Report shows ports not to blame for freight costs

Written By: - Date published: 10:19 am, January 13th, 2012 - 5 comments
Categories: exports, privatisation, workers' rights - Tags:

The Productivity Commission reports that freight costs are 25% higher here than in Australia and freight costs as a % of cargo value has risen in recent years. Their solution? Make the public and port workers poorer by privatisation and casualisation. Of course, those are ideological goals, not solutions to the freight cost issue, which has nothing to do with ports.

The report itself shows that it’s shipping costs that make New Zealand freight costs higher. It says that “The onshore components of New Zealand’s freight costs compare favourably with Australia and other OECD countries”, “the ocean transport component of sea freight costs is higher for Auckland compared with Sydney routes”, and “the onshore components of Auckland’s sea freight costs, particularly its port handling costs, compare favourably with Sydney’s”.

This table shows sea transport costs to New Zealand are about twice what they are to Australia, while port handling and onshore transport costs in New Zealand are about half what they are in Australia.

We don’t pay more for freight because our systems are inefficient but because Australia’s bigger scale means larger, more efficient ships, and because the international shipping lanes gouge us. In fact, our over-capitalised ports are competing with each other so intensely to try to attract customers, in what is a negative-sum game for New Zealand, that they’re barely making money while the shipping lines reap the rewards.

And why is the cost of freight rising relative to cargo values? I’ll give you a clue:

So, what does selling off our ports and making our port workers poorer got to do with addressing these constraints? Nothing, of course. The ports are, in fact, only a small part (about 6.3% according to the report) of businesses logistics costs. And they’re efficient already. New Zealand has the two most productive ports in Australasia: Tauranga and Auckland.

Despite the evidence in their on report, the Commission has just told National what it wants to hear to justify the ideologically-driven moves it is planning to sell assets and attack our work rights.

5 comments on “Report shows ports not to blame for freight costs ”

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  1. tc 1
    13 January 2012 at 12:23 pm

    Many of the competitive, efficient, price sensitive arguments fall down when you step back and realise that:
    a) we’re down here at the bottom of the world
    b) we’re a tiny country (metro melb’s bigger than us ) so you’re spreading costs over less people.
    c) We have little competition in alot of our industries so we get gouged, telco/transport/supermarkets/banks/utilities etc
    d) Fuel costs underpin most things and they’re soaring
    e) Oz gets up to 50% of it’s oil from it’s own reserves (Bass strait etc) etc etc

    Catching Oz and being competitive is becoming a tired irrelevant mantra. if you dig down it’s just not a valid comparison or possible, the way forward is (like luxury goods) sell the quality at the higher price and let the so called weakness become a strength. .

    • Lanthanide 1.1
      13 January 2012 at 1:37 pm

      Autralia producing it’s own oil has nothing to do with shipping costs or the price of oil used in its shipping unless for some reason they aren’t pricing their oil to the global market price.

      • Colonial Viper 1.1.1
        13 January 2012 at 1:46 pm

        As a note, the global market price (Brent/WTI etc) is not relevant for the majority of physical oil delivered, which is either traded in dark pool exchanges, or by long term secure contract (what China likes to do).

  2. randal 2
    13 January 2012 at 1:36 pm

    one thing for sure is that you never get told the truth in new zealand.

  3. Adrian 3
    14 January 2012 at 7:29 pm

    Ships don’t run on diesel, they run on bunker oil which is like marmite and as cheap (relativly) as chips.

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