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TT-Line – Spirit Replacements

Cassy O'Connor MP  -  Tuesday, 8 December 2020

Tags: TT-Line, Political Donations

Ms O'CONNOR - I am interested in finding out what sort of capacity we might have in Australia for any part of building the Spirit replacements? Given that a process has been established to determine a potential local content, perhaps you could flesh out minister, or Mr Grainger, what is on the ground in Australia and what may be possible. I know you are going through an exploratory process now

Mr FERGUSON - Thank you, Ms O'Connor, I will take the question. It is easy to answer in respect of the fact that there is nothing further to add at the moment in respect of the work that the task force is undertaking, because it has not reported at this point in time.

We are aware of capacity for shipbuilding enterprise here in Australia and in Tasmania, but to emphasise those would be getting ahead of the fact that the task force is continuing its work, it is engaged and involves Mr Dwyer who is a member of the task force, to ensure that it takes account of all of the needs, including of TT-Line itself as a business as it steps forward and provides advice to Government. It is also engaged with some specialised maritime consultancy, so that there is some expert advice.

It is premature for me to answer the question with any useful detail, but we are aware of Tasmanian shipbuilding operations including at Incat; and we are well aware of public advocacy by Austal, but they are only interesting at this stage. We are certainly encouraging those pitches to be made to the task force. The role of the task force is not to make any direct selections of any kind but rather to advise Government on next steps as we pause the process for six months.

Ms O'CONNOR - Thank you, minister. I am not looking for any detail on what the task force is doing particularly. It would be instructive to the committee to know where the potential capacity is to build a large steel hull vessel, like a Spirit replacement. I am not sure there is that capacity in the country.

Mr FERGUSON - I am on the record on that very point. We are not engaging in debates about whether Australia has that capacity right now or not, but what the opportunities might be for any percentage increase in content or delivery of the new vessels. Could they be built in Australia and if the industry capability does not exist right now, how could it exist? These are questions that can be considered by the task force and as it considers those options, including the very interesting proposal that has been well canvassed about hulls being built in Asia and fitted out in Australia, that is all of interest.

Ms O'CONNOR - I am interested in time lag here, potentially. From that answer, you said you are not sure if there is capacity here now but it might be able to be built up in time so that there is more possibility that these vessels will be built in the country. Is that a realistic proposition, in time, to have them replaced? To build up a whole industrial base around shipbuilding?

Mr FERGUSON - No, I am certainly not proposing any of that nature. What we are looking for is the advice from the task force. Until we have that advice, with options that have been carefully considered, that can then be presented to Government. We are speculating.

There is a range of possibilities that can emerge from the work of the task force and the advice that it provides to Government. Government would then consider that and make decisions in partnership with TT-Line so we ensure that we replace the current Spirits well within the optimum replacement time frame of 2028, noting that we are pro jobs and, through the pandemic, where we saw such a significant downturn in the economy and employment, we want to find ways to ensure that we get as many jobs out of the new ships as we possibly can.


Ms O'CONNOR - I am interested in following up on Mr Grainger's answer. So what we can take from that is that the companies who have the capacity to build a vessel to IMO standards, at this stage, are all outside Australia?

Mr GRAINGER - No, that's not correct. There are a couple of shipbuilders in this country who build vessels for the international trade.

Ms O'CONNOR - Big, steel monohull vessels?

Mr GRAINGER - No, high-speed craft.

Ms O'CONNOR - Okay. Looking at a scenario where there is a way found for most of the ship to be constructed in Australia, that would require a significant uplift from some shipbuilding company in order to be able to do that, if we went down that path?

Mr GRAINGER - Correct, apart from high-speed craft.

Ms O'CONNOR - Yes, that's right. In the annual report on page 9 of 64, it talks about the meetings of the Vessel Replacement and Procurement Committee, but the table seems to point to there being no meetings of the committee yet. Is that the case, and if so, when are they expected to meet?

Mr GRAINGER - There have been a number of meetings - you mean within TT-Line?

Ms O'CONNOR - In the annual report on page 9 of 64, it talks about directors' meetings and the fourth column over is Vessel Replacement and Procurement Committee and none of the directors attended meetings that it is not clear were held.

Mr GRAINGER - In the last 12 months, that is correct.

Ms O'CONNOR - So in the past 12 months there have been no meetings of the procurement committee?

Mr GRAINGER - That is correct.

Mr DWYER - If I could add to that, we rolled those ship replacement committee meetings into the standard board meetings, so instead of actually meeting as a subcommittee, the whole board met and discussed everything in relation to the shipbuilding project. Rather than having three or four subcommittee meetings, we lifted it up and met every month in relation to that.

Ms O'CONNOR - So that I can get a sense of the structures here, that committee has been rolled into the board and then you have the replacement procurement process looking for local content. How do those two processes work together, or are they two processes?

