SYDNEY Australia will ask its competition watchdog to monitor domestic passenger flights in a bid to boost competition in a sector dominated by national carrier Qantas, which is under scrutiny for alleged anti-competitive behaviour.

The Australian Competition and Consumer Commission (ACCC) will monitor prices, costs and profits in the domestic air passenger sector, according to a joint statement from Treasurer Jim Chalmers and Transport Minister Catherine King on Wednesday.

"A competitive airline industry helps to put downward pressure on prices and deliver more choice for Australians facing cost-of-living pressures," the statement said.

"ACCC market scrutiny will help ensure airlines compete on their merits, bring to light any inappropriate market conduct should it occur, and provide continued transparency at a time when new and expanding airlines are still trying to establish themselves."

The regulator will also monitor route capacity, a topic of some controversy following months of accusations Qantas successfully lobbied the federal government to stop rival Qatar Airways running additional flights to Australia.

The airline was embroiled in another scandal in August when the ACCC sued it for violating consumer law by selling tickets to cancelled flights. Days later long-serving chief executive Alan Joyce brought forward his retirement.

While Wednesday's release did not mention Qantas by name, the airline and subsidiaries are dominant in the local market and carried 61% of all domestic passengers in April, according to ACCC data.

The ACCC mandate will apply for three years and commence before year-end.

(Reporting by Lewis Jackson; Editing by Muralikumar Anantharaman)