Wednesday, September 28, 2011

Qantas boosts regional airlinks

Additional Qantas flights in regional Queensland being widely reported today. The link from Moranbah through Townsville will provide immproved connections with the northern Bowen Basin coalfields for FIFO, business and tourism. Towns such as Moranbah are among the highest income postcodes in Australia, but Cairns has not previously been the easiest short break destination for miners.
Qantaslink has announced plans to base an additional two Boeing 717 jets in Brisbane to cope with Queensland’s mining boom.
The new 115 seat planes will commence service from early 2012 and increase services between Brisbane and Moranbah, as well as introduce a new route from Townsville to Moranbah.
The new services will provide better connections to Cairns and between North Queensland and the Bowen Basin coal fields.
The company has also announced the arrival of a smaller 74-seat aircraft to increase flights between Cairns and Weipa as well as improve Moranbah and Emerald services.

Sunday, September 25, 2011

Warren's corporate body inquiry

The Cairns Post has reported on the call by our Feral Member for an inquiry by the ACCC into body corporate strata insurance in tropical Queensland. KS has considered for some time that  there is indeed cause for inquiry into competition in the strata insurance market.

The actions of insurance giant Zurich had been highlighted; after coming into the Far North unit market and achieving local dominance by undercutting competitors, they have ramped up premiums by up to 800 per cent, Mr Entsch said.
As Body Corporate chair of his block KS is awaiting confirmation of insurance renewal this week. Previous insurance was indeed with Zurich, and last years premium was approx $9k for a building valued at $4.4 million. Zurich has now been rejected after a quote for renewal of @$31k. An increase of more than 200% this year and the insurance now also includes a $10 named cyclone excess! The preferred alternative quote does also come with the $10k excess on named cyclone events, and also a water damage excess, but is substantially lower.

Entsch seems to believe that Zurich has engaged in predatory pricing, however I suspect that would be difficult to sustain by the ACCC. Strata insurance is typically distributed through brokers and arranged by the body corporate manager. Typically 3 quotes will be supplied by the broker. One would have thought barriers to entry were quite low making predatory pricing a difficult strategy to sustain. Significant insurers have withdrawn recently from the market as premiums have been rising.

Suncorp have withdrawn from the strata insurance market in Queensland but their GIO subsidiary offers strata insurance throughout the rest of Australia (including NT). Large insurers such as Alliance and QBE are no longer quoting for this class of insurance in FNQ. Wesfarmers is also no longer issuing new business in FNQ.

The economics of strata living in tropical Queensland, are under some pressure with these cost increases. Some form of inquiry into the industry structure and marketing of strata insurance, and the current absence of competition in North Queensland, would be welcome.

Thursday, September 22, 2011

Are we in a Golden Age?

Worthwhile to repost from Club Troppo and Core Economics .......

Posted by Paul Frijters on Thursday, September 22, 2011

It is easy to become absorbed in particular problems and in the disaster stories that dominate the daily media. Climate change, natural disasters, wars in Africa and Asia, Financial Crises, riots and food price rises: you would be forgiven for thinking the world is going to the dogs. Is it really, however, or is that just the gloom you get from staring at the problems and not smelling the roses?
The major indicators of how we as humans are doing are smelling exceptionally rosy. We are living in a golden age of progress and opportunity for humanity. Let’s list some of the big changes in recent times:
  1. Life expectancy is going up by a lot. Whereas the average Australian would not have expected to see 50 in 1885, the average Australian now can expect to live beyond 80. The same trend goes for both developed and developing countries. For the world as a whole, the World Bank reports that life expectation has thus crept up from about 52 in 1960 to 69 in 2009. And the increase is greatest in poorer countries, so there is even increased equity in terms of life expectancy by country.
  2. There are more of us every year, but the numbers are stabilising. According to this source, we used to be with no more than 50 million some 3000 years ago, reached 1,5 billion in 1900, now count close to 7 billion, and can expect to be with close to 10 billion in 2050 after which a reduction is expected. Whilst the increased numbers, who can all expect to live longer than our ancestors ever could, is itself a sign of success, the expected peaking, due to reduced fertility levels virtually everywhere in the world, is also very good news because it means the old nightmare-scenario of a Malthusian melt-down is now highly unlikely.
  3. We are less and less violent. Trends in murders and homicide are at incredibly low levels from an historical point of view: whereas our hunter-gatherer ancestors were believed to kill off about 1 in a 100 every year, modern Western society sees one homicide per 10,000 as very violent, corresponding to exceptionally violent countries like the US. More normal levels are in the order of 2 per 100,000. Globally, the trends have even been going down in the last 10 years. Trends in armed conflict also speak of exceptionally peaceful times. The Upsalla Conflict Data Program thus collects statistics on how many combatants die in total in organised conflicts around the world. The basic facts are that the period just after WWII was easily 5 times as violent as the 1980s per capita, whilst the 2000s are easily twice less violent again than the 1980s. The trend for the last 10 years too has also been clearly downward in per capita terms.
  4. Less of us are poor and more have access to basic facilities (clean water, sanitation, literacy, etc.). Global output growth in 2011 is in the 2-3% range, the vast bulk of which in poorer countries. Great news for inequality reduction hence.
  5. We are getting happier as the poor amongst us are getting richer. As one can see from the World Value Survey, the relation between income and happiness is very robust by country and we furthermore know that countries who escape dire poverty also increase their happiness. So the world as a whole is almost certainly getting happier. Even within countries that are in an economic downturn like the US, the average life satisfaction is about as high as it was before the downturn.

