From the Davy Jones’s Locker
The fourth in the series of ‘Davy Jones’s Locker’ articles is from the fourth edition of the Journal of the Australian Naval Institute published in May 1976. From its earliest years members of the ANI have discussed the importance of maritime trade to Australia and the challenges of its defence. The then Captain Neil Ralph DSC RAN gave an address to the ANI’s Canberra chapter on 30 March 1976.
Introduction
The importance of maritime trade to national economics varies according to the degree of self-sufficiency of the country concerned. On one hand the economies of UK and Japan have a precarious dependence on trade, on the other the economy of the USSR has a very limited requirement for trade. However no country can fully realise economic potential unless she trades competitively in world markets. The degree to which economic potential is realized determines the standard of living of the people, political influence abroad and inter alia, the level of the country’s defence. There is no military strength for Australia except on the basis of economic strength and it is on this basis that we best ensure the security of the country
The purpose of this paper is to indicate the importance of maritime trade to Australia and suggest its sensitivities to external factors which might have implications for defence. This should be the first step in a series of studies which other Institute members might take up in the interests of achieving a greater public awareness of the defence problems of Australia.
The scope of this paper is as follows:
- A description of the current nature and pattern of Australia’s maritime trade.
- Discussion of some implications of any disrup tion to this trade.
- An outline of the general nature and movement of shipping engaged in Australia’s trade.
- A summary of the inherent sensitivities of this trade to factors which might have Implications for defence.
Pattern of Australia’s Maritime Trade
Australia is a major trading nation and in terms of total value of trade it ranks 13th in the world. Expressed as a percentage of GDP, Australia’s trade is around 30% which is above that of Japan and the US.
From the early years of settlement Australian production of primary commodities including minerals, has been heavily exported, particularly to UK. In the case of manufacturing industries the comparatively small domestic market acts as a restriction on economies of scale which modern production techniques require. Consequently participation in international trade is of fundamental importance to the Australian economy. Imports have been an essential input to sustained growth and diversification of the economy and to finance such imports, exports must grow at a similar rate.
Imports
Imports have increased almost 5-fold over the last 20 years, stimulated by strong economic growth, a high rate of population growth, industrial development and rising incomes The main groups into which exports may be generally classified are:
- Producers materials (material for manufacturing industry): 44% of imports
- Producers capital equipment (machinery): 18%
- Transport equipment: 7% and increasing
- Finished consumer goods: 24% and increasing
- Fuel: 3% and increasing
- Other: 5%
The growth of the industrial sector has to a large extent led lo increased import demand for producers’ capita] equipment and producers materials and these now account for over 62% of total imports, a proportion significantly higher than 20 years ago.
Imports of finished consumer goods have roughly kept pace with the overall growth of imports and consumer demand while fuel’s share to total imports has decreased considerably, largely reflecting increased sell-sufficiency.
Over the last 20 years substantial changes have occurred in the sources of Australia’s imports. The UK’s share of our imports has fallen from 49% to 14%. US (22% ) replaced UK as leading supplier in 1966-67. Asia (34%) and EEC (13%) have increased their share of Australian import markets. (West Germany is leading source from EEC).
Exports
Australia’s export trade remains dependent to a large extent on farm products despite the growing contribution of mining products and manufactures. Seasonal influence on agricultural production and the often sharp variations in world commodity prices have resulted in heavy fluctuations in Australia’s export earnings. For example, in 1972-73 the volume of wool exports fell by 5% while the value rose 96% above the previous year.
The diversification of exports has been a principal objective of Australian export policy in the post-war years. In the late 1940s farm products accounted for just under 90% of Australia’s export earnings, whereas today, they account for around 52%.
The steady growth in exports of manufactures has been partly responsible for the reduced proportion of farm products, but in recent years exports of mining products have played the major role. In 1953-54, exports of mining products were valued at $102m., or 6% of total exports. By 1973-74, exports of mining products accounted for 24% of total exports and stood at $I,607m. Since 1963-64, exports of manufactures have increased from 11% to 20% of total exports,
The relative importance of the UK as an export outlet for Australia has reduced considerably over the last two decades, falling from 36% in 1953-54 to 7% in 1973-74. Both Asia (from 17% to 49%) and the Americas (from 9% to 15%) have greatly increased their shares of the Australian export market, especially over the last 10 years, Japan became Australia’s major export market in 1966-67 and now takes 31% of all our exports. The United States has raised its share from 7% in 1953-54 to 11% in 1973-74. However, in contrast to the pattern of import growth, the share of the EEC in Australia’s exports has fallen, from 23% to 10%.
