Curb command/control economy

Anthony Albanese is contemplating getting the government back in the airline business. Thirty years after Paul Keating sold Qantas, the government has a plan to buy regional carrier Rex, which has been in administration since July. Rex is already flying on public money, relying on an $80m federal loan to stay airborne. Plus the government has taken over the $50m the airline owes an investor and is letting possible purchasers know that it will talk about public support. And if no business wants to buy the airline, the government will. “Our great country towns deserve quality services and connectivity, just like our cities,” is the Prime Minister’s pitch.

Whether taxpayers should fund them is already settled – Canberra and the states have long subsidised freight and flights for people in regional communities. But even given that reality of a role for government, there are two problems with this proposal.

One is operational. By promising a splash of public cash, Mr Albanese ensures the cost will increase as other regional carriers and communities call for a share of the money now going to replace Rex, which failed in the marketplace. The other is way worse: it demonstrates, again, that Mr Albanese and his ministers’ default position on the economy is more command and control from Canberra, whatever the problem.

Likewise, federal Employment Minister Murray Watt advising Virgin Australia that he is watching its choice of a new chief executive. That Senator Watt spoke in the company of Transport Workers Union chief Michael Kaine made this look less like a suggestion than a warning.

It is more command and control, like Jim Chalmers’s new proposals to boost home building. The Treasurer wants banks to relax lending restrictions for first-home buyers with HECS study debts and has already promised to waive $16bn, which will make them better credit risks. Good for graduates but not for the vast majority of Australians who now are denied the services that debts repaid could have funded. Dr Chalmers has also called on the Australian Prudential Regulation Authority to reduce requirements for builders to qualify for housing construction loans. Of course, Dr Chalmers could have done more to expand housing by intervening less – by controlling interest rate-increasing inflation. And he would not have to require a change to construction funding rules if officials had clearly explained them in the first place.

The problem Dr Chalmers wants fixed dates from a “misperception” of what APRA required back in 2017. More of the same was on show on Wednesday when Industry and Science Minister Ed Husic addressed the National Press Club to promote his new review of research and development in Australia. Mr Husic was careful not to give comfort to special interest urgers who want more public funding through the $4.3bn Research and Development Tax Incentive. But he has long wanted big business to spend more on R&D as part of his manufacturing manifesto, which advocates that Australia needs a new industrial base.

“We are ensuring growing businesses have the support they need to increase our manufacturing capability and keep more jobs here in Australia,” he said last month, announcing grants from his $400m Industry Growth Program.

The problem is Mr Husic assumes that government can command economic growth and control where it happens by picking industry winners – just as Dr Chalmers believes he can finetune the economy to suit the government’s electoral agenda, and in the way Senator Watt thinks he can tell an airline he is watching who it hires (an airline the government is not thinking of buying!).

But it never appears to occur to Mr Albanese and his ministers that government is not an integral part of the market economy – and that by intervening and regulating, it distorts it far more often than it improves it. Keating understood that and sold Qantas. Anthony Albanese should learn from it and not buy Rex.