Wednesday, June 29, 2011

How does Cairns compare?

A presentation last year from the Office of Ecconomic and Statistical Research within Queensland Treasury may be of interest: How does Cairns compare?

Tuesday, June 28, 2011

Tully Sugar: end game or stalemate?

Our ABC has reported the latest move in the Tully Sugar takeover. The Mackay Sugar consortium has made their offer unconditional. However Mackay is below the highest offer:  "Mackay Sugar and Bunge is offering $43 per share, while COFCO is offering $44 per share. "

COFCO is Chinese and has enlisted Keith De Lacy to boost their local credentials.  Mackay have withdrawn their condition for more than 50% for their offer to proceed. 90% is required for a full compulsory acquisition of the remainder takeover under Australian corporate law. The Australian has reported that Mackay currently hold 29.9% and COFCO 26.6%.

Mackay is associated with Queensland Sugar Ltd (QSL) the former monopoly sugar marketer which had held an interest in Tully to maintain their sugar marketing arrangement. QSL has accepted the Mackay offer for its 19.9% holding.

QSL had previously used its interest to block an MSF takeover offer for Tully. MSF yesterday announced that they will cease marketing arrangements with QSL in 2014 for sugar from their recently acquired South Johnstone and Tableland Mills.

In any hotly contested corporate bidding war history suggest it may be wiser to be a seller than a buyer?
All bids for Tully expire in the first week of July.

parrot cage goes off

Dead King Parrot
The King Parrot has squawked and the parrot cage at our Journal of Ignorance has gone off! Even by its standards the display of ignorant cant is exceptional.

Certainly there is nothing exceptional about either the average level of rates in Cairns relative to other regional centres or increases of around 5%. If anything they compare quite favourably especially the minimum rate level. The comparison by the King Parrot with Brisbane convenienty overlooks that BCC debt will increase by around $500 million this year.

Care needs to be taken with comparisons when it comes to such as water and utilities. Presumably the King Parrot's headline $110 is based on all costs including water and sewage, for it to correlate anywhere near 5% for the average ratepayer. The looming FY end distracts from any further analysis which KS hopes to return to later in the week after the budget is released.

Note: KS always feels morally superior when it comes to rates as currently he pays approx $4,500 pa on his bohemian Esplanade abode, which are indeed some of the highest in Australia relative to market value courtesy of previous Mayor Major-General Third Degree Burns (ret). Consequently I am paying for the rest of you bludgers who should be paying even more!

Parrot squawk of the day: "I agree with everyone here. The Council wastes so much money. The cultural prestinct for example. You can have the biggest performace centre in the norther hemisphere but that does not bring the big performers to cairns. The cost of Transport is the problem. Val stop acting like a tentrum throwing kid. Cairns people don't want the prestinct - Full stop. Its a waste of money." - Tanja Fredriksz via Facebook who seems to have a problem with which hemisphere she is in.

Monday, June 27, 2011

"tourism, you've got to be joking?"

The Australian has run a series of posts on Shaping Our Future: ideas to change a century. The always thought provoking Phil Ruthven has some contrarian ideas on tourism as a key economic driver when the mining stimulus inevitably begins to fade.

Large scale manufacturing can't compete with Asia. Ruthven cites estimates from Boeing that 112 million Chinese will be travelling beyound their borders by 2020. He reckons a 15% share could be achievable with potential to deliver export income comparable with mining.

This fits with the theme that Cairns is actually well placed for many current global trends. Diversification for its own sake beyond core strengths and comparative advantages has seldom been successful or sustainable.

However, for the next few years the investment boom in resource capacity looks likely to remain the dominant theme:

Hello Sailor!

Queensland Economy Watch has a post on the excitement being generated at the Journal of Ignorance by the prospect of an expanded naval presence in Cairns. Kitchenslut's observation on this is more flippant:

"Where can you find pleasure
Search the world for treasure
Learn science technology
Where can you begin to make your dreams all come true
On the land or on the sea
Where can you learn to fly
Play in sports and skin dive
Study oceanography
Sign up for the big band
Or sit in the grandstand
When your team and others meet"

-  In The Navy, The Village People (KS: sounds like more tourism to me?)

