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Call it the ’90 per cent economy’. Post-pandemic, it will never be the same


If the economy manages to return to a normal growth rate in the second half of this year, quarterly gross domestic product will still be about $30 billion smaller at the end of 2020 than it was at the end of 2019. Only a super-strong burst of growth lasting several years will make up for the economic output lost to the pandemic.

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Even so, maintaining 90 per cent of the economy’s output in the face of a deadly pandemic has been quite an accomplishment.

In a way we’re fortunate the coronavirus outbreak happened in 2020 rather than in 2000 because, even two decades ago, the economic damage would likely have been far more severe.

Technologies that facilitate remote work have allowed millions to keep doing their jobs during the crisis. A study by the consultancy AlphaBeta, a part of Accenture, found the tools that enable remote work and collaboration permitted 3.2 million Australian employees to keep doing their work safely during the pandemic, including about 1.6 million who may have otherwise been unable to do any work at all. That’s a vast amount of economic output that would have been lost before remote working became possible on a mass scale.

At the same time, online shopping has helped keep our homes stocked with goods during the pandemic, delivery apps have made it easy for us to keep eating meals from our favourite restaurants at home and the digital delivery of movies, apps and music have kept us entertained.

But the strange circumstances of the 90 per cent economy will have lasting consequences. The adjustments made to sustain economic activity during the pandemic have altered the behaviour of businesses, workers and consumers.

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Take businesses first. There has been an astonishing acceleration in the use of digital technology during the past seven months. AlphaBeta’s research found Australian companies have, on average, increased their adoption of some digital technology during the COVID-19 period by as much as the previous 10 years. The uptake of digital collaboration tools, such as video-conferencing, has been especially swift. Most businesses intend to continue using these new tools and practices after the pandemic has passed.

Associated with this shift has been the vast, unplanned experiment in working from home. Before the pandemic Australia had been something of a laggard when it came to remote work. On the day of the 2016 census only 4.1 per cent of non-farm employees reported working from home, only marginally higher than in 2006.

But this year a legion of employees had their first taste of working from home, and many liked it.

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A survey published last month by Sydney University’s Institute for Transport and Logistics showed three in four workers believed that, post-COVID-19, their employers were more likely to support work from home than they did before the pandemic. A separate study by Swinburne University researchers John Hopkins and Anne Bardoel found three in four managers now believed their staff would do more remote work after the pandemic than before it.

The office isn’t dead. But the evidence suggests things won’t go back to the way they were.

Professor David Hencher, the director of the Institute for Transport and Logistics Studies, says the “new normal” for how Australia’s workforce balances time spent working from home versus time at the office might not become apparent until late next year. But he anticipates a substantial fall in work-related travel around big cities with major implications for the use of transport infrastructure, demand for office space and the character of our central business districts.

“There will be a decline in activity around our CBDs but quite a bit of that will relocate to the suburbs,” he said.

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Meanwhile, the pandemic has been altering the way we consume and spend. A recent survey by the McKinsey consultancy found a majority of Australians had tried “new shopping behaviours” since the onset of the pandemic and most intended to continue with them. While many old spending behaviours will return once health risks fade, new habits picked up during the crisis will persist. That will also have sweeping repercussions.

The coronavirus-induced downturn has changed the way businesses, workers and consumers behave. Our economy will be fundamentally different as a result.

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Biotechs push for IP tax incentives post-pandemic


The comments come as the nation’s biotech sector lobby group, AusBiotech, argued in its pre-budget submission published last week that the government should consider a manufacturing tax regime that rewards businesses who make profits from patented products that were created onshore.

Vaccine developers across Australia are in the race for a COVID-19 vaccine.

Vaccine developers across Australia are in the race for a COVID-19 vaccine. Credit:University of Queensland

“While research and development incentives are designed to encourage activities that will result in innovation, this incentive is aimed at commercial activities, by providing tax relief on profit derived from qualifying patents,” the group said.

AusBiotech chief executive Lorraine Chiroiu said as other developed nations aim to “supercharge” recoveries post-pandemic, competition for research and development expenditure is becoming more fierce. Australia must consider end-to-end tax incentives that make the country and attractive place to both research and commercialise products, she said.