Oil
Because of the pervasive importance of this commodity, oil should be considered separately. We have seen that oil imports are currently comparatively small and local production provides over 70% of the requirement. However as is generally known, to whatever level local production may reach, we will continue to have a requirement for heavy Middle Eeast crudes for use in heavy industry.
Already there is a tendency for imports to increase again and the areas of increase are mainly in bituminous products (increase of 64%) heavy lubricants (34.2%) and heavy fuel oil (34%) fuel (11%). The main sources of our imports of crude oil refined product are:
- Kuwait is lead supplier: 27%
- Bahrain: 3%
- Saudi Arabia: 1%
- Iraq: 1%
- Singapore: 6%
The trend to increase imports of oil from the Middle East will continue as consumption in Australia decreases and local sources reduce output. A reliable forecast for 1984-5 expects consumption to have risen by 75% over 1975-76 figures. Australian oil sources will be able to supply only a small fraction of the requirement by that time. We become again precariously dependant upon Middle East sources.
To summarise the nature and direction of our maritime trade we find that:
- The level of imports has risen enormously al
though the composition has not markedly
There is a tendency to import more
finished consumer goods, which indicates:
- Increased affluence,
- Production costs of similar products in Australia are probably higher in many cases owing to higher wage costs, and
- Balancing trade with Japan.
- The composition of exports has changed considerably the minerals and manufactures are now balancing the rural export levels.
- The source of imports and the destination of exports are now oriented strongly toward Asia and the Americas.
- The importation of oil fuel will increase marked ly over the next 5-8 years, with the Middle East becoming the major source.
Implications of Disruption to Maritime Trade
The change in our major trading partners has brought about fundamental changes in Foreign Policy and by implication. Defence Policy. Disruptions to trade can be caused in a number of ways, from trade blocks to blockades, from shortages at source to blackmail from source, political/economic duress or denial of use of trade routes.
Earlier we looked at the general nature and source of imports and, now to try to assess some of the effects of shortages caused by disruption, we need to look more closely at both. Firstly the composition of imports. We could probably do without many of the items which were included in the groupings mentioned earlier.
In researching this subject considerable difficulty was experienced in establishing which items were essential to the economy. Import Licences, long since abolished would provide this information. The Department of Overseas Trade apparently attempted to establish import excise essentiality on the basis of the amount of duty imposed on items, i.e. if the item had 7½% duty or less it indicated that the item was not available locally and therefore a degree of essentiality applied to it. Judged by this criteria 63%of imports were essential. This is obviously too high.
The short list which follows indicates those items with an idea of comparative value which are suggested as essential to a nucleus economy.
- Crude Rubber: $43M
- Wood: $4M
- Petroleum & associated products: $6M
- Organic chemicals: $6M
- Plastic materials: $2M
- Tyres: $1M
- Newsprint/paper products: $4M
- Iron & steel: $5M
- Calculators, computers etc: $1M
- Machinery: $6M
- Aircraft Parts (excluding engines): $8M
- Professional, scientific & optical goods: $111.8M
- Total this list: $7M
Total all imports 1974-75: $6085M
This works out to be about half the current imports although obviously some reduction in quantity could be accepted. However we must also have regard to unemployment caused by shortages and the consequential strain on a nucleus economy to provide the social support expected. Additionally trading relations could be damaged in cases where Australia could not meet export commitments and alternative sources established e.g. iron ore for Japan from Siberia.
There are some items which are imported and are absolutely essential to the manufacturing process such as petroleum coke, some ferrous alloys, caustic soda for making aluminium and graphite. To try to trace the precise levels of essential imports will require a great deal of research. The unemployment caused by shortages might be the best means to measure the effect. In broad terms, restrictions on finished manufactures (which are all consumer oriented-motor cars, transistor radios, colour TV etc) should not make too great an impact on the economy. Some unemployment in the retail industry will result and prices will rise as a result of the shortage.
Industry in Australia would however suffer considerably. As we have seen, industry relies to a considerable extent on imports of heavy machinery and producers materials. The shortage of producers materials will be the first felt in the manufacture of plastics and plastic components and tools, to name a few areas. There will be a significant increase in unemployment in the manufacturing industry which is the largest single employer in the Australian workforce. Probably the greatest single effect will occur in the mining of minerals. Almost all of the heavy equipment and tyres are imported owing to the specialised and complex nature of the equipment. Output will probably reduce to a fraction as current equipment is not replaced. The effect would be significant in 12 months.
