Conduct of the inquiry
1.1
On 7 December 2020, the Senate referred an inquiry into the fisheries quota system to the Rural and Regional Affairs and Transport References Committee (committee) with an initial reporting date of 24 June 2021. Extensions were granted on 13 May 2021, and 20 October 2021. On 4 March 2022, the committee tabled a progress report seeking a further extension until 20 October 2022.
1.2
The inquiry lapsed on the eve of the 47th Parliament but was re-referred by the Senate on 4 August 2022, with a revised reporting date of 29 November 2022. The Senate agreed the committee should have the power to consider and use the records of the committee appointed in the previous parliament. On 21 November 2022, the Senate granted a further extension to 7 December 2022.
1.3
During the 46th Parliament, the committee received 48 submissions and held two public hearings for the inquiry. Upon re-referral of the inquiry, the committee re-opened submissions and invited stakeholders to provide updated evidence. 23 additional submissions were received and the committee conducted a further three public hearings, taking evidence on new and existing issues relating to Australia's fisheries quota system.
1.4
Submissions, transcripts and additional information are available on the committee's website and listed at Appendix 1.
Acknowledgements
1.5
The committee thanks the individuals and organisations who contributed to this inquiry by preparing written submissions and giving evidence at public hearings.
Structure of the report
1.6
This report considers the benefits and drawbacks of the fisheries quota system on a triple bottom line basis, looking at economic, social and environmental impacts, and proposals for reform. The report contains five chapters:
This first chapter provides information about the inquiry, definitions, and a brief background to the introduction of fisheries quotas in Australia.
Chapter 2 looks at the economics of the quota system and impacts on fisheries management and administration.
Chapter 3 considers the benefits and drawbacks of the quota system for communities and small fishers.
Chapter 4 reviews evidence on the impacts of the quota system on environmental and ecological outcomes.
Chapter 5 presents the committee's conclusions and recommendations.
Notes on references
1.7
In preparing this report, the committee has made use of a substantial amount of evidence collected during the 46th Parliament, as well as new evidence, collected in the current Parliament. For clarity, submissions and transcripts from the 46th Parliament include a specific reference to that parliament in their footnotes. Footnotes without that reference are for evidence received during the current, 47th Parliament.
1.8
Throughout the report, references are made to both proof and official Hansard transcripts. Official transcripts were used when available. Page numbers may vary between proof and official transcripts.
Background
1.9
In 2019–20, the gross value of production of Commonwealth-managed fisheries was approximately $419 million. In 2020–21, it was around $400 million. More than 95 per cent of this value comes from fish species managed under the quota system. A detailed description of Australia's fishing industry, including size, value, geography and employment, is available on the website of the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES).
1.10
Under the current system favoured in Commonwealth fisheries, 'statutory fishing rights' (SFRs) can be bought and sold, and the total value of SFRs in Commonwealth fisheries is 'estimated to be in the order of $1–$2 billion'.
1.11
This section outlines the development and introduction of the quota system, defines its core components, and summarises key reviews and inquiries conducted since its introduction in the early 1990s.
Regulation of fish stocks in Australia
1.12
Prior to experiencing 'fish stock collapses' in the late 1970s, Australian governments typically granted an 'unlimited number' of commercial fishing licences and placed no limits on catch. According to fisheries consultant, Dr Nick Rayns, this was because of a 'residual notion' that fish stocks were 'almost infinite'. However, without controlled and regulated fishing rights, fishing activity tends to increase in an inefficient way, until stocks are depleted, the ecosystem is damaged, and it becomes uneconomical and unsustainable to continue fishing.
1.13
Australian governments took a number of steps in the late 1970s and 1980s designed to 'prevent further overfishing', including:
limiting the number of fishing licences (thus monetising them);
imposing restrictions on where and how people could fish; and
specifying allowable vessel types and gear.
1.14
These initial regulatory approaches are known as 'input controls'. Experts found that input controls were leading to inefficiencies, making fishing less economically rewarding, and that fishers were finding ways to subvert them. The later, more sophisticated approach to regulating fish stocks was drawn from economic theory and is known as a system of 'output controls'.
1.15
In 1986, New Zealand became the first country in the world to bring in a national system of output controls based on transferable quotas. In Australia, output controls were introduced through a 1989 Commonwealth Government policy statement entitled, New Directions for Commonwealth Fisheries Management in the 1990s. New Directions proposed the establishment of the Australian Fisheries Management Authority (AFMA), led to modern fisheries legislation, and set out the modern quota system, which is made up by combining a TAC (total allowable catch) and ITQs (individual transferable quotas).
