PATRICIA KARVELAS:
A lack of competition in Australia’s skies is pushing the price of flights up. Consumer Watchdog, the ACCC has found on capital city routes discount flights have gone up as much as 95 per cent since Rex and Bonza left the market. So, what can the government do to rein in the power of Qantas and Virgin? Andrew Leigh is the Assistant Minister for Competition, Charities and Treasury, and our guest. Welcome.
ANDREW LEIGH:
Thanks Patricia. Great to be with you.
KARVELAS:
The ACCC report found on the Melbourne to Adelaide route discount fares went up as much as 95 per cent in the last 3 months. That is huge. Were you expecting things to get this bad, this quickly?
LEIGH:
Absolutely. We’ve done work through the Competition Taskforce looking at the impact of competition in aviation and the effects are as big as I’ve ever seen in any other industry, Patricia. The estimates that the Treasury’s Competition Taskforce had in is that when you move from a monopoly carrier on a route to 3 carriers on the route, then the price per kilometre is halved, goes down from 40 cents a kilometre to 19 cents a kilometre. So, it’s expected and disappointing that when you had that collapse that you immediately saw prices for flyers increase.
KARVELAS:
It may be some time before a new airline emerges as a serious third competitor. So, what’s the government going to do about the growing price of airfares until then?
LEIGH:
Well, it’s certainly going to be a matter for the commercial market as to who comes in and clearly the government is looking at creating settings that make it attractive for competitors to enter the market. The slot review that Minister King has put in place for Sydney Airport is important. The opening of Western Sydney International Airport will also provide more flying slots that are available there. And one of the challenges for Bonza was that it wasn’t able to fly into our busiest city. That makes it challenging to set up a route network within Australia. We’re also looking at European‑style Flyers’ Bill of Rights to make sure that if your flight is unexpectedly delayed or cancelled in a way that isn’t related to weather, then the flyer gets compensation. Holding the airlines to account is important for us as a broader part of the competition agenda.
KARVELAS:
So, those things, you’ve just listed a whole bunch of stuff but really it won’t make a tangible difference in any near term. Consumers are being faced with these prices now. Do you concede that they’re kind of at an unacceptable – in an unacceptable situation given, you know, these are flights that are common for Australians to take?
LEIGH:
Absolutely. Look, competition in Australia is a big challenge for me. Over the last couple of decades, we’ve seen a rise in market concentration and increase in markups. We’re talking now about airlines, but we’ve been talking previously about supermarkets or banks. And if you go to baby food and beer, the same challenge occurs. And that’s why the government’s focus on competition isn’t just to go sector by sector, but to revitalise national competition policy in order to see the gains right across the economy. As the Treasurer will say in a speech today, the benefits to the Australian household would be around $5,000 a year. That’s on par with the last big wave of competition reforms in the 1990s.
KARVELAS:
Okay, so how would it work?
LEIGH:
Well, in the 1990s, the main focus was on things like allowing shoppers to shop around for an electricity price deal and changing some of the ways in which agricultural commodities were marketed. Now we’ve got a different set of challenges around the data and digital economy. So, we’re looking at things such as a right to repair, looking more broadly as to whether that might apply not only to cars, but also to agricultural machinery and to household appliances. We’re working with states and territories on planning and zoning, which is a big issue in areas such as supermarket competition, and thinking about issues such as modular construction, which are important in order to get the price down in housing. These sort of reforms, one by one, may not sound like they’re game changing, but overall, they’re really important. Now, I think back, Patricia, to Paul Keating’s comment that when he got microeconomic reform going, that every galah in the pet shop was talking about microeconomic reform. We’re keen for every cockatoo to be talking about competition policy.
KARVELAS:
Okay. Coles Chairman James Graham has suggested politicians are blaming the supermarkets for Australia’s cost‑of‑living crisis. Is that a fair comment?
LEIGH:
Look, I can understand that the major supermarkets feel themselves under pressure. You’ve had reports, including from the ABC Four Corners program, about some of the treatment of suppliers. You’ve had the ACCC action, which is alleging that for millions of product purchases across Australia, that Coles and Woolworths were engaged in deceptive specials. What we’re doing is holding the supermarkets to account, as Australians expect we will.
KARVELAS:
So, you say that you can understand. Does that mean you think it’s fair that he feels this way? Or are you, can you just clarify what you mean?
LEIGH:
I think he’s defending his shareholders’ interests, and I can certainly recognise that they would be feeling some pressure. You had the wage underpayment scandal for Coles and Woolworths last year. You’ve had the suggestions by the ACCC of dodgy discounts, which are being tested in court. We’ve also had allegations of mistreatment of farmers. As a government, we want to see a fairer deal for farmers and families. So, the mandatory Food and Grocery Code of Conduct we’re putting in place will help farmers. The unit price pricing work, the way we funded the ACCC to the tune of $30 million, will help consumers ensure that those unit pricing rules are applied, and that people are getting a fair deal at the checkout.
KARVELAS:
Just briefly, before I let you go, I just want to talk about, well, the biggest issue, really, that everyone’s thinking about at the moment, Trump, his election, but what it means, of course, for the economy. US President Joe Biden is there at the G20 Summit, but that looming replacement of Donald Trump is a big issue, obviously, particularly Trump’s threat to impose tariffs on imports. How can you stop that?
LEIGH:
Australia has always benefited from trade, and if you look back through our history, the periods of open markets have been the periods of greatest prosperity. We’ve succeeded in that, not just by doing cosy bilateral deals, but by engaging in broad multilateral reform. You see us supporting the entry of the UK into the Trans‑Pacific Partnership, broadening out the networks through the World Trade Organisation. Multilateral trade liberalisation doesn’t just work better, it’s also the right strategy for the current geo‑political environment. So, engaging in that with open markets is going to be what we’ll do. You’ve seen us broadening out the trading relationships through the Asia Pacific and dealing with some of the issues that we faced with around $20 billion of trade blockages to China when we came to office now being dealt with steadily, methodically, by Don Farrell as Trade Minister.
KARVELAS:
Thank you so much for joining us this morning.
LEIGH:
Thanks, Patricia.
KARVELAS:
Andrew Leigh is Assistant Minister for Competition, Charities, Treasury and Employment.