 "Don't talk to me about naval tradition. It's nothing but rum, sodomy and the lash"
 - Winston Churchill

Times change, hey?

Update: The latest instalment today from the Bogan King features support from Deputy Premier, Paul Lucas, based on an economic stabilisation strategy for Cairns. This is NOT a reason to support an increased naval presence in Cairns. Defence is a large chunk of the Federal budget and is renowned for management incompetence. The Navy has been prominent here in recent times. The only reason to support an expansion of HMAS Cairns is if it stacks up on cost and defence strategy objectives. NOT some misguided regional support strategy which would not be in the national interest.

Redcape recapitalisation progress

The Goldman Sachs led assault on Redcape (ex-Hedley pub fund) is progressing with due diligence complete and a recapitalisation proposal imminent with the exclusivity agreement extended for two weeks.

Residential Property Outlook

A report on Residential Property Prospects, 2011 to 2014 from BIS Shrapnel has forecast a more positive outlook for residential real estate. BIS reckons property prices are unlikely to fall dramatically and forecasts some of the strongest growth for Perth and Brisbane which have been laggards in recent years. The outlook is predicated on strong economic growth and low unemployment as the impacts of the resourcces boom flows through.

There is always a lively debate on whether Australian property prices are reasonable or an over-valued bubble. The negative perspective is typically well represented at Macrobusiness. The positive by Christopher Joye from Rismark / RP Data at Aussie Macro Moments. They are both among the best Australian economic blogs so you can take your pick depending on what you want to believe.

Joye has posted a number of interesting real estate charts today including this one on the higher volatility of more more expensive property so buying in a rich suburb is riskier. This seems to correlate with most recent Cairns land valuations where some of the most resilient suburbs were in the southern corridor.


Sunday, June 26, 2011

the great dinner roll heist

Crime in Cairns is a big issue. It will be a critical issue at the next State election. Cannibal Newman has tried to claim moral superiority on this in the last week, while at the same time being astutely aware that it may not be wise to appease visceral rednecks such as DJ Cunt Hunt from the Queensland Party!

The Accused

Kitchenslut is APPALLED that today when he attempted to enter his local Cairns RSL there was a crime seen happening! Yes, Kitchenslut scene local police dealing with the theft of the daily dinner roll delivery to the Cairns RSL. The culprits were conveniently outside in a decripit campervan, with furniture on roof. 

The RSL staff were concerned about the thin-edge-of- the-wedge with regards to their stash of alcohol being seen as an easy touch if these culprits got away with pinching the dinner rolls from the back doorstep!  KS is acutely aware of probems here and currently a most pressing issue as nearby body corporate chairman is the theft of sections of garden hose ...... presumably for bonging!

Who knows! The only empirical research certainty KS has seen is that there is a distinct disconnect between perceptions of safety and actual safety. The KS experience as a CBD dweller is that the street vibe can be more aggresive ...... or perhaps that's just age more than reality?! Although after ten years as a CBD resident my most confronting experience is still being asked, while staggering back alog The Esplanade,  by an indigenous gentleman, if I wanted to purchase his T-shirt. Kitchenslut politely declined .....

Note: The best right-wing-death-beast blogging on a loosely related theme from the rejuvenated Professor Bunyip: "There is a definite streak of truth, for example, in the old saw that many libertarian conservatives began their journeys to enlightenment not with Hayek in hand but with a bong."

Bob Katter's Nirvana

An excellent Op-Ed by Steven Rattner in the NY Times on the implications of ethanol subsidies as a public policy. In the US this means corn. Rattner outlines the damage caused by politics to promote ethanol and corn through Guvmint subsidies. (HT Greg Mankiw)

"FEELING the need for an example of government policy run amok? Look no further than the box of cornflakes on your kitchen shelf. In its myriad corn-related interventions, Washington has managed simultaneously to help drive up food prices and add tens of billions of dollars to the deficit, while arguably increasing energy use and harming the environment."

The gargantuan US Farm Bill provides all sorts of support subsidies including for not growing things: "corn growers receive “direct payments” — $1.75 billion in 2010 — whether they grow corn or not." Those with a literary inclination may recall the passage from Joseph Heller's Catch 22 where Major-Major's father was paid for not growing alfalfa and became an expert consulted by other farmers on how to profitably not grow alfalfa. Catch 22 was published in 1955 so not much has changed really.