Mr FERGUSON - I will respond as well and if the CEO or chair would like to add to my answer, that is fine. They are quite separate. The task force is an individual piece of work which does, however, involve the CEO of TT-Line, Mr Dwyer, as a key member of the committee. Its work is continuing and we expect to see advice out of that early in the new year and will then allow Government to then have some time to look at that. We intend to provide as much of that publicly as we are able to, but that is yet to be received. I cannot speculate on the nature of it, but it is separate to the board's consideration up until now.


Ms O'CONNOR - Minister, I take it from that last answer there's not going to be an attempt here to force findings on the task force's recommendations? If a task force has done its due diligence and found that there's not the capacity in this country to build ships that are fit for purpose, you as minister, and the Government, won't be too proud to go back to Plan A?

Mr FERGUSON - As the Premier and I have said, we've been very clear - Plan A, which is the RMC option, has not been dismissed at all. As a government, we are determined to ensure we expand the horizons of what we believe could be possible, and without ruling anything out at all. In fact, it's the Opposition that is trying to rule out options - and that is any option that involves Australia. We're simply seeking to find what those opportunities might be. Everybody's working very hard and in a very united way on that task force to develop up those options. It is entirely possible, on a spectrum of possibilities, that there might be an opportunity for an RMC, or an Austel or an Incat - or a hitherto unknown pitch that might yet emerge. We want to maximise, to the greatest possible degree, jobs in Tasmania and jobs in Australia.

Ms O'CONNOR - I understand Incat is potentially doing some preliminary work on being part of the Spirits' replacement. We remember the last time there was a cat running that service on Bass Strait. It had some issues for passengers, but they are a fantastic shipbuilder. What role do you potentially see for Incat here?

Mr FERGUSON - I would have to answer the question in the same way as I did earlier, regarding a different model. We don't want to get ahead of ourselves here; we simply want the task force to be able to consider the appropriate way forward and what the options could be. We don't want to be excluding and telling Incat to rack off or Austel to rack off. We're interested in exploring what the possibilities would be, noting that people are currently making some pretty exciting and interesting pitches. I'm inviting those parties to come forward with those pitches, because it's good for the task force to see what industry believes it is capable of. However, it would definitely be premature for me to be seen to backing any particular proposal because I'm certainly not; but I'm pleased that there has been a strong endorsement of the Government's position to prudently pause the procurement for now while we still preserve all our options going forward.

Ms O'CONNOR - When the task force report comes back, who makes the final decision on the procurement? Is it a ministerial decision; does the Premier make the decision? What role does the TT-Line Board have in that, and what role potentially does Cabinet have in that decision?

Mr FERGUSON - I will have to speak in a broad sense. It would be a government decision that's made, however, with the continuing advice on the role of the TT-Line Board. However, not being in possession of that report or the advice to date we can't second guess what the structure of those decisions might need to be, or the timeliness of them. It would be a government decision, however, always taking advice from our board.


Ms O'CONNOR - Minister, is Austal a Liberal Party donor?

Mr FERGUSON - They may be but I don't know if they are.

Ms O'CONNOR - You absolutely don't know?

Mr FERGUSON - I'm not aware of whether they are. If they are or not it's not relevant to this committee and my role as shareholder minister for this business.

Ms O'CONNOR - Well, according to you. It might be.

Mr FERGUSON - It may well be.


Ms O'CONNOR - I am sure the minister has read Mr Eslake's report, which is extremely interesting reading. I think we all recognise that Mr Eslake is a highly regarded economist and a very proud Tasmanian. He makes this statement -

In summary, it seems that having the replacements for the Spirit of Tasmania built 'in Australia' contrary to the recommendations of the board and the management of TT-Line, and indeed contrary to the settled positions of the Tasmanian Government itself until mid-July, would inevitably result in Tasmanian taxpayers paying a higher price and potentially a considerably higher price for ships that will inevitably commence operations at a later date than if TT-Line had been permitted to proceed as originally intended.

What is your response to this statement, minister?

Tasmanian businesses are facing a non trivial risk that shipping services will be less reliable than if the replacement vessels had been constructed as per TT-Lines original intention, and fewer tourists visiting Tasmania than would have been the case if the replacement ships had commenced operations as originally intended.

Mr Eslake says basically that this could well turn out to be the most ill advised decision made by any Tasmanian government since 1983.

Mr FERGUSON - I don't intend to add to the record. I've extensively critiqued that report and my opinion of it and the opinion of the Government, my colleagues. The report has a range of fatal errors and flaws and is based on rumour and assumption. I don't intend to further critique it at this scrutiny hearing.

Ms O'CONNOR - Don't you think it has some kernels of truth in it, though?

Mr FERGUSON - I have no further useful comment to make other than that. The Labor Party commissioned the report because they are steadfastly opposed to creating jobs in Tasmania.