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Federal

Dec 6, 2013

A test of government will as Qantas and Holden come begging

The government began climbing out of the hole it had dug for itself on Gonski -- but its handling of Qantas and Holden meant more headaches. Will the Coalition succumb to populism and bail them out?

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Alan Joyce

What should have been a successful week of recovery and repair for the government has instead been overwhelmed by two iconic names in the Australian economy: Qantas and Holden.

Both correctly claim they’re competing with government-subsidised competitors. Both say they need government help if they’re going to continue. Neither deserves a cent by any rational assessment of Australia’s economic priorities (the Productivity Commission is undertaking one such assessment right now). But both present a political pickle for the no-longer-so-new government, given voters’ irrational attachment to automotive manufacturing and their desire to see Qantas not merely survive but even return to government ownership — or at any rate not run by the clowns who have turned it into a multi-hundred-million-dollar loss-maker while trashing what was perhaps once Australia’s most potent corporate brand.

Yes, terms like “key tests” get bandied around by commentators too often, but these are both critical moments for the new government. It has already revealed a populist, economically irrational streak with the blocking of the GrainCorp sale. It has had to pull out a $1.2 billion fix for Education Minister Christopher Pyne’s spectacular ineptitude on Gonski education funding after less than a week of bad headlines. If it succumbs on either Qantas or Holden — or, heaven help us, both — the die will be cast: we’ll be back to the Fraser years (albeit without the progressive social and environmental policies).

Perhaps with that in mind, one of the economic dries within the government — a senior one, according to the ABC — decided to strike first and anonymously brief the national broadcaster that GM had already pulled the plug on Holden. Industry Minister Ian Macfarlane, automotive manufacturing’s friend at court and, probably, its only friend in government, insisted that the body bag not be zipped up before the patient had expired, saying the company had assured him no decision had yet been made. Macfarlane’s entitled to think such tactics are dirty pool from his dry colleagues, but after the Nationals managed to damage both the national interest and the government’s pro-business credentials with its successful tactics to block ADM on GrainCorp, at least the dries are mobilising more effectively this time to prevent further damage through the continuation of handouts to Detroit.

Qantas doesn’t appear to have too many friends at court, although it could probably drum some up if that extraordinarily successful CEO Alan Joyce launched another of his campaigns to blame unions for the company’s woes (chairman Leigh Clifford took time out from his busy schedule of overseeing the trashing of the company to address the far-Right HR Nicholls Society last night). But as with automotive manufacturing, Labor is gung-ho for government support of Qantas, even of partial renationalisation, and is poised to exploit any reluctance on the part of the government to give a handout or regulatory assistance to the “national carrier”.

And as luck would have it, both South Australia and Victoria go to the polls next year, although the latter isn’t until November. Finally returning to power after what seems like a generation in Adelaide should be a gimme for the Liberals, but cars will be crucial, and the Victorian Liberals will need all the help they can get to avoid being one-termers. There will be a short-term hit to consumer confidence if there were a high-profile casualty like Holden, even if the shutdown wouldn’t be for three years, coming as it would on top of Qantas’ public woes.

“… the right decision is the politically difficult decision, but this government needs to show it can do the latter.”

It’s nothing we couldn’t shrug off, especially as the economy may well have bottomed out at the start of this financial year, but it will mean further fiscal pain for the government. On that front, Treasurer Joe Hockey is now talking yet again about having to write down revenue further. All Labor’s fault, of course, he insists, but then Hockey insists on a lot of things. In January, he insisted he would deliver a surplus in his first year, which now looks about as likely as Alan Joyce delivering a profit.

Hockey at least had a win on the debt ceiling, with that pointless cap being removed through a deal between the “adult” government and the “economic fringe dwellers” in the Greens. As commentator Stephen Koukoulas pointed out, Hockey did ridiculously well out of the deal given much of what the Greens demanded is already available via the budget papers and the Australian Office of Financial Management. Moreover, Labor was unable to land any blows on the government in question time over its Gonski debacle, despite international comparative data showing how our educational performance continued to slide under the socio-economic status funding model that Pyne declared last week would be a good starting point for his own model.

That did, however, produce the chortlesome (yes, chortlesome) question time moment of Pyne haranguing Labor for simply throwing more money at education without targeting the areas that really make a difference. The Programme for International Student Assessment results show that won’t work, he insisted triumphantly, overlooking that his own multiple Gonski backflips had ended up with him throwing more money at the states without any targeting of any kind.

Meanwhile, Foreign Minister Julie Bishop had set off to first Jakarta and then Beijing to repair damaged relations, giving a necessarily cringing performance with Indonesian Foreign Minister Marty Natalegawa overnight. What exactly she says to the Chinese, given their confected fury at Bishop merely restating Australia’s long-held position over disputed territories, will be interesting.

Having started the week in a mess of its own making, the government did well to recover and move on, a key skill in office, and one the Howard government had in spades — although it’s always easier if you have supportive media outlets. But Qantas and Holden are going to undermine the government’s efforts to get itself back on track — or merely on track at all — before Christmas. In both cases, the right decision is the politically difficult decision, but this government needs to show it can do the latter.

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