It seems however from Rattner's Op-Ed that rising food prices and the US budget predicament may finally be drawing some critical attention to such subsidies. The US Farm Bill is also a mutually competitive reponse with the EU Common Agricultural Policy (CAP) which takes up 42% of the EU budget.

The French in particular have vigorously opposed any attempt to include agriculture in global trade reform. The advocates for such reform have been led by our very own eponymously named Cairns Group of agricultural exporting nations.

The Productivity Commission has just released their latest Trade and Assistance Review of all Guvmint industry assistance in Australia including agriculture.

Update: The first-ever official meeting of Ministers of Agriculture from G20 countries is being held in Paris on June 22-23

Wednesday, June 22, 2011

Trumped up Waffle?

Kitchenslut is frequently bemused by the vacuity within the 'business bulletins' from our very own home grown business guru Andrew Griffiths. None better than this weeks:

Everyone is talking about social media and its importance for communication, but it is such a big, daunting, complex topic that there is no wonder many businesses are struggling with integrating social media into their everyday communication. The reality is, if you aren’t confused by social media, you haven’t taken the time to understand what it can truly do for your business, meaning you have either put it to the side to ponder later, or it has gone into the too hard basket.
Two years ago I found out that more people use the internet for Facebook than they do for looking at porn. Clearly, something big was happening here. So, I took the time to get my head around the five main social media realms that I felt I needed to know more about : Blogging, Twitter, Facebook, You Tube and Linked In and I got well and truly confused. But over time, it started to make sense and that’s when I realised you need to push through the confusion state.
Interestingly enough, I found they could all be intertwined and utilised in a fairly effective way, which didn’t require huge amounts of time. And even more importantly, they all provided a way for me to communicate with my existing and potential customers in a very cost effective and time efficient way.
But, none of this matters if you don’t really understand or appreciate the importance of social media. We all need to be clear on the “why” of social media. The following presentation really sets the stage well. Now because it is a couple of years old, some of the statistics are a little outdated (they are even more impressive and compelling in 2011), but the core messages are extremely relevant today.
If you take a few seconds to flick through this presentation, I think you will get what social media is, as opposed to what it isn’t.

Clear as mud? If you were one of those not confused before you probably are now! Kitchenslut is damned pleased that he hasn't subjected himself to any Twitter from Griffiths, or any other such business guru for that matter, and notes the prominence of such as Donald Trump on Griffiths kitchily tabloid tackily cliched spruiker website.

Griffiths has been responsible for PR at CEC where the substance of corporate releases to ASX has drawn some comment. Kitchenslut Global Economics recommends Corpus Rios as a good site for genuine business people seeking substance. I'm sure there are a number of good local people who can advise on a social networking strategy.

Northern SEZ?

Front page at the Journal of Ignorance yesterday was the call for a Special Economic Zone in Northern Australia. "CAIRNS business leaders have described a renewed push for tax benefits and incentives to stimulate growth across northern Australia as a real boundary breaker"  trumpeted the Journal, which then followed up with just some vague general statements from Val Schier and Stewart Christie from Advance Cairns.

The call is part of the Northern Australia Project from the free market Institute of Public Affairs. Queensland Ecconomy Watch is sceptical: "Instead of carving out regions of Australia as low-tax, low-regulation zones, we should improve tax and regulatory policy settings across the whole country." One would have thought this approach more consistent with the usual ideology of the IPA.

Saturday, June 18, 2011

Warren Chifley bashes banks

The Feral Member for Leichhardt, a leading luminary in the socialist pork faction of the LNP, has blasted greedy banks for "interest gouging" and demanded a special moratorium for Cairns on loan to valuation ratios. Warren seems strangely unaware that the pricing of risk has changed following the GFC and with changes to bank regulation and capital requirements is not going to revert to what it was anytime soon.

Perhaps this partly explains the demise of CEC? Yet again, there is no policy idea for business finance except demanding a handout. We have previously posted on some of the policy and regulation issues re SME banking which would be a more constructive focus for Warren if he actually capable of understanding the situation.
Meanwhile, Stephen  Bartholomeusz at BusinessSpectator has noted "the Reserve Bank submission to the Senate inquiry into competition in banking last year showed that net interest margins remain within the range of 2.25 per cent to 2.5 per cent of what they were in pre-crisis. In the 1980s they were north of 5 per cent."

