Labor fails to stick the landing on aviation policy

The federal government’s decision to block Qatar Airways from increasing flights to Australia is confounding. More capacity and more competition will ultimately lower prices for consumers. By jane hume.

First published in The Australian.

Labor came to government with promises of better times for Australians. One year on, as the Senate’s Cost of Living Committee has heard from community groups, businesses and everyday Australians, those better times have failed to land.

This isn’t surprising. Labor has repeatedly failed to deliver an economic plan to tackle inflation with fiscal policy, leaving the Reserve Bank the task of using only monetary policy to lower aggregate demand – a blunt tool that disproportionately hits mortgage holders and business borrowers hard in their hip pockets.

Labor’s cost of living policy bungles run across the board. Some are intentional – like the decision to explicitly prioritise rapid emissions reduction over the skyrocketing cost of electricity for businesses and consumers. 

Other are inexplicable. For instance, the Cost of Living Committee recently heard evidence from the aviation industry about the decision by the Minister for Transport, Catherine King, to deny Qatar Airways’ application for 21 more international flights into Australia.

Logically, more international flights means more competition, which will push down prices for customers. As Labor’s own Assistant Minister for Competition, Charities and Treasury, Andrew Leigh, put it: “competition plays a vital role in driving down prices and changes to the law are necessary to ensure a level playing field and stop big companies from using their size to dominate markets.” 

The Coalition agrees. 

More flights also increase supply of seats, which puts downward pressure on ticket prices. It’s what Aussies have been crying out for. The CEO of the Tourism and Transport Forum told the committee there is a “desperate need for Australia to have as much increased capacity as possible”. 

Even Rod Sims, the former chair of the Australian Competition and Consumer Commission, weighed in, saying that capacity will help bring prices down. And prices are stubbornly high. Graham Turner, the CEO of Flight Centre, estimated that average airfares are up by around 40 per cent compared to pre-Covid. 

This is forcing Australians to make tough decisions about visiting family overseas or interstate. The only ones not making tough decisions are Labor.

So why would Labor discourage more visitors, more freight, more money flowing into our tourism economy, and cheaper prices for Australians? Honestly, we don’t know, because Labor won’t tell us. 

Minister King has repeatedly failed to justify her decision to block more competition in the aviation market. She said that more competition and more seats is not in the national interest. She has said that “it was not just one factor that led to this particular decision,” referring variously to human rights concerns, sustainability, and to protect jobs. But unless the Minister can come forward with more information, none of these reasons cuts the mustard. 

When I questioned Virgin Australia at the Cost of Living Committee, they said they couldn’t see how Qatar’s request for 21 extra flights, which will bring in investment and economic activity, could cost any Australian jobs at all. In fact, it would create them. 

One industry expert has estimated that approving the Qatar decision could have led to up to four additional international services into major Australian airports a day; up to one million additional seats per year. 

This decision to block extra flights comes soon after Labor cancelled the direction to the ACCC to monitor competition in the airline industry – a key transparency mechanism that has revealed that prices for airfares remain high even as costs come down.

As ACCC chair Gina Cass-Gottlieb said, “[w]ithout a real threat of losing passengers to other airlines, … groups have had less incentive to offer attractive airfares, develop more direct routes, operate more reliable services, and invest in systems to provide high levels of customer service.”

But thanks to Labor, competition in the air is now – conveniently – a market without the ACCC’s oversight.

This government campaigned on transparency. All the publicly available information – not to mention basic economics – suggests that more airline flights will mean more capacity, more competition, and ultimately lower prices for consumers. In a cost of living crisis, lower prices sounds to me like something that would be in the national interest. If it’s not, Minister King needs to say why.

Jane Hume is the Shadow Minister for Finance, the Shadow Minister for the Public Service and the Shadow Special Minister of State, Senator for Victoria.