The more freight costs, the more everything costs

The more freight costs, the more everything costs

Living on an island state like Tasmania means nearly everything we buy from, or sell to, the mainland has to cross Bass Strait. That journey adds extra transport costs compared to businesses on the mainland who can simply use road or rail. Think of it as a ‘water tax’ just for being Tasmanian.

The Tasmanian Freight Equalisation Scheme, or TFES, is a long-standing federal government program specifically designed to tackle this. Its main goal is straightforward: to reduce the cost of shipping eligible goods across the water, aiming to put Tasmanian businesses on a more level playing field with their mainland counterparts.

The scheme kicked off back in the mid-1970s after an inquiry recognised this unique disadvantage. The basic idea was to make the cost of essential sea freight to and from Tasmania roughly the same as moving goods the equivalent distance over land on the mainland. When it functions as intended, TFES helps our exporters stay competitive when selling interstate and, in theory, helps keep the prices of goods shipped into Tasmania more affordable for everyone by subsidising part of that freight cost.

However, the reality often falls short of the promise, and that’s where the problems lie.

Businesses frequently report that TFES is complex to navigate, slow to pay out, and bogged down in confusing paperwork.

There are strong criticisms that the current rules can favour large corporations over smaller local businesses, and it hasn’t adapted well to modern needs, like adequately supporting crucial air freight for time-sensitive products (think fresh seafood or urgent supplies).

Instead of being a simple, effective bridge, it often feels like another barrier, hindering rather than helping Tasmanian producers and exporters reach their potential, and doing little to ease cost-of-living pressures related to imported goods.

That’s why there’s a strong push to modernise it – to make it faster, fairer, simpler, and truly effective for all Tasmanians in today’s economy.

It is absurdly overcomplicated

At its core, this is a rebate you get for using a service, based on what you’re using it for. Why is this so complicated?

Everyone’s in charge

The department tasked with administering the TFES — the Department of Infrastructure, Transport, Regional Development, Communications and the Arts — is different to the agency that delivers the scheme — Services Australia — which adds an extra and unnecessary level of red tape.

The government has an interest in keeping it slow

The slower you get it, the better they look

Every claimant wants their payment administered quickly. Governments are not in the habit of rewarding public servants for the expeditious distribution of taxpayer money! However, these incentives could be aligned – both sides of the interaction want the same outcome. By having both sides work to a mutually-preferred outcome it opens up enormous scope to improve the administration of the scheme and unlock potential improvements that could be identified on the public-service side of the ledger.

It suppresses competition

The scheme has baked into it an anti-competitive restriction that sees value being directed at one mode of transport and not at any other that might be able to deliver the equivalent service at an equivalent price, or cheaper. It artificially suppresses competition along subsidised routes and reduces downward pressure on prices that would result from that competition.

It has zero stability

As it stands, the TFES operates under ministerial direction. Ministers change for multiple reasons – change of government, change of portfolio or the parliamentarian leaving the portfolio – which instils a level of uncertainty. This lack of certainty is not desirable. Ministerial direction does, however, provide a flexibility that would enable the government to implement many of the recommendations the committee made much more swiftly than through legislative reform. There’s just no guarantee they’ll last.

Dedicated frontline staff on the ground

Rebates are administered and processed by people outside the state the TFES was designed to support. Frontline staff, assist businesses with their claims, would give you someone to contact with questions, making the claims process cleaner and easier.

Park it in one department

Stop making different departments handle different parts of the scheme. It makes accountability and transparency difficult, but for users, it makes it much harder to figure out who’s responsible for where their claim is at. Park it in one department, give it sole responsibility, and hold it accountable for delivery. It will speed up claims processing and reduce the cost of administering it.

Change the way the money gets distributed

Currently, the less that gets paid, the better the government’s budget looks. Bureaucrats have an incentive to go slow. Changing the incentives would motivate bureaucracy to make it quicker to deliver. Imagine if there were late payment fees charged to the bureaucracy when it fails to deliver within a guaranteed delivery window!

Modernise it

We can use technology to make things faster and cheaper. Shipping manifests should be relied upon to determine the identity of shipped goods. These goods could be automatically categorised and reviewed by a human, rather than requiring a human to categorise them against a complex system(that only increases in complexity for mixed cargo). The cargo being shipped is already being documented, logged and stored; why are we asking the user to do this again?

Prepayment: regular shippers with regular shipments, where the specific nature of the shipped goods and the volume being shipped is largely static, display predictable behaviour: they will make their claim at a point that is largely consistent with the time they last made their claim.

Accounts: An account-based scheme would allow for the storing of shipper’s information, which is not anywhere near as dynamic as things like shipping volumes, reducing the time it takes to complete paperwork, and even allowing for it to be pre-filled.

Bring in air freight

The inclusion of air freight in the TFES would markedly enhance Tasmania’s capacity to export high-value, time-sensitive products to mainland and international markets. Perishable goods such as seafood, cut flowers and premium fresh produce currently face substantial cost disadvantages when air freighting to markets, undermining Tasmania’s competitive position in these lucrative sectors. While valuable, the existing sea freight subsidies do not adequately address the needs of producers whose products require rapid transport to maintain quality and command premium prices.

The introduction of subsidised air freight would create healthy competitive pressure on sea freight operators, who currently hold a relatively captive market. This intermodal competition could drive efficiency improvements and price reductions across both transport modes, particularly for intermediate products valuable enough to potentially use air freight but not so time-critical that they require it.