By Matt O'Sullivan & Jacob Saulwick
Pressure on Sydney's roads could be eased by the removal of hundreds of thousands of truck trips if the competition regulator is successful in forcing the Berejiklian government to unwind a significant element in one of its signature privatisation deals.
The Australian Competition and Consumer Commission on Monday launched legal action aimed at the terms on which the Coalition government in 2013 privatised the operation of Port Botany in Sydney and Port Kembla in the Illawarra for $5.1 billion.
The ACCC, which also took a swipe at state governments over short-term thinking when privatising assets, is concerned at the way the terms of the port privatisation deal, in effect, prevent the development of another container terminal at Newcastle.
Advocates for a Newcastle terminal say that one would help remove unnecessary heavy vehicle traffic from Sydney roads.
After months investigating restrictions imposed on the Port of Newcastle, the ACCC began legal action in the Federal Court against NSW Ports – the successful bidder for Port Botany and Port Kembla – for striking alleged anti-competitive deals with the state government.
The competition watchdog is alleging that making agreements containing provisions, which would effectively compensate the operators of Port Botany and Port Kembla if the Port of Newcastle built a container terminal, was "anti-competitive and illegal".
The Coalition government privatised Port Botany and Port Kembla in 2013 and the agreements – known as port commitment deeds – were struck as part of the $5.1 billion deal for a period of 50 years.
The Port of Newcastle wants to build a container terminal.Credit: Max Mason-Hubers
The deeds oblige the government to compensate the operators of Port Botany and Port Kembla if more than 30,000 containers are transported each year though the Port of Newcastle, itself privatised in 2013.
Another deed signed when the Port of Newcastle was privatised required it to reimburse the state for any compensation paid to the operators of Port Botany and Port Kembla.
Roy Green, the chair of the Port of Newcastle, said the operator wanted to see the restrictions removed on the development of a large-scale terminal capable of handling the world's largest container ships.
A container terminal at Newcastle could help reduce the number of trucks on Sydney's roads. Credit: Kate Geraghty
"These restrictions placed on the Port of Newcastle, we don't think are justified," he said on Monday.
The operator of Newcastle’s port insists that plans to build a container terminal are not viable because of the constraints imposed at the time of privatisation.
A report commissioned by the port, which will be released on Tuesday, forecasts that construction of a container terminal at Newcastle would remove up to 750,000 container truck trips through Sydney by 2050, relieving pressure on the city's roads and rail network.
And it estimates a container terminal would boost NSW's gross state product by $6 billion by 2050, half of which would come from lower freight costs.
ACCC chairman Rod Sims said the compensation provisions effectively meant that the Port of Newcastle would be financially punished for sending or receiving container cargo above a minimal level if Port Botany and Port Kembla had spare capacity.
"This makes development of a container terminal at the Port of Newcastle uneconomic," he said. "We are taking legal action to remove a barrier to competition in an important market. The impact of any lessening of competition is ultimately borne by consumers."
Mr Sims said he had long voiced concerns about the "short-term thinking of state governments" when privatising assets and making decisions primarily to boost sales proceeds, at the expense of creating a long-term competitive market.
Labor leader Michael Daley welcomed the ACCC's legal action, accusing the government of reaching the terms of the agreement to sell Port Botany and Port Kembla in secret. "The Liberals denied that deal existed," he said of the port commitments deeds.
But Treasurer Dominic Perrottet said the government's position in 2013 was, and remained, that no competition issues arose as a result of the "arrangement which provided certainty to all parties involved".
"The government has and will co-operate fully with the ACCC and as the matter is ongoing no further comment will be made at this time,” he said.
A spokesman for Premier Gladys Berejiklian said she and the government had consistently said that there was "no legislated container cap at the Port of Newcastle and arrangements do not prohibit the development of a container terminal at the port".
The ACCC said the state government was "not currently" a party to the legal action.
NSW Ports said it would vigorously defend itself in court after paying $5.1 billion to the NSW government in 2013 based on the "full contractual terms contained in the agreements".
In a moved that pitched him into the longstanding controversy over the terms of the privatisation, Deputy Premier John Barilaro recently said that the state's farmers would “absolutely” benefit from being able to export through a container terminal in Newcastle.