The high toll of punishing small trucking operators

Robert Gottliebsen
MARCH 30, 2016
BUSINESS SPECTATOR
The decision to unfairly punish owner-driver truckies not only lowers competition and drives up transportation costs, it also makes Japan Post’s Toll deal a steal.
Last night’s sharp rise in the Australian dollar exposed the extreme danger to Australia’s national prosperity of lifting road transport costs by an average of around 30 per cent to satisfy the agenda of the government’s Road Safety Remuneration Tribunal.
In addition, the policies will devastate a large number of Australia’s 35,000 owner-drivers and countless tens of thousands of farmers.
Conversely, it will generate an enormous increase in membership for the Transport Workers Union and enable major transport groups like Toll, which has close links with the TWU, to dominate Australian transport (Truckies are on the road to ruin).
South Australia is set to receive a particularly hard kick.
The tribunal is punishing the small operators in the name of road safety but, in my view, ignoring the fact that higher freight rates will not help. New technology can achieve the same aim without devastating the Australian economy.
My commentary prompted amazing developments late yesterday which continued during the night:
Smaller transport groups have been desperately trying to get the tribunal to defer the measures set to create such devastation and a tribunal hearing was held yesterday.
Yesterday morning the TWU asked me for a right of reply and, as is always my policy, I promised them that their reply would be published in full on our electronic sites. As of the time of writing this commentary, (6am on Wednesday) no email has been received. The offer stands.
Nick Xenophon, who voted for the Gillard government’s legislation not knowing that the tribunal could and would be used to boost the TWU and devastate owner-drivers and farmers, appeared to realise the havoc he unknowingly created. He held talks with transport groups. (Nick, you are unfairly being blamed, but deferring the tribunal’s devastation is not the answer. The tribunal must be abolished. It has become a vehicle for the interests of the TWU and major transport operators).
The Minister for Minister for Industry, Innovation and Science, Christopher Pyne (also a South Australian) suddenly took an interest in the measures the tribunal are planning to implement next week. Pyne realised that, apart from the economic devastation, the Road Safety Remuneration Tribunal’s decision effectively knifed much of the impact of a lynch pin of Malcolm Turnbull’s upcoming election campaign — the ‘effects test’.
And they have also set the scene for Japan Post to dominate Australian road transport.
In essence, the tribunal is demanding 35,000 owner-drivers charge a lot more for their services than trucks being driven by members of the Transport Workers Union, who are employed by big operators. In gaining that outcome, the Transport Workers Union has done an amazing job for their interests.
I have been in business myself and commenting on business for more than half a century and when two products are roughly the same, the lower price wins. By demanding that owner-drivers charge a higher price and not making the same demand on employed drivers (usually TWU members), the owner-drivers are going to be driven out of business. That sets the scene for large operators to take market share, bankrupt the small operators and then raise prices. And it will be legal.
This is exactly what the government’s long overdue “effects test” proposal is designed to stamp out. But it will be too late for the road transport industry. If there is a double dissolution (and that is no certainty), by the time the new parliament settles down, the legal carnage on small truckies will be well under way as their trucks and houses come on to the market.
Meanwhile, Japan Post has a once-in-a-life-time opportunity to dramatically lift its market share of the Australian road transport industry.
When Japan Post purchased Toll for $6.5 billion last year, most people thought that it had paid a very high price. But the tribunal policy makes the price look low. However, to take advantage of the situation, the Japanese must inject many billions of dollars into Australia via new equipment. Initially the tribunal has allowed Toll and others using TWU employees to undercut the owner drivers who are being forced to charge two to four times more than their current rate. But as things now stand, the large operators don’t have enough equipment and drivers to take full advantage of the unique market opportunity created by the government body.
But once small operators are forced out of business and truck prices slump, Toll and other majors will be able to pick up used vehicles for a low price and, of course, can buy new vehicles. And given the incredibly high prices the tribunal has set for small operators in what it calls “the interest of safety” — Japan Post will make an absolute fortune out of the Australian transport industry. It means that supermarkets like Coles and Woolworths, along with all other retailers, will be lumbered with much higher transport prices and therefore higher food prices will also follow.
Productivity is set to fall dramatically because competition is being eliminated. As I pointed out yesterday, any safety problems can be easily overcome by modern technology. And if regulation is required, Victoria has excellent legislation that can be used nationally (and its Labor legislation).
There is absolutely no need to drive a big proportion of the 35,000 owner-drivers out of business. There are only two occasions that I can recall where there has been a concerted government effort to wipe out a large number of small operators. The most successful was in the clothing and textile business when a lot of migrant women making clothes at home were said to be exploited, so were closed down. And of course the ladies in their homes had gained income which they had planned to use to send their children to university. The jobs went off shore.
Secondly, in his early years as Treasurer, Peter Costello, after bad Treasury advice, had legislation drafted stating that if 80 per cent of a contractors income came from one source then that person was deemed as being employed by the source and not be a contractor. This caused screams of protest led by media people.
Howard called back Peter Costello from holidays and the new treasurer quickly fixed the problem. If the truckies are to be successful, they will have to work extremely hard on people like Nick Xenophon and the Coalition to see if the tribunal can be abolished.
The Australian parliament of 2016 is not easy. If the road transport tribunal is successful then Australia will have one of the most costly transport industries in the world and it will substantially reduce our export potential.
All Australians will suffer. And because of modern technology the whole exercise is absolutely unnecessary.
Once drivers are monitored via new technology and their insurance policy is linked to that monitoring, there will be no long driving issues.
Japan Post has to hope that Australia does not wake up to the Road Safety Remuneration Tribunal and that it can achieve government-driven dominance. It will make the Toll purchase price cheap.