“As IP is highly-mobile, its flow-on benefits can easily be separated from the jurisdiction where it was developed, and its management, capitalisation and manufacturing migrated to low-tax jurisdictions that offer on-going incentives. Supportive policy is critical to retaining the benefits of R&D and its manufacturing in Australia for longer.”

Other ASX-listed biotechs including ResMed and Starpharma have also recently cited the importance of boosting the country’s medtech ecosystem in the wake of the coronavirus pandemic.

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The sector has fought hard against proposed government caps on the research and development tax incentive scheme, arguing now is the time for greater expenditure on new ideas.

The next steps for those changes may not be known before the October 6, budget. A senate committee reviewing possible changes for the scheme will now not report back to government until October 12.

In its 2021 budget submission, AusBiotech argued targeted research support would be key to propelling smaller startups into the success that has been seen by CSL, Cochlear and ResMed.

Mr Howitt said a rethink of incentives “could improve Australia’s competitiveness as a place to nurture and build medical innovation companies like Cochlear”.

The Australian government has signalled a number of policies in recent months to encourage local research in the medtech space, most notably in terms of funding for COVID-19 vaccine projects. 

Earlier this month, health minister Greg Hunt committed $25 million from the Medical Research Future Fund to fund local clinical trials for projects about the prevention or treatment of coronavirus.

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Local News - Victoria

Public transport expected to take post-pandemic beating


The Department of Transport is considering expert warnings that rail will be hardest hit once the virus subsides, with usage to return to just 70 per cent of pre-pandemic levels.

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Metro’s Hong Kong parent company, MTR Corporation, is reporting that a $HK70 million ($12.5 million) loss across its international subsidiaries in the first half of 2020 is “mainly due” to the dramatic dive in patronage and revenue on Melbourne’s suburban railway.

The Monash study found one in five people will stop travelling into the CBD, as work-from-home arrangements increase by 75 per cent, significantly reducing the number of white-collar workers coming into the city.

However, the CBD is headed for worsening gridlock, as 9 per cent of the state’s public transport commutes switch to car trips, the survey of more than 2000 people found.

Business leaders are pushing for more parking on the city’s fringe as cars become the primary mode of travel, making up 61 per cent of all trips to work — a rise from 57 per cent.

Cycling will rise by 55 per cent, making up 3 per cent of all work-related trips. A dip in off-peak travel will be evened out by a rise in delivery trips.

Public transport trips are expected to fall from 36 per cent to 30 per cent of all work-related trips, with the study commissioned by the Department of Transport warning these trends could take up to seven years to reverse.

“A decline in public transport and a growth in car driving is not a good outcome,” lead researcher Professor Graham Currie warned. “We are going to have more and different congestion hot spots in Melbourne.”

Professor Currie, the Monash Chair of Public Transport, said there had been a shift in attitudes about public transport, noting the second lockdown had marked a significant turning point. “Crowding and infection fear are new major concerns for users.”

To keep services running, the Andrews government gave Metro and Yarra emergency funding relief in June, which is understood to amount to roughly two-thirds of revenue losses on their operations and maintenance contract, which excludes losses on advertising or delays on infrastructure projects.

While the government refused to confirm the amount, sources close to the deal said Metro was lent about $56 million — $8 million a month between June and December.

The city's trains are empty during lockdown.

The city’s trains are empty during lockdown.Credit:Luis Ascui

The state is set to be reimbursed about 66 per cent of the payment once usage returns to 80 per cent capacity and the operator turns a profit.

The cash injection was supposed to last until the end of the year, but operators may ask for another lifeline in the wake of the second lockdown.

“Like every organisation, we’re navigating uncharted waters through this pandemic,” Metro’s chief executive, Raymond O’Flaherty, said.

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Ninety seven cent of Metro’s revenue typically went back into operations, maintenance and employee salaries, which had risen to 100 per cent with no current return to shareholders during the pandemic, Mr O’Flaherty said.

But the chief executive confirmed that Metro was “committed to Melbourne for the long term”.

