Well now … high Australian house prices are clearly not the only cause of the mess at Qantas, but there is a clear causal connection.
What on earth is it? Read on and I’ll show you.
At the time of the Qantas labour lock-out in 2011 I blogged this.
“Cut away all the tactics and spin and it’s obvious that Qantas International faces ever more sophisticated and vigorous competition from Asian and Middle Eastern airlines. Many of these airlines provide better service and lower fares: small wonder then that they are winning ever greater market share from Qantas. Qantas says their competitors operate at a 20% cost advantage, and they can’t beat ’em so they want to join ‘em, at the expense of Australian jobs. That’s a fair enough business position for Qantas, because un-addressed, high costs will otherwise eventually kill Qantas International.”
“On the other hand the Qantas workforce, or at least important parts of it, is doubtless facing the same cost of living and household budget pressures that we see every day among our tenants, landlords and the wider community. They face high and increasing costs. They don’t have the flexibility to “compete” with Asian workers with lower household costs. So quite obviously they will try to bargain with Qantas for a deal that provides security and allows them to keep up.”
Two years on and nothing has changed …
Housing is the biggest single cost in Australian workers’ household budget, right? So now, here’s the connection to house prices …
Neither Qantas nor its workforce can easily give in: it’s a battle for survival because of the costs each “side” faces. But if the cost of housing themselves (in the world’s most unaffordable housing) was way less, Qantas’ Australian workforce would not need to battle their employer, Qantas’ cost would be lower, the airline more competitive, and jobs more secure.
This same big picture (of uncompetitive high costs in Australia) has already killed countless companies in many industries recently (Ford, Gove Alumina, Angus & Robertson and SPC Ardmona are just examples). The tourism industry is squeaking, the huge inbound higher education sector is struggling, and everyone in retail is looking over their shoulder.
And then, of course, there’s Holden. The underlying issue is just the same.
So the Qantas saga is yet another harbinger of much more fundamental structural (cost) problems for the Australian economy. And, one of the biggest structural issues is the “value” of our biggest asset – residential housing – and costs faced by the residents to pay for it, be that rent or mortgage payments.
So, Paul Sheehan can rant as he does in today’s SMH. He can suggest that we just let Qantas and Holden close down. He doesn’t seem to care. Actually, I don’t seek to come down on either side of Sheehan’s question (let them fail, or not). I really don’t know enough, and can see merit in both sides of that argument.
But it’s the wrong question …
The real issue for Government, and the community, is our economy-wide uncompetitive cost structure (in which housing ourselves happens to be, by far, the biggest single component). When we start to properly address that, we’ll be focused on the right question.
something 2 ponder 