Sunday, April 24, 2011

The Banana Republic of Cairns

Leigh Dall'Osto has a thoughtful post at Cairns matters on "Demolition of the Construction Industry". There is much in here to comment on and I'm not sure I will agree with Leigh on conclusions and policy solutions. I have already laboured the point in previous posts that this is not something specific to Cairns.

What is more specific to Cairns is the impact of corporate failures, unpaid creditors, bad debts, at least relative to other regions, which is discussed by Leigh, and economically significant. This is a genuine problem to which I don't pretend a solution. However it should occur to people that this problem is actually partly because we adopted an insular local culture. Local is good, and local heroes good?

Had our local construction industry been more diversified, with more financially strong national players present, this wouldn't have become such a problem. Tradies would have been paid. I am at risk of diverting into economic wonkishness here, and didn't want to make it a long post, but something to come back to.

With the benefit of hindsight, how did our local building industry become so outsized anyway, and what lessons does this offer for policy decisions? If we want to pretend we can be our own tiny Banana Republic then that is what we will become?

However, if you want everything to be local you also accept all the risk. If you insist on local ownership/equity then development funds must be debt. The Far North did brilliantly out of Chris Skase splurging on the Mirage in Port Douglas, and then going bust. We need investment from beyond the region rather than the mentality that if we keep everything local here we will be better off.

Note: I used the word 'diverfied' purposely above in a different context as the current obsession with 'economic diversity' in Cairns has now fallen into the category of 'pet-shop-parrot-policy'. Paul Keating famously referred to walking into any pet shop in the 1980's and the parrot would be talking micro-economic reform. The Cairns parrots are squwarking madly on diversity which is the biggest danger of all .......

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