Yarra Trams’s new chief executive, Julien Dehornoy, said it was a “challenging” time in transport and the company had “not been immune” to the impacts of the financial shock. The government’s funding injection would provide “certainty” to passengers as the network recovered, he said.

A full recovery, however, may be slow.

A month after the first round of stage three restrictions in March, patronage returned to just 40 per cent of normal levels, up from 10 per cent at the height of the lockdown.

In cities such as Vienna, Oslo and Berlin, usage has not exceed 80 per cent capacity months after restrictions eased.

Executive director of the International Association of Public Transport, Michelle Batsas, said rail would continue to be the “backbone” of the city’s public transport network, but people would likely shift to shorter, suburban trips which was a trend occurring in Singapore.

On-demand services such as 15-seater buses that could be booked on an app might become more popular, especially in suburbs on the city’s fringe, she said.

A Department of Transport spokesman said the government was adding extra train and tram services on the busiest lines to help passengers socially distance.

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Sharing the risk: Retailers and their landlords face a post-pandemic dilemma



The COVID-19 crisis is accelerating trends in the retail sector that will force retailers and their landlords to develop new relationships – whether they like it or not.



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Local News - Victoria

Victoria Police push for expanded PSO powers to continue post-pandemic


PSOs are trained officers recruited to patrol train stations after dark. They have similar powers to police and carry guns, but can only use their powers on duty and in and around designated areas.

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Ms Neville said last year she wanted to see PSOs at major events.

Since emergency powers were implemented at the start of April, PSOs have arrested 406 people, handed out 293 infringement notices – including for breaches of COVID-19 restrictions – and stopped and checked more than 7000 people as part of Operation Shielding.

Most of their enforcement work occurred in Frankston, Dandenong and Box Hill, according to Victoria Police.

“Not only are commercial burglaries significantly down, but we know the visible police and PSO presence has made people feel safe during these uncertain times,” Deputy Commissioner Shane Patton said.

“PSOs have also embraced the opportunity to support the community.”

He said police would evaluate where they place PSOs to ensure they are in the best locations to maintain community safety.

PSOs have been deployed to the Melbourne and Geelong CBDs and shopping strips and centres in Dandenong, Frankston and Box Hill.

PSOs have been deployed to the Melbourne and Geelong CBDs and shopping strips and centres in Dandenong, Frankston and Box Hill.Credit:Jason South

During the pandemic, the top reasons for arrest by PSOs were theft, shop theft and being drunk in a public place – an offence the government has committed to abolishing due to its disproportionate impact on the vulnerable.

Gregor Husper, principal lawyer with the Police Accountability Project, said he held concerns about expanding the deployment of PSOs because there were insufficient accountability measures.

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“There is a strong need to balance any increase in police powers with increased police accountability. The public has no confidence in the police complaints system … Incremental increases in police powers are incrementally eroding hard-won freedoms,” he said.

“Marginalised people, people of colour, Aboriginal people, the homeless tell us they are being over-policed. Increasing PSO numbers will likely result in further over-policing of marginalised people.

“The government must show real justification for increasing power. Civil liberties aren’t a buzzword. They are about basic freedoms and protections for those who most need them.”

Daniel Bowen, spokesman for the Public Transport Users Association, said it made sense to be more flexible around PSO deployment, but he warned against moving too many away from the public transport network.

“We would certainly support moves to allow authorities to deploy PSOs more widely across public transport, not just constraining them to railway stations after 6pm,” he said.

“I think we will need to be careful to make sure public transport passengers continue to feel safe. The question might be how many officers move off the public transport network.”

Victoria Police indicated that if the role of PSOs were expanded, it would need to recruit more than the almost 1500 it has now to patrol the public transport network and provide security for courts and government buildings.

Shopping Centre Council of Australia chief executive Angus Nardi strongly supported the long-term presence of PSOs.

“The visible presence of PSOs in shopping centres during COVID-19 has been incredibly positive for community assurance and safety, and we strongly support their presence and engagement in the long term,” Mr Nardi said.

PSOs were introduced in 2012 under Liberal premier Ted Baillieu and the effectiveness of the policy has come under scrutiny in the years since, with criticisms it is expensive and inflexible.

