pass on this cost burden which ultimately affects consumers buying products from supermarket shelves,” Ms Carnell said.

AFGC highlighted another downside under the Fair Work legislation was that many Australian manufacturers will now be compelled to use higher cost, less environmentally sustainable land-based transport to move cargo.

“This obviously pushes the freight of goods back on to Australia’s already congested highways and increases the emissions output of industry,” Ms Carnell said. “Also, companies believe that freight prices could further increase from less competition to long-haul rail services.”

One leading Australian vegetable processing company has estimated it will be forced to pay more than $7.4 million extra in annual freight costs in switching from coastal shipping to road/rail transport. Other companies have also reported up to a 10 per cent increase in the cost of moving freight from Melbourne to Brisbane and Perth.

The new workplace legislation – which excludes ships operating under single-voyage permits – has been extended to foreign-flag ships moving cargo between Australian ports. Under the previous policy, the costs of shipping local cargo, including food products, on foreign vessels was cheaper because of lower labour costs.

“While the new laws assert fairness, food and grocery companies believe that if foreign vessels are only carrying coastal cargo incidental to Australia’s foreign trade, it’s grossly unfair to impose additional costs because the work of those seafarers is primarily concerned with foreign trade.”

Ms Carnell highlighted that food and grocery manufacturers – who employ more than 315,000 Australians – were already under intense operating pressure in Australia.

“This shipping issue places further margin pressure on Australian manufacturing operations that are already under considerable pressure from imported foreign-produced goods from the Asia Pacific region,” Ms Carnell said.

“The Government needs to better understand industry’s needs to remain profitable and employ people in Australia’s largest manufacturing sector.”