LEON DELANEY:
Earlier today the Assistant Minister for Competition, Charities and Treasury and Assistant Minister for Employment and our local member here in the seat of Fenner, Dr Andrew Leigh, gave a speech at the Chifley Research Centre in Melbourne all about competition. Now, the speech covered a lot of territory, but the item that has been attracting the headlines is the revelation that the Competition Task Force has determined that passengers flying on an airline on a route served by just one airline are charged twice as much as passengers that are flying a route serviced by three airlines.
The Assistant Minister joins me now. Good afternoon.
ANDREW LEIGH:
Good afternoon, Leon. Great to be with you for the first time in 2024.
DELANEY:
Goodness, gracious me – it’s the end of the month already, and this is only the first time. I’ve been remiss – either that or you haven’t been returning my calls. One or the other.
LEIGH:
I think it’s the former.
DELANEY:
It’s always my fault, I know. All right, seriously – airlines. Here in Canberra, of course, we know the pain of a lack of competition because not only are we subjected to high airfares, but we’re also subjected to high rates of cancellation. What can be done about that?
LEIGH:
Well, Canberra Airport I know has been pushing more airlines to fly into Canberra, and getting Jetstar here has been important in terms of getting more airline competition. We know from this research that if you’ve got one airline flying a route then the average fare is 40 cents per kilometre. If you’ve got three airlines, it goes down to 19 cents, and more airlines drives the price down still further.
As you say, Leon, one of the potential reasons for the high rate of flight cancellations, particularly on that Sydney‑Canberra leg, is the lack of competition on that leg. Because we know that firms offer better service to customers when there’s more competition.
So we are very keen to see more domestic airline competition. The government has got the aviation coming up, and this work by the Competition Taskforce will feed directly into that and into the slots review, which is about making sure that new competitors have access to the key landing slots and the biggest airports.
DELANEY:
The discovery that any business will charge more when there’s no competition is not exactly earth shattering, is it? You’d expect that. But, of course, what we have here is we’ve got it quantified – we know just how much more they’re charging, and that’s quite a significant variation between an operator with competition and an operator without competition, isn’t it?
LEIGH:
It’s huge, isn’t it? Halving the price when you go from one carrier to three carriers really means that Australian flyers are better off when there’s more carriers in the market. You can actually see this in Australian history. We had among the strongest aviation sectors in the world ahead of World War II. There were half a dozen major carriers. Then in the post‑war era the duopoly prevailed, and it was only with introduction of airline competition in the late 1980s that a typical middle‑class family could afford to fly.
DELANEY:
Is that why it’s in many cases cheaper to fly overseas than it is to fly domestically?
LEIGH:
One of the things we know in the market is that international competition is often thicker than domestic competition. So if you look at international carriers, you’ve got some 60 carriers flying into Australia, flying almost 2,000 landings every week. That means that there’s a lot of choice for the flying public, and that’s a benefit to people who are going overseas.
We’ve just increased the number of flights that Turkish Airlines can have, we’ll be increasing the number of flights from Vietnam Airlines with up to 63 a week by mid this year. So getting more flights – more carriers flying into Australia is important.
Now, obviously there’s a lot of talk about Qatar. I’d really like it if Qatar returned to flying into Canberra where they’re unconstrained. They were flying into Canberra before the pandemic. They haven’t chosen to take that option up since the pandemic.
DELANEY:
So, to be clear, despite the decision made by Catherine King about the application by Qatar to fly into Sydney, there’s no impediment to them flying into Canberra?
LEIGH:
None at all. They’re welcome to take up those slots. At the end of last year they announced they’d be flying into Adelaide, another airport where they’re not constrained. So flying into Canberra I think would make good commercial sense for Qatar and, of course, be terrific for Canberrans, giving us more opportunities of direct international flights.
There’s some destinations you can fly to directly from Canberra Airport, but not enough, and we’re a growing regional hub with a lot of people who would like the ability to fly overseas without having to go via Sydney, Melbourne or Brisbane.
DELANEY:
As I said before, you covered a lot of ground in your speech today, and one of the things you were talking about is mergers and acquisitions. Were you surprised by the revelation that only about one‑third of mergers are actually reported?
LEIGH:
A lot of mergers are going under the radar and that certainly did surprise me. It seems to be a case of an iceberg where you can see a little bit on the top but there’s an awful lot more down below. We know now that for every merger that the competition watchdog gets officially notified about there’s two or three other mergers that are going below the radar.
So this new Treasury analysis, Leon, allows us to approach the question of merger reform not in terms of just pure theory but in terms of data. That can cut through the old ideological debates and allow us to come up with a merger regime that’s right for Australia and that ensures we become the sort of productive, dynamic economy that Australians need in order to raise living standards.
DELANEY:
You also raised a topic we’ve discussed before – that’s non‑compete clauses in employment agreements. They’re becoming increasingly common in Australia. But you’ve been concerned about the impact on competition and labour mobility.
LEIGH:
Non‑compete clauses make it harder for workers to take up a better job. And we know from one survey that there’s one in five workers that are bound by them – not just tech workers, not just executives but early childcare workers, yoga instructors, IVF specialists. That’s bad for those workers because they’re constrained from taking up a better job, but it’s also potentially bad, Leon, for the start‑ups that don’t get access to new talent that you can have when you’re able to entice employees to come across from another firm.
Competition between employers is one of the drivers of wages. One of the potential reasons why wages stagnated so poorly during the Coalition’s decade in office is the prevalence of non‑compete clauses and the fact that workers find it harder to move to get a better job.
DELANEY:
Now that the federal government has backflipped on its commitment to retain the original version of the stage three income tax cuts, what guarantee is there that the government can be trusted not to backflip on other issues, including negative gearing, the capital gains tax discount, franking credits, all of those previous commitments that the government has made?
LEIGH:
Leon, we have no plans to make changes in that area and what you can do is trust us to look after middle Australia. These changes mean that every Australian taxpayer will get a tax cut. It means that the average Australian worker will get twice as big a tax cut as they otherwise would have gotten. Eight of ten Australian taxpayers are better off under this plan, and that figure is even higher among women who missed out under Scott Morrison’s old tax plan.
This is a tax plan that delivers bigger tax cuts for more Australians, which is economically responsible in the face of inflationary pressures and which ensures that we spread the benefits to those who need them the most.
DELANEY:
Okay. Didn’t exactly answer my question, but I’d like to ask you one more: there are reports that there are some backbenchers within the Labor government that are pressuring the Cabinet to revisit the question of negative gearing because of the impact on housing prices. Now, speaking as an expert in economics, I know what the government’s position is – no change. I know that. But speaking as a professor of economics, if you did change negative gearing, would it actually do anything to address housing affordability, or is that a false argument?
LEIGH:
Well, Leon, let’s focus on what we’ve announced, not what’s being speculated about. As you've said, we've got no plans to change negative gearing. What we do have a plan for is to get these bigger, better tax cuts through the Parliament. The big question for Peter Dutton is not spreading fear campaigns but will he and the Liberal Party vote for a fairer tax plan? Are they going to vote for the average Australian to get twice as big a tax cut or are they going to vote for keeping things the way they were? Effectively voting for the more unfair Scott Morrison plan over the much fairer and more equitable plan that we’ve put forward.
DELANEY:
Andrew, thanks very much for your time today.
LEIGH:
Thanks, Leon.