Again, it is difficult to make a precise judgement on the real effect of the economy of a reduction in imports of oil but as we have seen we will become dependent on overseas supply of oil and the greater the dependence the greater the consequences. As an indication of the effects of oil restrictions in the current situation, the following unemployment would probably result.
- 10%reduction in supply: 85,000 workers,
- 15% reduction in supply: 128,000 workers, and
- 20% reduction in supply: 17,1000 workers.
A serious effect would of course be the reduction in our ability to trade.
Restrictions on the import of finished manufactures should not greatly harm the economy. Reductions in mineral output will occur if the specialized mining equipment is not imported. Reductions in import of producers’ capital equipment and materials will have very large and penetrating effects on the economy, unemployment being not the least effect. The consequences of reductions in level of oil imports will increase considerably from now on.
Domestic Trade
In looking at trade generally we cannot afford to overlook interstate trade. Much of our industry depends upon the movement of large amounts of cargo around the Australian coast. For example:
- Steel Making. Iron and coal is moved in considerable quantities.
- With the industry locations, bauxite, alumina and aluminium metal must be moved.
- The bulk of our domestic oil produced in Bass Strait so we again face a national transport need.
- Although nickel is mined and refined in WA its main use is in NSW.
- To cite one example basic sugar refining is undertaken in northern NSW and QLD. It is a bulk cargo normally handled by sea and if this is not available, there may not be sufficient railway or road facilities to meet the tonnage.
- An inter-related example of domestic and national trade in the production of alumina. Currently we are exporting to Japan large quantities Of salt which is used in part for the production of caustic soda essential to the domestic refining of
Regional Commitments
In time of war for reasons other than the war-effort itself, we must consider supporting the economics of neighbouring countries. For example, there is a close trade relationship between Australia and New Zealand and a certain degree of economic integration. In times of tension it will be important to maintain existing trade relationships. We would continue to import maximum possible quantities of pulp, newsprint and timber from New Zealand to support the New Zealand economy. Similarly with exports. New Zealand is reliant on Australia for items such as petroleum products, copper, iron and steel and aluminium.
For reasons of morale and also to maintain the Papua New Guinea economy we should maintain imports from PNG of: coffee, tea, cocoa, vegetable oil, in addition to rubber which would be of strategic interest in war. PNG generally relies on Australia for a large part of its import requirements. Without these and in the absence of alternative suppliers PNG might be in difficulties.
General Nature and Movement of Trade Shipping
It is convenient to consider trade shipping under the two main groupings – overseas and coastal. Overseas shipping comprises two main groups – bulk and general cargo.
Overseas/Bulk Shipping
We are all aware of the nature of bulk ships they vary in size from 500 to 500,000 tons. Generally their economic speed is 17 knots or less. According to their size there are restrictions to the ports they can use, the routes they can use and their use of the Panama and Suez Canals. The size of bulk ships grew tremendously after the closure of the Suez.
In Australian trade bulk ships are used in the transport of oats, wheat, coal, bauxite, salt, sugar and oil. The most intense traffic is from the WA iron ore ports of: Dampier, Hedland and Walcott. Most of this traffic goes to Japan via Ombai and Lombok Straits. There is an average of 3 ships loaded in each port every 2 days and the traffic between Australia and Japan comprises about 8 ships, 4 northbound and 4 southbound in every 400 mile stretch. In all there are 30 bulk ore carriers between Japan and Australia in transit at any one time.
Other bulk shipping exports from WA occur mostly out of Fremantle which exports grain to Asia and the Middle East, alumina and mineral sands. Combined with the iron ore and salt traffic further north, there is a considerable flow of overseas bulk ships operating on the west coast of Australia, and now bulk operations on the east coast
Bulk carriers operate extensively out of Weipa and Gladstone in Qld. More than 5 million tons of bauxite is shipped overseas annually from Weipa and another 5 million shipped to Australian aluminium plants at Gladstone and Bell Bay in Tasmania. Bulk carriers in and out of Gladstone ship out 7½ million tons of coal and 2 million tons of alumina annually, while delivering 4½ million tons of bauxite. Much of the exported bulk cargo goes to Japan. Hay Point, another Qld port near McKay, exports 8½ million tons of coal annually.
Coal is bulk carried from both Newcastle and Port Kembla, 7½ million tons from Newcastle and 3½ million tons from Port Kembla, to overseas ports, again mostly to Japan.
Other east coast bulk exports are sugar from Mackay. Lucinda and Bundaberg. Liquified petroleum gas is shipped to Japan from Westernport. Bulk wheat is shipped from Adelaide, Sydney, Newcastle. Brisbane and Geelong in Victoria. Geelong being the largest wheat shipper in Australia.
