Senator the Hon. Simon Birmingham
Minister for Finance
Leader of the Government in the Senate
Senator for South Australia
Date: Thursday, 11 March 2021
Ali Moore: Well, cut-price air tickets are the centrepiece of the federal government's plan to try to get Australians to travel domestically. Is it going to be enough to inspire you to pack your bags. There are other parts to the package as well to have a look at how it's going to work. We're joined by Finance Minister Simon Birmingham. Minister, good morning.
Simon Birmingham: Good morning, Ali. Good to be with you.
Ali Moore: First to these cut-price air tickets, 33 routes. How is it going to work? Is it a reimbursement to the customer?
Simon Birmingham: No. What we are structuring with the airlines is, is a payment that will be made there. But the airlines will be price monitored based on average prices occurring prior to this policy being settled so that we can make sure there's no price gouging in that regard. And the airlines will have to be demonstrating that these are, in fact, half price fares for destinations that particularly we know, usually rely on international tourists to get more Australians moving because ultimately Australians usually spend more heading out of our country than international visitors do coming into our country. And so all we need to do really is make sure we redirect some of that traditional outbound Australian expenditure into more active domestic tourism by Australians.
Ali Moore: So it's just a whack of money that will go to the airlines and they were meant to pass that on or they'll be required to pass that on in cut price fares?
Simon Birmingham: They will be required to pass that on and half price fares is what we are working towards. So what we're looking there with the airlines is, as I say, there'll be price monitoring based off of prices prior to this announcement to make sure that then they flow through in discounted air fares, particularly targeted to those regions who need it most targeted in ways as well to deal with the fact that sometimes, of course, there's peak and busy periods. What we want to do is make sure that tourism businesses are seeing new customers coming through the doors in the times where they may not be so busy, where bookings may be weak. And so we'll be using these ultimately many thousands of fares, 800,000 half price fares across Australia.
Ali Moore: It's going to be hard, though, isn't it, for people to work out whether they're actually getting half price? Because as you just pointed out, it really depends what time you travel, how busy the route is. What's your benchmark for working out whether that discount is being offered? How do you know that they're passing it on? Are you using a day from a year ago or two years ago? How are you going to work it out?
Simon Birmingham: So our benchmark is the average price of fares on these routes for a period of around four weeks prior to this announcement being made, prior to the policy being bedded down so that we are looking at what the airlines were doing and then we will be expecting for 800,000 fares across the country to see from the airlines half the price of that average benchmark that was in place. So we'll be putting the airlines well and truly to account to make sure that it is passed through to consumers. In the end, the airlines do their own price discounting and so on as well. So for consumers, the incentive is cheap airfares, 800,000 of them with taxpayer supports across the country. And all of that about trying to make sure that as we continue the exceptional success Australia has had in saving jobs through this global economic crisis that we save jobs in the tourism industry going forward to.
Ali Moore: And have you picked the routes? I know there's too it seems at this stage in Victoria, both of those flights into Avalon, none to Tullamarine, to Melbourne Airport. I just find that surprising because the aim is to try and pick up where you might have international travellers. We had a huge amount of international travellers coming through Melbourne Airport.
Simon Birmingham: We've particularly been looking at those regions that have been most dependent on international visitation. And in terms of regional Victoria, that's especially the Great Ocean Road. All of the tourism data shows that's the case. And so Avalon's proximity to the Great Ocean Road lends the appeal there. But these are initial routes. We will be working with the airlines and the tourism industry so that if there are additional routes that need to be added to make sure this is a success in getting people travelling across the country and travelling to the areas that need it most, then we will finish those particular routes as we go through implementation.
Ali Moore: So why target just the airlines? Wouldn't the voucher system that you give to people that could be used on a broad array of tourism services? Because, of course, you've still got your car, your food, your accommodation. Why just target the airlines? Why have you decided that's the most efficient way of helping the sector?
Simon Birmingham: Efficiency is probably the key there, that this is the most efficient way to try to mobilise people to get moving and from the moving to get them spending.
Ali Moore: But the states have done travel vouchers and found it very successful.