A 2016 Auditor-General report found evidence PSOs increased perceptions of safety on Melbourne’s train network at night but with the data available it was not possible to determine if their presence had an impact on crime.

Premier Daniel Andrews’ Labor government has handed PSOs more powers since, allowing them to arrest and search in certain circumstances.

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Post-pandemic tax reform is on the agenda. How could it affect you?


Amid the economic fallout from the coronavirus pandemic, policymakers are looking to the future – and to what Australia’s tax system will look like in coming decades.

Reserve Bank governor Philip Lowe has urged an overhaul of taxes to remove impediments to Australia’s economic recovery.

In his ministerial statement on the economy, federal Treasurer Josh Frydenberg confirmed that tax reform is being considered alongside a host of other economy-boosting measures such as infrastructure spending, skills programs and industrial relations reforms.

But of all the taxes imposed by governments, state and federal, one tax has emerged as the most ripe for reform: stamp duty.

A decade on from the Ken Henry tax review, which recommended stamp duty be abolished in favour of a broad-based land tax, state treasurers are mounting a fresh push to abolish the unpopular tax, which adds tens of thousands of dollars to the cost of buying a new home.

So what is stamp duty? What are the alternatives? And how likely is reform?

What is stamp duty?

For as long as governments have existed, they have needed to impose taxes to collect revenue. One of the earliest forms of taxation in Australia was stamp duty – along with customs duties on imported goods and taxes on alcohol and tobacco.

The “stamp” in stamp duty literally refers to the stamp or seal that was imprinted on contracts and other documents to make them official. Transactors would pay a certain fee, or duty, every time a document was officiated in this way.

Today, most transactions take place online, without a physical stamp on them, but duties continue to be applied to property conveyancing (also known as transfer duty), motor vehicle sales and some insurance contracts.

For home buyers, stamp duty is typically charged as a percentage of their new home’s value, with some exemptions for first-home buyers.

State governments abolished some stamp duties as part of the introduction of the GST (goods and services tax) in 2001, but stamp duty remains a large source of revenue for all state and territory governments, accounting for 30 per cent of the self-raised taxes of NSW, Victoria and Queensland.

Why is there talk of abolishing it?

State treasurers are pushing for an end to stamp duty because it has proved a highly volatile source of revenue for them – rising during property booms and evaporating during property busts.

Economists back up the treasurers, decrying stamp duty as an “inefficient” source of revenue. Former Treasury secretary Ken Henry is more blunt. “It’s just a bad tax,” he said earlier this year.

Former Treasury secretary Ken Henry.

Former Treasury secretary Ken Henry.Credit:Louise Kennerley

Henry’s review of taxes identified stamp duty as one of the most inefficient taxes in governments’ revenue-collecting armouries.

In truth, all taxes are bad, in the sense that they distort the economy and stop activity that might have otherwise occurred. Taxes on wages discourage workers from working. Taxes on company profits discourage investment and encourage companies to look offshore or to hire expensive accountants to help them minimise tax.

The trick is to impose taxes on things that can’t really be avoided in face of the tax.

Stamp duty, by targeting people choosing to enter into new contracts and undertaking new transactions, fails this fundamental test. People can avoid the tax by not doing the transaction.

First-home buyers must spend longer saving up for a home. Empty-nesters are discouraged from downsizing, which would free up more housing supply and ease upward pressure on home prices. Workers are also discouraged from moving to where jobs are located, leading to higher unemployment.

Economists would like to see such inefficient taxes abolished in favour of other taxes that do less damage to the economy.

What are the alternatives?

Abolishing stamp duty overnight would leave a huge hole in the finances of all state and territory governments.

So, if it is to be abolished, alternatives must be found.

The most commonly discussed methods of plugging the revenue hole left by stamp duty is either a broader land tax or an increase in the scope or amount of GST – or some combination of all three.

The ACT government is the only state or territory government to have committed to abolishing stamp duty. In 2012, then chief minister Katy Gallagher outlined a 20-year plan to slowly phase out stamp duty and to slowly ramp up annual land taxes. This has proved politically challenging during the middle phase, as taxpayers are forced to pay both stamp duty and land tax, albeit at lesser rates on each.