Bulk imports into Australia occur at some of the ports mentioned but not nearly at the same level. Causticsoda and petroleum coke, fertilisers, sulphur and liquid chemicals are the main bulk imports and of course oil. Most bulk ships therefore arrive in ballast.
Oil from the super-tankers is received at: Adelaide, Geelong, Altona, Westernport, Kurnell and Brisbane. Refined products are then distributed around Australia by sea excepting that Darwin and ports in NW Australia receive refined products direct from Singapore.
General Cargo
The general cargo vessels group comprises mainly:
- Container ships, the largest group being the Sea- lane 41,000 ton vessels which carry 2,000 containers at over 30 knots.
- Lash (Lighter Aboard Ship) which require mini mum port facilities. The number of these ships will grow but will not approach anything like the number of container ships. Speeds about 23 knots.
- Hybrids-specially designed according to parti cular trade but carry both containers and hold cargo. Roll on roll off. Etc.
- Hold cargo – used for smaller operations.
Overseas operations usually are organised through conferences. There is the Australian European Conference, Australian North Bound Conference (East Asia, Japan, Korea etc), Australian -American Conference.
Container ships are handled only at ports where loading and unloading facilities are available. In Australia this restricts their movement to the major ports in the capital cities. The trend has therefore been to centralise cargo handling and concentrates this shipping on Sydney, Melbourne and Fremantle. New container complexes are planned for Adelaide and Westernport.
Other overseas general cargo ships operate in and out of capital city ports but take on cargo at some regional ports. Ships operating between Australia and the Pacific Islands are generally small vessels and are frequent callers ai regional ports.
The volume of overseas trade passing through Australian ports as a percentage of trade is:
- Sydney: 33% (including Port Kembla and Newcastle),
- Melbourne: 16.5% (including Geelong and Westernport),
- Fremantle: 15.2%, and
- W. Australia 35.3%. (30% of this trade flows east to America, 30% Europe and elsewhere and 40% to Asia.)
The general picture of overseas trade traffic is a very active one, involving bulk and container ships, and numerous smaller cargo vessels. There are approximately 10,600 ship arrivals from overseas each year with cargo. The movement of shipping to and from Australian ports carrying this trade is considerable. The following figures are inward arrivals at the ports shown for 1974-75 (includes coastal):
- Port Jackson: 3,264
- Botany Bay: 371
- Port Kembla: 813
- Newcastle: 1,361
- Port Melbourne: 2631 (1516 o/s 115 coastal)
- Geelong: 429 (291 o/s 138 coastal)
- Westernport: 405 (161 o/s 244 coastal)
- Fremantle: 1,804
- Brisbane: 1,304 (946 o/s 358 coastal)
- Maryborough: 14
- Bundaberg: 96
- Gladstone: 430
- Rockhampton: 78
- Hay Point: 157
- Thursday Island: 109
- Mackay: 221
- Bowen: 27
- Townsville: 489
- Lucinda: 65
- Innisfail: 27
- Cairns: 477
- Cape Flattery: 58
The picture is further characterised by the concentration of much of this shipping through Lombok, Ombai and Jomard Straits to the north of Australia.
Coastal Trade
Approximately 5% of freight carried in Australia is carried by coastal shipping. However although this is small it is of major importance as the sea freight cannot be relocated by other means. The shipping involved comprises the smaller general cargo type, hulk oil and ore carriers. Torres Strati is important to the movement of bauxite from Weipa, the limiting depth of Tones is 36 feet and the channel is of course very narrow. Also the iron ore carriers from the NW ports return to the NW having delivered their cargoes to the steelworks at Westernport, Port Kembla and Newcastle. Ships like Mount Newman of 119,000 tons, Anlych Castle 109,000 tons, Iron Sirius and Iron Summers take passage westward in ballast through Torres.
Sensitivities of Australian Trade
Through a rather long course through Australia’s maritime trade we have established that Australian manufacturing industry is a very significant importer of both capital machinery and materials. Much of this comes from the Americas and Europe. Manufacturing industry is an increasing component of the base of the Australian economy and the economy’s health is proportional to the level of manufacturing industry. Shortages in manufacturing materials and equipment will first manifest itself in unemployment, and cause all of the social problems associated with unemployment.