1.16
According to the Commonwealth Fisheries Association Inc. (CFA), the current quota-based system achieves a 'balance of environmental and economic objectives in fisheries management [by drawing] on the field of economics, including on property rights in fisheries'.
1.17
TAC and ITQs are defined in Box 1.1, below, which also provides yield-related definitions.
Box 1.1: Key components of fisheries quotas—definitions provided by the Fisheries Research and Development Corporation (FRDC)
TAC: total allowable catch
The total catch allowed to be taken from a resource in a specified period (usually a year) to meet the management objectives of the fishery as defined in a fishery management plan or regulation. The TAC may be allocated to the eligible person(s) in the form of quotas, as specific quantities or proportions. (Note: TAC is a control used to limit the ecological impacts of a fishery by directly limiting the total catch.)
ITQs: individual transferable quotas
A type of quota (a proportion of the total allowable catch (TAC)) allocated to a person (individual fishers, vessel owners etc.) or other legal entities and which can be sold (transfer of ownership) or leased to others. This is an output control, used to limit the impacts of a fishery by directly limiting the catch of a person/entity in combination with the TAC.
MEY: maximum economic yield
MEY is the level of catch and fishing effort where the difference between the full costs of exploiting the resource (cost of labour, capital including depreciation, materials and an allowance for 'normal' profit) and the return from selling the output of the resource (i.e. revenues) is maximised, i.e. the net economic return. MEY for a single species fishery is generally greater than the maximum sustainable yield (MSY). However, in multi‑species fisheries, the MEY level of catch of individual species may be greater or less than its MSY level, because whole-of-fishery MEY is determined by the set of species caught together, not individual species.
MSY: maximum sustainable yield
The highest theoretical equilibrium yield (catch) that can be continuously taken (on average) from a stock under existing (average) environmental conditions.
Transition to quotas
1.18
Industry initially resisted ITQs, as fishers were concerned about having their individual catch 'forcibly constrained'. Dr Rayns noted that the transition to output controls in Australia and New Zealand was made more difficult by the large number of licences that had been granted and a desire to avoid 'allocating lots of small amounts of unviable ITQ'.
1.19
ITQ allocation was generally made based upon 'catch history', with those granted ITQ most often those who had 'a long-term reliance on the fishery'. Many small‑scale fishers were compensated to give up their licences and leave the industry, and fisheries had to develop new technologies and new processes for measuring catch sizes and fish stocks.
1.20
According to AFMA, the introduction of catch limits and tradable quotas had a dramatic effect on the number of vessels and the problem of over-fishing:
At the time of New Directions' release [1989], there were approximately 1000 vessels operating in Commonwealth fisheries and several fisheries were experiencing overcapacity and overexploitation. Excluding the Torres Strait, there are approximately 300 fishing vessels operating currently in Commonwealth fisheries [2021].
Setting and managing quotas—the regulatory structure
1.21
AFMA is responsible for the 'efficient management and sustainable use' of Commonwealth fish resources. AFMA is an independent regulator established under the Fisheries Administration Act 1991 (Cth), which uses provisions of the Fisheries Management Act 1991 (Cth) to regulate commercial fishing in Commonwealth waters.
1.22
Generally, state and territory governments manage fishing close to shore, while Commonwealth waters stretch from 'three nautical miles from Australia's coastline to the edge of the Australian Fishing Zone' (200 nautical miles from the coast; see Figure 1.1). AFMA also regulates fishing by Australian boats 'on the high seas'. The Commonwealth has agreements with states, and the Northern Territory, under the Offshore Constitutional Settlement, which facilitate the management of fish stocks across jurisdictional borders.
1.23
Most Commonwealth fisheries are now managed through TAC and ITQs, regulated by AFMA. TACs may cover a single fish species, with multiple TACs covering different species or different parts of one fishery. TACs may also cover 'the total catch for a group of species or partial stocks/species when these are shared with other jurisdictions'.
1.24
TACs are set by calculating how much of the fish stock can be removed while spawning stock is maintained 'at or above the threshold level'. Threshold levels are related to either the MEY (the maximum yield to maintain profitability), or the MSY (how many fish can be removed without impeding the next generation of the stock). The FRDC submitted that TACs are:
… often set to achieve an MEY objective, which is usually more conservative as maximum gross profit requires more of the stock to be left in the water than the MSY threshold. The methods and basis for determining the TACs for each fishery are generally specified within a formal harvest strategy.
