Treasurer Joe Hockey’s rather casually released ‘checklist’ of exceptional circumstances that justify federal assistance to ailing companies is at least an attempt to bring some consistency to the industry assistance debate.
The list is, however, incomplete. In fact, the checklist is little more than a restating of what makes the Qantas case special, and would shine little light on future calls for taxpayers to see national advantage in private-sector bailouts.
So what’s missing? What could make this list a workable framework to carry Australia through its ‘great reckoning’? (The Great Australian Reckoning is upon us, January 30)
Readers may have their own suggestions – including the popular refrain of ‘Don’t pay a cent in corporate welfare!’ However, I will put that suggestion aside on the basis that rapid structural change in any economy requires some application of the ‘smoothing’ potential of the public balance sheet.
To recap, Qantas is likely to get access to government-guaranteed finance on the basis of four points (Qantas ticks all the boxes for aid, February 13):
– Its ownership, and therefore capitalisation, is artificially restricted by the Qantas Sales Act.
– Qantas is integral to the functioning of the Australian economy, and disruption of its services has an immediate negative impact on economic activity.
– The Australian aviation sector is being interfered with by foreign governments, who have recapitalised its main competitor, Virgin, despite a run of recent losses.
– It is streamlining its operations and getting its house in order.
It’s not a bad list, but the last point needs fleshing out. Industrial relations consultant Grace Collier has recently written a number of articles in The Australian explaining where she thinks enterprise bargaining agreements are ruining businesses.
In the case of SPC Ardmona, Collier argued that SPCA was covering up the real wages paid to its workers – though a number of workers have spoken to journalists and put their incomes at less than $50,000 per year.
Whatever the truth of those claims and counter-claims, it was a false assertion of the Abbott government that wages and conditions were the main cause of the company’s problems. The prolonged high dollar, drought and numerous cases of dumping by overseas competitors were part of what local MP Sharman Stone called a ‘perfect storm’ hitting the fruit preserving industry.
Even if workers were taking home $60,000 or $70,000 in income – which has not been proven – the company was walloped by a highly unusual combination of negative factors. And bringing wages down would not, alone, have solved the problem.
Victorian Premier Denis Napthine has made the right decision for his state in tipping in $22 million to help the firm invest $100 million to upgrade its plant for expansion into growth markets – particularly targeting exports to the emerging Asian middle classes.
The Abbott government totally fluffed its own SPCA debate. Nonetheless its promise to strengthen anti-dumping legislation is welcome – even if it adds weight to SPCA’s and Sharman Stone’s arguments for assistance.
But back to Qantas. The truth is that some of its industrial relations settings would make SPCA workers’ eyes water.
A few weeks ago Collier wrote of the legacy problems Qantas has from its days of public ownership. Specifically:
"…the airline made new enterprise agreements with two parts, with long-term staff preserved on high wages and new staff on much lower wages. As a result, people are working side by side doing the same job on different pay rates and there is no hope of ever breaching the divide.
"The long-haul cabin crew agreement divides flight attendants into two classes and the pay disparity is staggering. Flight attendants from the old days have salaries that are in the ranges of $116,000 to $154,000, but newer hirings can only ever earn in the $40,000 to $83,000 range."
Shining a light on these wages – which in some cases are well over double the full-time weekly earnings of $74,000 – is not to suggest that getting rid of a few older cabin staff will sort out the national carriers’ woes. It won’t.
Rather, it's important to note the hypocrisy of running a witch-hunt for overpaid workers at SPCA, and then allowing far worse enterprise bargaining agreement conditions to prevail at Qantas.
In short, Hockey should be making more noise about Qantas EBAs than he did about the SPCA agreements.
Beyond IR, the other question that should go on Hockey’s list is whether the business is in a clear growth industry that will help with the jobs crisis enveloping the nation. That’s not socialism – just political pragmatism.
How do we know what the growth sectors are? Well, the Abbott government went to the election telling us specifically where new jobs would be created. The ‘five pillars’ of the economy included: “Manufacturing innovation, advanced services [including tourism], agriculture exports, education and research, mining exports.”
SPCA was a perfect fit for the ‘manufacturing innovation’ category, just like the fish processing factory in Tasmania the government invested in the day after knocking SPCA back (SPCA workers are cannon fodder in a different war, February 4). Private firm Huon Aquaculture got $3.5 million in federal assistance to install new plant and equipment – also to expand for growing export opportunities.
And Qantas is also in a growth sector – tourism. The number of Chinese visitors in particular has skyrocketed in the past couple of years. A leaner, better-capitalised Qantas is likely to generate large numbers of jobs in the medium term.
To recap on a recap, then, Hockey’s fuller list might be:
– Is the company held back by artificial ownership restrictions (ahem, like GrainCorp)?
– Is the company vital to the economy? (Put out your hand, Telstra!)
– Is the company’s sector being unduly manipulated from abroad?
– Has the company reformed its cost structure?
– Is the wages component of that cost structure reasonable?
– Is the company in a clear growth sector?
Industry assistance is never a comfortable business. However, a full examination of the rights and wrongs of each case eases some of that discomfort.
Moving to assist Qantas is, given the circumstances, appropriate.
But as a taxpayer, before handing over a cent, I’d like to know that next time I order a G&T on a Qantas flight, it is not delivered by a worker earning twice the national average wage.