Tasmania’s producers and manufacturers call for immediate changes to the Tasmanian Freight Equalisation Scheme

Fruit Growers Tasmania | Sunday, 23 February 2025, 10.05am

Statement from Peter Cornish, Chief Executive Officer, Fruit Growers Tasmania; and Wayne Davy, Chair, Tasmanian Chamber of Commerce and Industry

Tasmania’s producers and manufacturers are seeking an immediate adjustment of the Tasmanian Freight Equalisation Scheme (TFES) payment schedule, to restore some cost parity for shippers across Bass Strait, preceding a full review of the Scheme as recommended by the Senate Select Committee into the TFES.

The findings of the Select Committee were quite damning and concluded that the Scheme is no longer fit for purpose and should be reviewed.

To provide some immediate relief to north bound shippers whilst a review is undertaken over the next 12 months, we are seeking the following actions.

A 22% increase in assistance for the calculated freight cost disadvantage for all northbound movements, increasing the current cap from $755 to $924 per twenty foot (equivalent) container.
Increase the intermodal component from $100 to $200 per container.
Increase the transshipped (export) freight assistance from $700 to $800 per container, to reflect the increase in intermodal costs.

All the evidence presented to the Senate Committee, including the Commonwealth Government’s own figures, show that the freight cost disadvantage for shippers has increased significantly since 1998, and in particular, over the last four years. This is having a detrimental impact on Tasmanian businesses trading interstate and overseas.

The extent of the requested actions is well below what should result from a full review of the Scheme. These have been structured in a straightforward way which should make it simple to implement without altering the formulas within the existing model. In short, the proposed actions can be made without delay or any adjustment to the Scheme’s parameters.

The evidence supporting these adjustments is clear.

The Commonwealth Government’s Bureau of Infrastructure and Transport Research Economics’ Monitoring Report 2024 shows a 22% increase in the average post assistance sea freight disadvantage between 2000-01 to 2022-23. This implies a necessary increase in the assistance cap from $755 to $924 per container.
Evidence from shippers shows the intermodal cost has doubled over the last 25 years to $200 per container. This is in line with the increase in CPI over the period, as acknowledged by the Bureau.
To recognise the increase in the intermodal cost for freight transshipped to export destinations, the fixed amount should increase from $700 to $800 per container. This only partially compensates export shippers for the increasing cost disadvantage experienced on north bound freight, but it is a start.

In summary, the budget cost of the requested changes is $39 million.

The Scheme represents a sound investment (of less than 0.5%) in Tasmania’s $26.6 billion annual exports both interstate and overseas. It supports the viability of the industries that rely on the Scheme and the many thousands of Tasmanian workers they employ.

While these are the three immediate changes to the Scheme being sought, there are others that a more comprehensive review should consider. In particular, these include an increase to the southbound freight assistance and changes to the administrative arrangements to make the scheme more straightforward and user friendly.