Grattan on Friday: the Albanese government has questions to answer on competition

The Albanese government this week announced a review of competition policy. At the same time, it is not able to convincingly explain its decision to refuse Qatar Airways’ bid to expand its flights to Australia.

The case for the flights seems open and shut. Australians want to catch up, post-pandemic, on international travel. More competition would put downward pressure on prices.

Australia had a bad experience with the airline in 2020 when some Australian women were subjected to intimate searches after a newborn was found abandoned in Doha airport. But the government has ruled out this being the reason for the refusal.

Transport Minister Catherine King’s explanations don’t cut it. She said approving the additional flights wouldn’t be in the national interest. It was not in line with the goal of decarbonising the aviation sector. “Qantas [..] has just purchased brand-new planes, that’s at a significant cost. [..] They’re bigger planes, they’re quieter planes, they’re [ …] better for the environment.”

Asked her most recent position, she told The Conversation this week: “The Australian government takes its responsibilities to competition in the Australian aviation sector seriously,” adding there were green and white papers coming on aviation.

Air services agreements were “not commercial decisions about any particular airline but rather treaty-level agreements between countries that are determined in the national interest”, King said. “The Australian government considers a range of factors when determining whether an expansion of bilateral air rights is in our national interest.”

Some critics are pointing to the closeness between Anthony Albanese and Qantas boss Alan Joyce. Qantas – opposed to the Qatar bid on the grounds it would “distort the market” – operates in alliance with Emirates, the biggest Middle Eastern carrier. On Thursday Qantas, which has received much public criticism about its services, announced a bumper $2.47 billion profit.

When he launched the competition review on Wednesday, with Assistant Minister for Competition Andrew Leigh, Treasurer Jim Chalmers batted away questions about the Qatar Airways issue as having been already answered. We don’t know what Chalmers thinks of the decision, but it would be surprising if he agreed with it.

Tony Webber, a consultant on aviation economics who doesn’t work for the Middle Eastern airlines or Qantas (although he was employed by the latter years ago), describes the decision as “unusual”. He says there would be “very clear positives” in the extra flights – Australia is still 30% below pre-COVID international capacity and the fares are 50% above pre-COVID levels.

A former chair of the Australian Competition and Consumer Commission, Rod Sims, has been very critical of the decision and the lack of an adequate explanation. He told The Australian: “When you are taking decisions which would seem to prevent both the extra capacity which we desperately need now and the extra competition, then clear explanations are needed.”

Indeed. And, by the way, Chalmers has just appointed Sims to an expert panel to help with the competition review, to be done within the federal Treasury.

That brings us to the extent to which Chalmers is seeking to elevate Treasury as a policy hub within government, going far beyond its core fiscal policy role.

This year, Treasury has produced the new Measuring What Matters report (a stocktake of national wellbeing) and is preparing the soon-to-be-released employment white paper. Chalmers restarted Treasury work on modelling the impacts of climate change. Out this week is the latest Intergenerational Report. Treasury has previously done these IGRs, but Chalmers has promoted this one to maximise its impact, with a flow of extracts all week before Thursday’s release.

Over the years, Treasury’s clout has waxed and waned, depending on particular governments, treasurers and treasury secretaries and their relationships. Paul Keating had difficulties with secretary John Stone (who later became a National Party senator). By contrast, Keating was very close to Stone’s successors Bernie Fraser and Chris Higgins. He bonded closely with his Treasury experts as they worked up options for tax reform in the mid-1980s.

Steven Kennedy, the present secretary, who played a crucial role in helping the Morrison government through the COVID economic crisis, is well-placed to drive the work Chalmers wants from his department.

Chalmers has Keating’s prime ministerial ambition and also his drive to leave a legacy as treasurer. Like Keating, he understands the need to sell his ideas to opinion makers, including journalists, as was evident this week in his marketing of the Intergenerational Report.

But the differences between Chalmers and Keating (on whose prime ministership Chalmers wrote his PhD) are also apparent. They go to the circumstances of their respective times, and their personalities.

When the public debate turns to reform, Chalmers quickly points out this is not the 1980s – when, for example, productivity-enhancing changes could be more readily identified and pursued.

The differences between then and now are obvious in Chalmers’ articulation of today’s five big shifts: “from hydrocarbons to renewables; from IT to AI; from a younger population to an older one – which changes our industrial base and places a bigger emphasis on the care economy – and from globalisation to fragmentation”.

In style, Keating was the ultimate crash-through guy, vocally impatient when thwarted, especially if that thwarting came from his boss, Bob Hawke, as happened on his plan for a consumption tax.

Chalmers has a less volatile temperament. No doubt he was frustrated when Albanese last year stomped on his push for a reworking of the Stage 3 tax cuts, but he didn’t show it.

On policy, Chalmers is both an expansionist and an incrementalist. He and Treasury are swarming over everything they decently can. But he is also cautious. He has learned from his study of the Hawke-Keating governments and his personal experience of the Rudd-Gillard years.

For instance, he accompanied his reforms of the Reserve Bank with the appointment of an insider, Michele Bullock, as governor. His time as an adviser to then-treasurer Wayne Swan imprinted on him the risks of excessive boldness on tax. The response to the Business Council of Australia’s call this week for comprehensive tax reform has been an indication bite-size changes are preferred.

Chalmers is also operating within Albanese’s prescription that the government should keep its eyes firmly on staying in office. The PM told last week’s ALP conference Labor needed to be in power long enough to shape the future and bed down changes, so they were not later undone by a conservative government.

Observers’ opinions of how reformist Chalmers’ program is will be influenced by their own predispositions. But certainly Chalmers wants to focus attention on the future, not just the present. Asked on Thursday what hurdles he foresaw along a reform path he nominated “short-sightedness”. He wants the support of the public and as many stakeholders as possible for changes he proposes. He also has an eye to his colleagues, putting credit into his personal political bank.