Economists like land taxes because they are hard to avoid. Most – although not all – also like the GST because it is also somewhat hard to avoid: everyone needs to buy stuff. Australia’s GST rate of 10 per cent has been unchanged since it was introduced in 2001 while other countries have increased theirs, including New Zealand with GST at 15 per cent.

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Who else is against stamp duty?

NSW Treasurer Dominic Perrottet is leading the charge among state treasurers to abolish stamp duty.

Late in 2019, he established a review, led by former Telstra chief executive David Thodey, to look at state taxes. Of 33 submissions to that review, more than half raised the issue of stamp duty.

“Throughout the consultation period, we consistently heard how transfer duty is a costly tax that impacts citizens’ freedom to move throughout the seasons of life,” Thodey, who is planning to release the findings of his review in June, has said.

Henry and fellow former Treasury secretary Martin Parkinson have both told Thodey’s review that stamp duty should be axed in favour of an expanded land tax regime. Productivity Commission chair Michael Brennan has also described a switch to land tax as a “worthwhile reform”.

In April, Philip Lowe added his voice in support of reform, calling for an overhaul of the taxation of “income generation, consumption and land” to help lift the economy out of the coronavirus doldrums.

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Who can abolish stamp duty?

Stamp duty is a tax levied and collected exclusively by state and territory governments. They could, if they liked, decide to abolish it tomorrow.

But doing so would leave a massive hole in their finances.

This could be plugged, over time, by increasing land taxes. But to avoid political death by angry home owners, it’s likely the land tax could only apply to new purchases, meaning a very small revenue base initially.

That’s where the federal government comes in. State and territory treasurers want the federal government to provide extra revenue support as land taxes ramp up.

In short, they want the federal government to plug the revenue gap, most likely through an increase in GST revenue which, although collected by the federal government, is historically handed over to states and territories.

Before the COVID-19 crisis, Treasurer Josh Frydenberg dismissed the possibility of such reform. “This is not a mandate we have, nor plan to seek,” he said in response to Perrottet’s review last year.

But things have changed since then.

Is now a good time to scrap stamp duty?

In the face of falling revenue, the federal government is being forced to consider what Australia’s tax system will look like in a COVID-19 world.

As it searches for ways to boost the economy, reforming taxes to be less of a drag on growth is one avenue being considered.

Political wisdom is that increasing the GST or imposing a new land tax would be wildly unpopular.

But the imperative for growth and job creation is paramount.

According to Treasurer Perrottet: “There is no better time to rid the states of inefficient taxes that hold back economic growth.”

The establishment of a national cabinet during the coronavirus outbreak also offers new avenues for co-operation between state and federal governments, which could facilitate a reform package.

When he was treasurer, Prime Minister Scott Morrison said he was in favour of payments to states who make productivity-enhancing reforms, as recommended by the Harper review of competition.

But, in other respects, the timing is less ideal. Historically, governments have used excess revenue to smooth the path of difficult tax reforms, by well and truly over-compensating reform losers. That was the strategy when the GST was introduced. There is, arguably, less room to do that today.

But as policymakers consider the urgent need to kickstart the economy, the chorus of voices calling for tax reform only continues to grow.

“I think the economic argument for making the investment is going to be strong no matter what time of the cycle,” Henry has said about axing stamp duty. “Best just to get on and do it.”

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Principals plead for better treatment post-pandemic


Ms Spink said the challenging nature of the role could make it harder to recruit talented leaders.

“Why would anybody want to step into a role that is so huge and stressful, especially in a time like now?”

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The levels of stress felt by principals even before the pandemic has been highlighted by the newly released Australian Principal Occupational Health, Safety and Wellbeing survey for 2019.

The annual survey revealed that principals were subject to violence, threats, bullying and conflict at a far greater rate than the general public. Of the 2385 principals surveyed, 42.2 per cent had experienced physical violence as opposed to 3.9 per cent of other people.

Survey author Professor Phil Riley, of Deakin University, said a societal problem was playing out in schools.