1.25
ITQs are one of a number of 'layers or tools' used for the management of fisheries. According to CFA, others include:
Fishery specific regulation and permit conditions;
Species risk-assessments;
Bycatch and discard plans (as required);
Protected species management plans (as required);
Approvals under Part 13 and 13A of the [Environment Protection and Biodiversity Conservation Act 1999 (Cth)].
1.26
Fisheries policy development and planning functions are mainly undertaken by AFMA's Fisheries Branch, including:
development and implementation of Fisheries Management Plans and arrangements covering target and non-target species; bycatch and broader marine ecosystem impacts
international consultation and liaison including Regional Fishery Management Organisations (RFMOs) and management of high seas stocks
analysis, forecasting and research on individual fishery performance
stakeholder liaison and consultation, particularly through Management Advisory Committees (MACs)
development of ecological sustainability tools and management approaches to minimise the impacts of fishing on the marine environment.
1.27
Management of fisheries is conducted through a number of committees, including Management Advisory Committees (referred to as 'MACs') and Resource Assessment Groups (referred to as 'RAGs'). In 2017, AFMA formally established the Economic Working Group 'as an advisory group to provide AFMA with strategic advice on a range of fisheries economic matters'.
1.28
According to AFMA, it implements Australia's statutory management objectives, by:
managing fisheries for 'long-term sustainability and economic performance', applying 'the precautionary principle';
implementing an 'ecosystem-based fisheries management approach' to manage the risk of commercial fishing to the ecological sustainability of fish species, habitats and communities;
establishing harvest strategies based on peer-reviewed science and expert evidence;
implementing cost recovery of direct fisheries management costs in an efficient manner; and
facilitating 'co-management' of fisheries resources in conjunction with industry.
1.29
In addition, Commonwealth fisheries are managed in accordance with the Commonwealth Fisheries Harvest Strategy Policy, and the Commonwealth Fisheries Bycatch Policy.
2005 ministerial direction
1.30
In 2005, the government issued a ministerial direction to AFMA under section 91 of the Fisheries Administration Act 1991 which was designed to improve 'AFMA's ongoing performance of its functions and the exercise of its powers'. The direction aimed to address the reportedly 'poor biological and economic status of a number of [Commonwealth] fisheries'.
1.31
The ministerial direction instructed AFMA to, among other things:
Implement the long standing government policy of managing Commonwealth fisheries using output controls in the form of individual transferable quotas by 2010 unless there is a strong case that can be made to me, on a fishery by fishery basis, that this would not be cost effectives or would be otherwise detrimental.
1.32
The ministerial direction was accompanied by a 'structural adjustment package' (buyback scheme), which saw an investment of $149 million in removing fishing concessions for key Commonwealth managed fisheries.
1.33
Figure 1.2 shows the management arrangements in place for commonwealth fisheries.
1.34
While Australia was an 'early adopter' of TAC and ITQs, ITQs became increasingly popular around the world during the 2000s and 2010s. According to the CSIRO, by 2018 around 40 per cent of managed fish stocks globally were being managed using ITQs or similar rights-based systems.
Previous reviews and inquiries
1.35
In preparing this report, the committee had regard to a number of significant reports on the management of Commonwealth fisheries, including:
1.36
References to these reports appear in subsequent chapters.
ITQs in state and territory fisheries
1.37
ITQ systems are now in place across some fisheries in every jurisdiction. In 2019, there were 48 Australian fisheries managed using ITQs (Figure 1.3). While the first quota systems were introduced in the mid-1980s, most of the current ITQ systems were introduced between 1995 and 2010, with some fisheries converting to ITQ management more recently.
Notes on scope
1.38
There are many different kinds of fishers and fishing communities—from recreational and Indigenous cultural fishers, to large scale commercial fishing operations. This report is primarily focussed on the impact of the fisheries quota system on commercial fishing, which is dominant in Commonwealth fisheries and those covered under TAC and ITQs. The roles of recreational and cultural fishing are taken into account where evidence has been provided, but they are not the primary focus of the report.
1.39
The committee took evidence from a number of fishers and organisations whose operations are based in state-managed fisheries. While the committee has considered this evidence in detail, the focus of the committee's conclusions and recommendations is largely limited to the management of Commonwealth fisheries.
Country-of-origin seafood labelling
1.40
While the inquiry was established to review the quota system, evidence provided by participants canvassed a number of other issues impacting fisheries—most significantly, country-of-origin seafood labelling.
1.41
The committee's report and recommendations address the core issue for this inquiry—the impact of ITQs as part of the fisheries quota system. However, the committee acknowledges the importance of seafood labelling to the industry and articulates its full support for reforms in this area.