LAURA JAYES:
Mr Hockey, thanks for joining us. Qantas’ immediate reaction to this has been to say “yes, we welcome this as a long-term solution” but they don’t see this as a short-term. Does the Government have nothing to offer in the short term?
TREASURER:
No, we do. In the short-term we want to get rid of the Carbon Tax immediately, which was identified in their own half-yearly statement as a material impact on their bottom line which was $106 million. We can get rid of that immediately, $106 million burden on their balance sheet and in the longer term you focus on changing the Sale Act to their great advantage Laura, to give them the chance to compete on a level playing field with other airlines around the world.
LAURA JAYES:
Qantas saw a short-term solution as the government debt guarantee, a debt facility. As I understand it, that would have been about in the order of $3 billion. Why was it that Cabinet decided not to go down this path, because a few weeks ago you were very open to this?
TREASURER:
The fact is, we have had a good look at Qantas; at its balance sheet, the state of play it is financially sound as an organisation. It is a big thing to give an unsecured loan of $3 billion of taxpayers’ money to a private company. It was the Labor Party that privatised Qantas in 1992, some of their frontbench still haven’t caught up with that fact. In 2002, the Labor Party actually advocated to remove all foreign ownership restrictions on Qantas. They have been skiing down the hill from privatisation to getting rid of foreign ownership and near the bottom of the hill, Bill Shorten holds up his hands and says to everyone, “let’s turn around and ski back up the hill”.
LAURA JAYES:
But Mr Hockey sorry to interrupt, but you did a few weeks ago set out the four criteria that Qantas needed to fulfil in order to get a debt guarantee. Why did you do that if you had no intention of offering it?
TREASURER:
Well firstly, the first criteria that we laid down was, they are constrained by a specific piece of legislation that affects just their company. And now we are getting rid of it, getting rid of it, so we are removing the first criteria which ensures they don’t need to come to the Government.
LAURA JAYES:
Yeah but sure the other criteria set out, was it in the national interest to have a carrier. Yes I think the answer is…
TREASURER:
Yes, yes.
LAURA JAYES:
Two of the other criteria set out was they need to get their house in order. Haven’t they done that?
TREASURER:
That’s up for the markets to decide, that’s up for the shareholders to decide. But ultimately, Qantas needs to run its own company. We need to set them free Laura, we need to allow them to compete in an incredibly tough global market and that’s what we are doing.
LAURA JAYES:
So let’s look at the changes then to the Sale Act. The third part of this Sale Act would mean more foreign ownership opened up to the domestic arm, not the international arm…
TREASURER:
If that’s what they choose…
LAURA JAYES:
If that’s what they choose, but that’s certainly opening the path to do this because that’s the operating system that Virgin operates on. That would be the level playing field.
TREASURER:
Well Jetstar is not covered by the Qantas Sale Act. So Jetstar can engage in a whole lot of joint ventures overseas as it is, but the fundamental point is, Qantas is being set free. To do what it must do to sustain its business model. Now the directors have a fiduciary obligation to act in the best interest of the company. They are not going to run down the company deliberately. What they have to do, what they have to do is manage the company for the sake of the shareholders and the stakeholders including customers, so let them do that.
LAURA JAYES:
Looking at Qantas’ labour costs, I think something like 24% of their revenue goes toward labour costs. This is quite high when you compare it to Cathay Pacific which I think is about 13%. So given that, do you see that Qantas now without these restrictions in place would look to offshore their maintenance facilities, their catering facilities and other parts of the business, that is the end game here isn’t it?
TREASURER:
That’s a matter for them, that’s a matter for them.
LAURA JAYES:
Sure, Sure.
TREASURER:
They have to contain their costs.
LAURA JAYES:
Cabinet didn’t make this decision without taking into account how Qantas might react to that, so that is a very real, live option for Qantas.
TREASURER:
Laura, there are no blank cheques from this Government for individual businesses, full stop. There are no blank cheques, whether it be a multibillion dollar unsecured loan, which I am sure every business in Australia would dearly love from the Government, or a guarantee that debts would be repaid which every business in Australia would dearly loved by any business. There are no blank cheques, no blank cheques. There is no money, Labor has left us with $123 billion of deficits, $667 billion debt- there is nothing left in the bank to write our largess to individual companies.
LAURA JAYES:
Just finally, are you just ignoring the legislative reality here? Labor and the Greens have already blocked this in Senate. By not only Labor and the Greens, Clive Palmer in the next Senate has expressed strong reservation.
TREASURER:
I would say to them, if they care about Qantas workers, if they care about Qantas jobs, pass the legislation and free up Qantas. Labor believed in that 12 years ago. What’s happened is Labor is going back to a pre-1992 position. They effectively want us to nationalise Qantas, well that’s Labor’s position. I think Ben Chifley would be spinning in his grave at the thought that Labor has no consistent principles.
LAURA JAYES:
Sure. Does the Government have a plan B? And if this stalemate continues even into the next Senate is this something Cabinet will revisit?
TREASURER:
Plan B is to improve the economy, that’s what we have to focus on, so all airlines employing Australians can do well.
LAURA JAYES:
But should Qantas be keeping up this 65% market share?
TREASURER:
That’s up to them, that’s their market share, that’s up to them.
LAURA JAYES:
Treasurer Joe Hockey thanks for joining us.
TREASURER:
Thank you Laura.