This costly scheme helps small businesses, so why has almost no one on King Island got a good thing to say about it?

King Islanders are paying up to $9 for two litres of milk, an inquiry has heard, as an “obsolete and out of date” scheme intended to ease sea freight costs comes under fire.

The Tasmanian Freight Equalisation Scheme (TFES) was introduced in 1976 by the Whitlam Labor government in an effort to alleviate costs for Tasmanian businesses having to transport goods across the Bass Strait.

Last financial year, $187.1 million of taxpayer funds was spent on the scheme.

The aim of the TFES was to level out the playing field by theoretically making it cost the same to travel by sea as that distance would by road.

But a Senate Select Committee, which commenced on King Island this week, has heard locals are only becoming more exposed to freight inequities.

Headed by independent Tasmanian Senator Tammy Tyrrell, it aired outdated rebates, restrictive rules and administrative burdens.

‘High prices’ for basic supplies

The “obsolete” scheme is affecting prices of just about everything on the island, according to local mayor Marcus Blackie.

“Aside from a few exported items, it really provides King Island no real equity at all,” he said.

“We are totally exposed, more than mainland Tasmania, more than anywhere else in Australia, to the inequities of freight.”

With infrequent shipping, Cr Blackie said the island was reliant on airfreight, especially for items with a short shelf-life.

“Newspapers, mail, courier items, spare parts, perishable foods come in every day via aircraft that currently is not the beneficiary of any equalisation at all, and we pay very high prices for that,” he said.

“That is basic supply lines to King Island and nothing extravagant.

“Two litres of milk sells in our supermarket down the street here for $9, and the reason we’re paying $9 is because of the air freight.”

‘Just too difficult’

At the heart of Currie sits the King Island Bakehouse, run by Audrey Hamer.

She brings in dried goods from Victoria, including five or six tonnes of flour every month.

But with so much information to provide, including product origins, she told the inquiry claiming a rebate wasn’t worth the headache.

“I don’t know where everything is sourced from, our supplier sometimes is unsure as well,” she said.

“I have not claimed freight equalisation since probably the 80s or 90s because it just got too difficult.

“It was just taking me that much time, all the time … so I just didn’t do it.”

‘Beyond the island’s capacity to keep moving forward’

The committee also heard grievances from producers, and of previous reviews that had not brought change.

Approximately 40,000 head of beef are shipped off the island each year, according to the King Island Beef Producers Group.

Appearing on its behalf, local farmer Roger Clemons told the inquiry freight costs had risen, but the subsidy remained stagnant.

At the same time, he said shipping options were limiting and complicated — for example, most Victorian imports went through Devonport first, which meant the island forked out double the cost.

“This is probably my third involvement in a freight equalisation review, but anyway, you live and hope,” Mr Clemons said.

“This time [shipping is] really serious, because the freight rates we’re getting charged now are just beyond this island’s capacity to keep moving forward.”

The scheme and its rates have been the subject of multiple reviews.

One of the major recommendations of the 1998 review was that key assistance parameters be reviewed annually, and indexation adjustments made, in recognition of how sea freight disadvantage changes over time.

Bringing money back into the community

Others feel while the TFES is an imperfect system, it still has value, and they hope for better outcomes.

Elders’ Amanda Mahoney uses it often to assist her clients to ship in feed, rural building supplies and more.

She told the committee she didn’t have the time or the staff, and the process could be cumbersome, but she believed the benefit made it worthwhile.

“It is hundreds and hundreds of thousands of dollars that we’re claiming back for our clients,” she said.

“We do it because the dollar value of what comes back to King Island, if we’re not doing it, that money isn’t coming back to our community.”

In a statement, Senator Tyrrell said freight prices were only exacerbating cost-of-living pressures on King Island.

“It’s clear from the evidence we heard … that Tasmania’s Freight Equalisation Scheme equalises nothing,” she said.

The committee will hand down its final report on November 26.