"The crisis has refocused banks everywhere, and their regulators, on the imperative of appropriately pricing risk and lending to businesses in a weak and volatile economy is risky."

"Assuming the ABA study is broadly in tune with the RBA’s findings, it would be useful if the politicians and other bank bashers thought about the evidence – or, when it comes to gouging, the lack of it – before embarking on any more populist "reforms"."

Among commentary at the Journal of Ignorance prolific ranter John Green has offered financial advice: "People wanting or thinking about purchasing commercial property in Cairns can contact me as I know the names of at lease(sic) 2 major bankers who are more than willing to lend here.There(sic) criteria has been similar for years,you need about 40% deposit and an encouraging valuation"

Perhaps John didn't read what Warren said because lending on these 'meagre' terms was exactly what he was complaining about: "Most major banks are now seeking 65 per cent or lower debt to equity ratios from their existing customers  ...... This is unconscionable and it is driven by greed and the banks’ desire to increase profits."

I wonder what John's qualifications are for such advice and services but do note the Journal do seem to have now removed an email address that was previously posted. Would you take property finance advice from a man who didn't at lease know his leasts?

Note: Bartholomeusz post was based on a survey by the Australian Bankers Association which showed that bank fees on households actually fell last year. This is supported by RBA data as posted by Peter Martin.

Update: Terry McCrann on the populist policy folly of banning mortgage exit fees.

Thursday, June 16, 2011

boys, girls and queensland unemployment

Queensland Economy Watch recently posted on the impact of tourism regions on unemployment stats for Queensland. KS was sceptical at the time given the far North is a relatively small proportion of Qld. However Gene Tunny is correct and if anything conservative after some excel spreadsheeting today! The Far North is indeed solely responsible for much of the divergence between Queensland stats and the rest of Oztralia. However!

As KS keeps banging on about there is a divergence twixt male and female unemployment! National male unemployment has moved significantly below female. National male unemployment is at 4.7% and female at 5.4%. This is the opposite of the Far North, and also not evident in much of Queensland where they are close to equal. This indicates not direct tourism so much, but rather construction in coastal areas.

The charts below plot National unemployment, Queensland unemployment, and Queensland ex the Far North. What is evident, even without the Far North, is that Qld has moved from below the National average to above. Effectively, Qld was pulling the National average down pre the GFC and has since moved to dragging it up. The Queensland trend ex- far North still significantly underperforms the rest of Australia over the time of the ABS data series.

Also apparent is that the trend improvement since the GFC peak is pretty much entirely in male employment, with female unemployment basically flat and with no indication of any down trend in Qld. At the peak unemployment in the Far North male unemployment here represented 19% of all unemployed males in Qld.

Also of note is that unemployment in the Far North was above the Qld average pre GFC despite a property boom and has been structurally higher throughout the cycle. 

Total Unemployment
 Boys Unemployment
 Girls Unemployment

Unemployment back up again!

Latest ABS unemployment stats for the Far North released today were disappointingly poor and revesed last months substantial falls, Headline unemployment jumped back above 10% with the total number employed down and the number unemployed up, with little change in participation rate. A 3 month moving average has been added to the chart this month to give more context to the volatility. ABS data appears to imply population growth around 1.4%

Kitchenslut's previous suggestion last month that the gap between the Far North and other queensland regions had closed appears to have now been blown away *sob*. Although there are also some high unemployment in some sectors around the Gold Coast, Sunshine Coast, and some Brisbane areas. Higher male unemployment remains a feature in the Far North which is the reverse of national data.

When it comes to unemployment data Ricardian Ambivalence has used Google insights to chart searches on 'unemployment benefits' which correlates closely with national unemployment data. RA suggests the national unemployment rate may be about to head lower based on this indicator, following recent flat data.

Wednesday, June 15, 2011

mortgage arrears

The Far North is ranked 19th on a list of regions ranked by dollar amount of 30+ day mortgage arrears. That may not sound good but is below many other Qld regions. Perhaps more significantly arrears in the Far North have increased much less in the past year than other regions such as Gold Coast, Ipswich, Wide Bay - Burnett, Sunshine Coast and Caboolture.

