The speedy completion of the channel deepening project will put downward pressure on fuel prices, says VECCI.

"Rising fuel prices are impacting on business costs across the supply chain, making our industries less internationally competitive and leading to inflationary pressure at home", says VECCI Chief Executive Officer, Neil Coulson.

"Specific negative economic impacts of rising fuel prices include a reduction in discretionary expenditure by consumers on meals, entertainment and road-related tourism activity, thereby reducing economic activity and growth, and upward pressure on prices and wages, leading to possible interest rate pressures.

"Rather than simply cutting excise, the Federal and State Governments need to look at creative ways of offsetting fuel prices rises by reducing business costs in the areas of infrastructure, business taxation and regulatory reform.

"Channel deepening, for example, will put downward pressure on fuel costs by:

• reducing the cost of fuel shipped into Australia via economies of scale resulting from the use of larger ships;
• increasing the share of freight moved on ships vis a vis less fuel-efficient trucks and trains, thus cutting fuel use and putting downward pressure on fuel prices;
• reducing the amount of fuel used in each ship journey, again putting downward pressure on fuel consumption and prices - the savings from using a 4,100 TEU vessel, the next generation of ship coming to Australia and which will also require deeper channels, as opposed to a 2,400 TEU vessel, the current standard, is in the order of 55 percent of fuel costs on the Europe - Australia voyage; and
• reducing the total number of ship journeys via economies of scale generated by the use of larger ships.

"While the channel deepening project will take around two years to complete, oil prices are expected to remain high for some time, given the projected demand profile of the Chinese and other Asian economies.

"As such, it is important for the Victorian Government to provide a clear start and finish date for the Project, particularly in light of the successful trial dredging program", says Mr Coulson.

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VECCI Strategic Communications
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