We pay for our imports by exporting rural products, minerals and some manufactured goods. Rural products tend to be seasonal but mineral export is continuous at a considerable rate. Reductions in export earnings from minerals means a balance of payments problem which is either solved by using reserves or reducing imports. Probably the import of finished manufactures could be reduced without significant impact. The direct rate of unemployment arising out of reduced mining would not be significant. The greatest impact of reductions in trade will be a reduction in the standard of living which the older members of the community might accept but the young people of today who take current standards as the normal would find reduction in these standards as something to protest volubly about. Domestic chaos would result if there was disruption to trade.
The success of our maritime trade is currently geared to the success of the Japanese and American economies. Should difficulties in trading arise with either, Australian trade and therefore the economy would suffer. Difficulties in diplomatic relationships between Australia and her trading partners are unlikely to arise in the foreseeable future. Problems may however arise from our dependence upon Japan as an export market because of the closer proximity of mineral deposits in China and Siberia. In this event the Australian economy would seriously suffer as alternative markets of the magnitude would be difficult to find. Furthermore the economic relationships made between Japan and her neighbours may strongly influence political relationships which might have implications for the continuing security of South East Asia. Disruption in oil supplies to Japan from the Middle East is more likely to upset Japanese and Australian trade. Without the current and the increased oil Hows required to maintain Japanese industry its requirement for Australian raw materials would reduce. The supply of oil from the Middle East to Australia will increase from now on and in a few years we may be precariously dependent on this source. There are very real and distinct disadvantages in being in this situation.
The shipping which carries our main trade to Japan routes through the strategic straits of Lombok, Ombia and Jomard. Unavailability of these routes would have considerable consequences for the conduct of this trade. Similarly Torres Strait is important to coastal trade-mostly for the movement of bauxite to Gladstone and Bell Bay. Shipping by sea is the only means of moving bauxite from Weipa.
Because of the scale and expense of constructing and operating specialised cargo terminals, Australian cargo movement is limited mainly to three ports, Sydney, Melbourne and Fremantle. Whilst in a defence context this may be an advantage, an aggressor may also see advantages in it for him. Oil refineries are more dispersed but a reduction in the supply to any one could dislocate the industry.
The volume of shipping involved in Australian trade is considerable. There are nearly 15,000 inward movements to Australian ports each year, with a peculiar mix of dispersal and concentration in the total disposition
Conclusion
Maritime trade is essential to continued Australian prosperity and therefore basic to the determination of allGovernment options including defence. It must therefore be adequately protected. The present nature and pattern of Australian maritime trade is largely dependent upon;
- The continued pace and growth of the economies of trading partners.
- Continued freedom of the sea lanes.
- Stability in international relations to ensure the above two points.
- The maintenance and growth of existing trade relationships at least until Australia can diversify export markets.
The problem for defence includes consideration of:
- The amount of shipping involved in Australian
- The dispersal of shipping around Australia.
- Concentration of shipping on a few main ports,
- The strategic importance of straits in our shipping lanes and the lack of options.
- The varying speeds of merchant ships. Australia has yet considerable trade potential to realise and there is no doubt that maritime trade will increase further. The types of ships is not likely to vary much in the foreseeable future but the numbers involved obviously will. Increased diversification of trade will mean more use of more sea-lanes, adding to the problem of defence.
The Author
The then Captain Neil Ralph was one of 57 Foundation Members of the ANI and he was a very active member in its formative years. He was born in Melbourne in 1932 into a family of eight children. After completing high school he initially worked as a Bank of New South Wales teller and then joined the RAN in 1952 as a probationary naval airman (observer). He undertook three months basic naval training at HMAS Cerberus before being sent to UK for observer training.
Following his training as an observer Neil Ralph was given a seven year short service commission. He flew in Fireflies off HMAS Sydney and then Sea Venoms off HMAS Melbourne. Initially he was a Venom observer and later as a pilot after his pilot training in 1958.
Notably Lieutenant Commander Ralph commanded the first contingent of the RAN Helicopter Flight – Vietnam (RANHFV) from July 1967. He was subsequently awarded the Distinguished Service Cross (DSC). He later was the executive officer of the converted fast troop transport Sydney in early 1970.
Neil Ralph’s other significant appointments were on the staff of the Royal Naval College Greenwich, Commander (Air) at HMAS Albatross, Director of Naval Training, Commanding Officer of HMAS Torrens, inaugural Director of the RAN Staff College, Commanding Officer of Albatross and finally Deputy Chief of Naval Staff. Rear Admiral Ralph retired from the RAN in 1989. He was then appointed Commissioner for Veterans Affairs and held the position for six years before retiring in 1995.
Postscript: In 2019 and 2022 the ANI wrote two comprehensive reports on protecting maritime trade which are available at https://navalinstitute.com.au/publications/reports/.