Simon Birmingham: Some states have done vouchers and states we would encourage to continue to do that and to supplement this sort of programme. What we're doing is to. To get people moving across the country through this measure and what we think will work here is, is by [indistinct] of people seeing a mass of discounted airfares coming onto the market, all the research shows that for every dollar a traveller customarily spends on the airfare, they spend another 10 dollars on the ground in accommodation, in restaurants, in visiting attractions and other tourism businesses. And so we've done the research there that shows actually getting people to book those flights has all of the knock on effects. As I said, Australians spend 65 billion dollars leaving the country in 2019. Visitors to Australia spend 45 billion dollars in Australia in 2019. So if we can get Australians spending even two thirds of what they did, leaving the country pre pandemic, then that will offset the international expenditure that we're missing out on the present.
Ali Moore: Simon Birmingham, you'd be more aware, I guess, than most that Australians have become a little bit wary of making travel plans, bookings and forking out some cash, because the speed with which the situation can change and borders can slam shut is something we're all just too familiar with. Do you need some guarantees around border closures for this to work?
Simon Birmingham: We do know that that confidence is a key factor here. And what I'd say to listeners thinking about the fact that there might be 800,000 or there will be 800,000 half price airfares coming out to encourage them to make those bookings to places in Queensland, to Broome, to elsewhere around the country, and to know that the airlines and the tourism operators as well have adjusted their policies and practises to make it easier for people to change if unforeseen circumstances occur and to get refunds if unforeseen circumstances occur. We hope that's not the case. So we hope to see state borders stay open. Australia is enjoying amazing success in suppressing COVID in every state and territory across this country. And so we think people should now be in a position to plan and book with a high degree of confidence, we hope that these discounts will incentivise them to do so. But they should also know that those airline and tourism operators have made their terms and conditions more appropriate for the conditions that we operate in.
Ali Moore: Just two other very quick questions. Minister, you're also as part of this package, as I understand it, providing retention payments to airlines in return for keeping their staff on until international travel restarts. You are the Finance Minister. What sort of quantum of money are we talking about?
Simon Birmingham: Look, altogether, this is a one point two billion dollar package that-.
Ali Moore: So those retention payments are in that?
Simon Birmingham: They are within that. And across the world, around 20 airlines have gone broke and will never fly again on estimates. And clearly as an island continent Australia. We can't afford to see that happen. So the measures we are putting in place there are specific to the international components of both Virgin and Qantas to make sure that they don't lose the critical capability, if pilots are stood down for a permanent, prolonged period or flight engineers or others, then restarting those airlines becomes very, very challenging and can potentially tip airlines into stages of vulnerability. So we are supporting that critical national piece of infrastructure there to make sure that unlike other parts of the world, our airlines will be able to restart when those international borders and flights get going again.
Ali Moore: And talking about critical national infrastructure, of course, you're aware that the closure of the Yallourn power station has been brought forward here in Victoria. Angus Taylor, the Federal Energy Minister, says that raises reliability and price concerns. Again, with your Finance Minister hat on, would the federal government step in if the private sector doesn't fill the gap that will be left by the removal of Yallourn in terms of power supply, would you build a power station if you had to?
Simon Birmingham: Well, we're a long, long, long way off of that consideration. We put in place reforms a few years ago that forced energy generators to give advanced notice of decisions such as power station closures. And so Yallourn's announcement of its closure in 2028 is giving lots of notice to industry. And I'm sure that that with the right policy settings, industry will fill the gap that is necessary there to make sure that we have reliability, but also we have pressure that keeps the downward pressure occurring on prices.
Ali Moore: So you'd rule that out, rule out the federal government needing to step in?
Simon Birmingham: I don't see any circumstance where it will be necessary for government to build and operate power stations. But what we will do is work with industry very closely as we see this 1480 megawatts of generation removed from the market and to make sure that there is growth of generation back into the market, particularly reliable generation that can be there at times when intermittent supply may be maybe less available. And so we'll work through this with the energy sector. But I'm confident that we will see investment. Australia has seen record levels of investment in recent years in renewable energy generation across the country. That's world leading in terms of the per capita extent of renewable energy generation investment that's been occurring in Australia in the last couple of years. We want to make sure that's also complemented by the type of reliable, dispatchable energy that's necessary to keep our grid secure, stable, and also that downward pressure on prices.
Ali Moore: Well, seven years is a long lead time, but I tell you what, I'll bet you it will go in a flash.
Simon Birmingham: It will, Ali. And we'll be working closely with the industry through that time to make sure that the gaps are filled.
Ali Moore: Simon Birmingham, thanks for talking to us.
Simon Birmingham: My pleasure. Thank you.