The Senate has sunk government plans to open up Australia's port-to-port shipping industry to more foreign-flagged vessels – many of which are crewed by sailors paid as little as $2 an hour.

The relatively obscure Shipping Legislation Amendment Bill made headlines in September when cruise operator Bill Milby revealed he had been advised by public officials to sack his entire Australian crew and replace them with lower-cost foreign workers ahead of the government's proposed reforms.

Fairfax Media revealed research in September that forecast that just 88 of the 1177 people employed as domestic seafarers in Australian coastal waters would keep their jobs if the controversial bill was enacted.

The government had argued that changes made by the former Labor government, at the "behest" of the Maritime Union, had shrunk the coastal shipping industry further.

In 1962, there were 138 Australian ships working the coast. Today that is just 15.

The Coalition wanted to replace Labor's current three-tiered licensing system with a single permit system that would provide access to the Australian coast for a period of 12 months, even if a foreign ship was only doing a one-off job.

The government said the reforms were needed to get more freight back on ships and off the nation's roads.

Liberal senator Richard Colbeck said by 2030 the national freight task would increase by 80 per cent but coastal shipping was forecast to grow by just 15 per cent.

"So more trucks on the road, less freight being carried around the Australian coastline by ships," he said.

But crossbenchers lined up to say the bill would sign the death warrant for the Australian industry, including senators Jacqui Lambie, Glenn Lazarus and Ricky Muir. Nick Xenophon said the bill would "basically gut Australian shipping".

"The government's own regulatory impact statement in the explanatory memorandum explains it all: This will destroy Australian jobs in the Australian shipping industry," he said.

Labor's Stephen Conroy said, if passed, the bill would lead to coastal shipping being dominated by foreign crews on "third world wages" undercutting Australian operators. "This bill sells out the national interest. It sells out Australian businesses. It sells out Australian workers," he said.

Foreign ship crews, often made up of Filipino and Indian nationals, are paid at wage rates as low as $2 an hour and do not receive superannuation.

According to international maritime data, an Australian able seaman receives $US2742 a month compared to an average $US850 a month paid to the crew of ships involved in international freight.

Eric Abetz appealed to Tasmanian senators, especially crossbench senators Lambie and Muir, to back the bill so that a proposed $30 million DP World container terminal in Burnie goes ahead. "Labor's policy has failed and failed dismally," he said. Senator Abetz said under the current system it was cheaper to move sugar from Thailand to Melbourne than from Bundaberg to Melbourne.

The bill was voted down 31-28.

Source SMH