Essays on Qantas Bailout Debate Literature review

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The paper "Qantas Bailout Debate" is a good example of a macro & microeconomics literature review.   In 2014, Qantas, previously a government-owned airline, requested the federal government for assistance. It put a request to the government for a debt guarantee that would better its credit rating. The airline was facing financial difficulties after it reported a half-year loss of $252 million in the 2013-14 reporting period. Qantas was also facing stiff competition from other airlines, particularly Virgin Australia. The company intended to resolve in job cuts, where around 5000 people would lose their jobs, and sale of around 50 aircraft in order to save around $2 billion in 2016-17.

The company also faces challenges regarding the foreign ownership clause as outlined in the Qantas Sale Act. This issue raised serious debate in the parliament and among other key parties particularly on the role of government in bailing out Qantas. Tony Abbott, Australia’ s prime minister, opposed the intervention of the government in Qantas affairs. Abbott argues that the government should be fair to all businesses; what the government does for one business should be done for all businesses.

This was, therefore, a difficult affair. However, he supported the amendment of the Qantas Sale Act that would alter the foreign ownership component and create “ a level playing field” (Lane, 2014). The Sale Act requires that Australian based carriers should have at least 51 per cent of the shareholding owned locally. The rules need to be changed to allow restructuring of local businesses and at the same time ensure that Australians keep a huge ownership stake in its international corporations. Moreover, Lane (2014) points out that a debt guarantee for Qantas is sentimental and has no convincing case for it.

There was the possibility of risking public money to incorporate issues and that Qantas would benefit from cheap debt. It is also expected that commercial companies should survive devoid of government contribution.

References

Bird, R. M. and A. D. Tarasov (2004) ‘Closing the Gap: Fiscal Imbalances and Intergovernmental Transfers in Developed Federations’, Environment and Planning C: Government and Policy, 22, 77–102.

Lane, A. (2014). Qantas needs to grow up – a bailout won’t solve its problems, The Guardian Newspaper, 28, February 2014, .

Höijer, R. (2004) ‘Theft by Bandits and Taxation by Kings: A Critique of Mancur Olson on State-formation’, Political Studies Review, 2, 24–38.

Inman, R. P. (2003) ‘Transfers and Bailouts: Enforcing Local Fiscal Discipline with Lessons from U.S. Federalism’, in J. Rodden, G. S. Eskeland and J. Litvack (eds.) Fiscal Decentralization and the Challenge of Hard Budget Constraints, Cambridge, MA: MIT Press.

IPA, (2015). Government must rule out Qantas bailout, 29 November 2013, .

Kornai, J., E. Maskin and G. Roland (2003) ‘Understanding the Soft Budget Constraint’, Journal of Economic Literature, 41, 1095–1136.

Mullins, M. (2014). Ugly nationalism in support for Qantas bailout. 2, March 2014,

Oates, W. E. (2005) ‘Toward a Second-generation Theory of Fiscal Federalism’, International Tax and Public Finance, 12, 349–373.

ODPM (2004). Balance of Funding Review – Report, July, London: Office of the Deputy Prime Minister.

Stiglitz, J. E. (2000). Economics of the Public Sector, 3rd ed. New York: W. W. Norton.

Tingie, 2014). Qantas bailout still possible. 6, February 2014, .

Verret, J.W. (2009). How the bailout reshapes corporate theory and practice, 30, August 2009, .

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