By Leith van Onselen

The media is full of articles discussing the merits or otherwise of the Government providing taxpayer assistance to Qantas and Holden today.

These articles often talk as if both industries have similar impacts on employment, and therefore should receive equal consideration when it comes to taxpayer assistance.

It’s important to point out at this juncture that there are critical differences between the two companies, which necessarily demands a different policy response.

Qantas operates in aviation, which is a bona fide services industry. This necessarily requires that employment be performed locally, irrespective of who owns or operates the airlines. Whether a passenger flies to Sydney from Melbourne using Qantas, Jetstar, Virgin, Tiger, or another provider, a similar number of Australian employees – from counter staff, to baggage handlers and airline stewards – still need to provide the function. This means that even if Qantas were to fold completely, airline services would be performed by another carrier – be it an expanded Virgin, Tiger or another entrant, such as Singapore Airlines. In either case, the new supplier would still need to employ Australian workers to fulfill its functions, and the overall employment impacts from Qantas’ failure would be manageable.

Indeed, when Ansett collapsed a decade or so ago, there was minimal impact on overall aviation employment. Ansett’s void was soon filled by Qantas and Virgin, along with some smaller airlines that have popped-up along the way.

By comparison, automotive assembly is tradable. If Holden were to close down, leading to the probable collapse of component makers and local assembly by Toyota, many of the associated jobs – estimated at around 50,000 directly and another 200,000 indirectly – would shift offshore. There would be no employment offset, at least in the short-to-medium term. Instead of rolling-off the plant at Elizabeth or Altona, the lost car production would instead enter Australia via ship from Japan, Thailand, or somewhere else.

In short, the different employment effects from the two industries requires a different policy approach. There is minimal justification for providing taxpayer assistance to Qantas, whereas the risks to the broader economy from the automotive sector’s collapse as the mining investment boom unwinds could be immense, justifying greater support.

The numbers are not terribly large, from BS:

South Australian Premier Jay Weatherill has accused the federal government of blame-shifting amid reports car maker Holden will cease its Australian operations in 2016. …Other countries around the world supported their automotive sector far more than Australia, he said. …Meanwhile, Labor’s Kim Carr says the government has confidential information showing Holden could stay in Australia until 2025 with an assistance package of less than $150 million extra a year. …senior officials in the Department of Industry and Innovation, were handed to the Rudd cabinet in July. They detail that Holden, Toyota and more than 160 car parts makers could stay in Australia for $300 million extra a year.

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