HT: macrobusiness

Queensland Budget

The Journal of Ignorance has several posts on yesterdays State budget and the Bogan King (or should that be 'King of the Bogans'?) reports that "the Budget featured about $3750 per capita spending on Far Northern residents, about $1000 more per capita than the southeast corner". Not enough for real estate spruiker Ross Moller who wants the $10,000 new home grant extended beyond six months just for the Far North.

The budget seems to have been generally well received, despite an increased deficit and debt, with optimistic forecasts on economic growth for the next two years coming from resources investment.

Queensland Economy Watch takes issue with the increase in stamp duty and notes that the Henry review was highly critical of this inefficient tax. Lower stamp duty may have been preferable and more efficient than home grants pork however State Guvmints are heavily dependant on property related taxes.

Far North Pork: Cairns, Mulgrave, Barron River.

Queensland budget website.  To be updated .......

Tuesday, June 14, 2011

Live Cattle Conundrum

KS hasn't seen the Four Corners program on cruelty to our live cattle exports at Indonesian abbattoirs. Agricultural exports to nearby populous and increasingly wealthy Asian nations is potentially a key growth industry for northern Australia. There has been plently of commentary around on this issue and impacts on the beef industry. An interesting alternative cattle industry perspective defending the Indonesian live trade today comes from an email doing the rounds from an industry insider and published at BusinessSpectator, linked here without comment.

I am asking for a fair go. You have been expertly manipulated. Hear the actual other side of the story let the Australian public see both sides. I am happy to make all the arrangements. This is too important to let sit with the images you portrayed on Monday without recourse. -Scot Braithwaite

Sunday, June 12, 2011

Katter Krude Ekonomiks

Productivity assessment of the cost of biofuels such as ethanol, espoused by Bob Katter, as a carbon abatement policy:

"In summary, while the results for biofuels vary, and are particularly sensitive to assumptions about life-cycle emissions  intensities, most biofuel policies are high-cost means of achieving abatement.  The cost per tonne of abatement — as measured by the implicit abatement subsidy — was typically A$300–600/t CO2 and possibly as high as A$800/t CO2."

Wednesday, June 8, 2011

foreign creep

The three-way tussle for Tully Sugar continues with the Tully board now recommending the bid from China's COFCO ahead of Bunge and Mackay Sugar unless there is a better offer before the bid closes.

Meanwhile, today Far North based MSF (Mulgrave, Sth Johnstone & Tableland mills) quietly released an announcement that Thai shareholder Mitr Phol had increased their stake via an equity derivative from 19.9% to 22%. The 'creep' provisions of takeover regulations allow a company to move beyond the 20% takeover threshold by acquiring up to an additional 3% every 6 months. Mitr Pol acquired their 19.9% stake from Guiness Peat Group in November last year.

MSF also informed the ASX that their registered office was now located in the thriving corporate centre of Gordonvale.

Tuesday, June 7, 2011

Redcape recapitalisation state of play

Australia's best forensic financial journalist, Bryan Frith, lays out the current state of play for Redcape (ex-Hedley) pub fund in The Australian.

"It is suggested that a recapitalisation would include a renounceable rights issue to existing unitholders, but with RPF units selling at only 16c it's doubtful whether the renunciation rights would provide much value. But, with the fund capitalised at only $26m, a large recapitalisation would require existing unitholders to either stump up significant additional equity or face drastic dilution of their investment."

As previously posted those unitholders include a number of local business identities with past links to Hedley and presumably a good number of smaller local investors and ex-employees, as well as the Hedley receiver.

Monday, June 6, 2011

tourism and unemployment?

Kitchenslut is currently diverted but hopes to return with more loose change next week. Meanwhile Queensland Economy Watch has posted on unemployment and tourism regions. Tourism is a key driver in the Far North however KS continues to maintain it has been overstated as the dominant cause of the building boom & bust 'Cairns Recession'. This has been covered in several previous posts. Kitchenslut will delve further into the numbers here at QEW and is sceptical of the large impact of the Far North on Queensland's unemployment rate but will refrain from comment until time permits proper analysis.

Meanwhile Macrobusiness has further commentary and charts .....