“It’s just appalling. The thing that worries me is we’re about to start collecting data for our 10th year of this survey, and every year it’s gone up,” he said.

“There is no relenting on this, it’s getting harder and harder to be in that position.”

Professor Riley also hoped the new-found respect for educators that had emerged during the pandemic would help improve things long term.

“One of the things that’s happened is people have had their eyes opened about how difficult it really is. It really is a very complicated job and people do have a new respect for that, I think,” he said.

“We have to say ‘no more, it needs to stop’. COVID-19 could be a great resetting moment.”

Victorian Principals Association president Anne-Maree Kliman said she was extremely concerned that aggression towards principals was increasing.

“I’m not surprised by it because it’s what I hear from my members, and as a principal for 17 years, I experienced it,” she said.

“It’s really important that the community understands principals are always willing to have conversations and always willing to provide support or guidance but they must always be approached in a respectful way; that’s the immediate thing we need to have happen.”

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Alan Joyce flags a new-look Qantas in a post-pandemic world


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“The Qantas of 2021 and 2022 will not be the Qantas of 2019,” he said following a market update on the company’s pandemic response. “We’re looking at the scope and scale of our businesses going forward.”

Mr Joyce said there would be some pent-up demand from customers who want to visit family or go on holiday when domestic travel restrictions lift, but Qantas would also look to stimulate demand with cheap airfares.

Melbourne to Sydney fares on its budget arm Jetstar could fall to $39 or even $19, he said. “We’ll make sure we get as many people travelling as possible,” he added.

Qantas on Tuesday said it expected to burn through $40 million a week from late June until travel demand returns. That is after standing down 25,000 of its 30,000 employees without pay and reducing other spending.

Mr Joyce said the company could sustain that cash burn until the end of 2021, and the airline’s liquidity had been boosted by $550 million in fresh debt, secured against three Boeing 787 Dreamliners. On top of $1 billion raised in March and secured against seven Dreamliners, the company’s net debt sits at $5.8 billion.

Mr Joyce ruled out speculation Qantas might have to resort to an equity raising to last through the COVID-19 pandemic, pointing to another $2.7 billion in unencumbered aircraft assets it could use to access further loans.

Qantas says it was extending domestic and trans-Tasman cancellations through to the end of June and other international fights through to the end of July.

Qantas says it was extending domestic and trans-Tasman cancellations through to the end of June and other international fights through to the end of July.Credit:Jason South

Ratings agency Moody’s said Qantas’ debt raising and reduced cash burn showed it had the ‘”flexibility to deal with the current environment” despite the “unprecedented circumstances in the industry”.

Though the international and domestic travel markets will be smaller, Mr Joyce said Qantas could use its relative financial strength to grow its share against weaker competitors at the end of the pandemic.

COVID-19 has devastated airlines around the world, including Qantas’ domestic competitor Virgin Australia, which went into voluntary administration a fortnight ago owing almost $7 billion. Administrators are looking for new owners.

“Qantas is well positioned to pick up [market] share domestically and internationally and our intent would be to have a bigger share,” Mr Joyce said.

“We think we’re well positioned as one of the strongest airlines in the world and to take advantage of our strength.”

He said it was not clear what Virgin would look like under new owners but that it would be a competitor that presented “challenges and opportunities” for Qantas.

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“We will adapt to whatever comes out of administration and I think do exceptionally well,” Mr Joyce said.

Mr Joyce confirmed reports that the airline was talking to Vietnam Airlines about selling out of its 30 per cent stake in their Vietnamese joint venture Jetstar Pacific, but reaffirmed Qantas’ commitment to its other Jetstar franchises in Singapore and Japan.

Qantas is currently flying the equivalent of about 5 per cent of its pre-pandemic domestic capacity and 1 per cent of its international capacity. The company said on Monday it was extending domestic and trans-Tasman flight cancellations through to the end of June and other international fights through to the end of July, but could quickly return to capacity if required.

Qantas shares closed 1.7 per cent higher at $3.62. The company’s shares, which like most airline stocks were hammered by the COVID-19 outbreak, traded at $6.67 on February 20.

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