The Entertainment Economy

Entertainment is somewhat topical following yesterdays controversial CRC on the Entertainment Precinct. This week also APRA (music not finance) released a report on the Economic contribution of the venue-based live music industry in Australia.

An interesting component of this was that the size of the live music economy in Queensland surpasssed Victoria. Queensland Economy Watch has speculated that this could be because of country music, a thought which caused KS some trauma! This is a breakdown of the data:

Pubs, clubs, bars, restaurants, cafes, and night clubs are the categories of live music venues covered in this report. This is ordinary suburban and street culture. There are clear differences between states. The NSW club industry is powerfully dominant in that state, as are pubs in Qld. Cultural differences and regulation clearly play a role here. Let's compare these numbers with population ......

              population      live music
NSW          32.4%        32.1%
VIC            24.8%        22.0%
QLD           20.2%        23.6%
WA            10.3%           9.0%
SA               7.4%          8.7%
TAS             2.3%          2.2%  
ACT            1.6%          1.1%
NT               1.0%          1.0%

The surprise here is surely Victoria, where Melbourne regards itself as the cultural hub of Australia, including live music. Something to look at is methodology. APRA (Australasian Performing Right Association) requisitioned this report through Ernst & Young: "For the purposes of the study the venue-based live music industry is defined as those hotels/bars, clubs, restaurants/cafes and nightclubs licensed with APRA that stage live music."  I wonder how extensive the licensing by APRA is, and how biased this is to larger venues?

Curiously,  Google throws up links from music industry sites (particularly Victoria) which make specific claims on this report to support smaller venues, and then specifically misrepresent that it relates to smaller venues. I don't see that this report does anything of the kind and possibly the opposite. Please note that I vociferously support smaller venues but that is not in this report?  What the report shows is support for large music venues in clubs and pubs likely to support APRA?

When it comes to entertainment, and topical issues,  this brings up gambling which gets not a single mention in the APRA report, despite the bulk of live music revenue outlined in the report coming from venues reliant on gambling revenue? Note: Interesting post on conflict between the two here.

It would be just as feasible to associate state differences with poker machines rather than country music .... although what really should be provoked is further genuine research?

Update: "The most popular genre of live music staged at the venues surveyed was rock/pop, accounting for 38.5% of respondents, followed by “all styles” with 31.4% and blues/roots/country with 13.9%.

Tuesday, September 20, 2011

Whitsunday woes

The Sunday Mail ran a feature on the woes of the Whitsundays which may makes Cairns look like a boom town. This has since been followed up at macrobusiness: beautiful one day, bust the next

"There are a couple of areas around Australia that I consider interesting microcosms of the risks of non-diversified long term investment portfolios. There are obviously some regions in Australia, such as mining towns, that are currently booming and you would probably be laughed at to suggest that these places are in danger of having their economies collapse which, at least for now, is the case.
Back in 2007 if you went to a place like Airlie Beach in North Queensland and made the same gloomy statements you would have received a similar laugh. Today, however, that is not the case."

This chart is from The Economic Importance of Tourism in Australia's Regions. Something to reference and come back to perhaps as there are some points deserving of discussion both in agreement and disagreement ......

build it and they will come ....

..... to Mt Isa? The North West Star has reported on the policy of Katter/Australian/Queensland Party leader Aidan McLindon to support the regions:
"Imagine what could be done in Rockhampton or Cairns or Mount Isa with thousands of millions of dollars." Mr McLindon said increased infrastructure spending outside cities would encourage population decentralisation.
Highly unlikely, rather a waste of funds that would make the pink batts scheme look like tuck shop money. Perhaps a politician should respect where people want to live rather than indulging in their own God Complex. McLindon then says:
"Brisbane won't be the livable city in 10 years because they just keep building more and more and they're going to end up gridlocked."
Well, if we spend all the money on infrastructure in Mt Isa that will probably be self-fulfilling for living standards in Brisbane, however no Guvmint would be likely to survive long enough for that to happen. A HUGE God Complex here.

Hardly surprising as it was McLindon who previously proposed moving all the poker machines in Qld to somewhere like Mareeba, or Innot Hot Springs, and creating a new Las Vegas to boost the Far North economy.

These people are seriously delusional and scarey!

Monday, September 19, 2011

northern foodbowl

Belated post from a prominent feature in The Oz on Coalition support for more dams and agriculture in Northern Australia. Apparently an exclusive to The Oz and surprisingly absent elsewhere in any coverage in the News Ltd stable in Queensland?

As suggested  on Media Watch tonight 'exclusive' seems to be synonymous media talk for a mutually concocted story. Never mind, most promisingly the lead from the Coalition side was at least from Andrew Robb, who said a few sensible things and at least the policy may not be an insensible capitulation to Bob Katter.

KS has also posted before on the potential for agriculture and that the Far North is not perfectly, but comparatively well positioned for gobal themes. This is in line with the recent presentation by Bill Cummings on the economic potential for agriculture.

Sadly, it also seems to be tied up in uncompromising partisan politics.

Wrong day stupid!

Along with some more antiquated shopping laws, the confluence of public holidays in Queensland into a concentrated period has always been an obvious no-brainer for change. So it was with a combination of both approval and despair that accompanied yesterdays announcement by Anna Bligh that the Guvmint would consider moving the Queens Birthday weekend. Wrong day stupid!

KS was beaten to the punch on this by Queensland Economy Watch: "I’m pleased to read the Government is reviewing Queensland’s productivity-sapping cluster of public holidays in the first half of the year and can only completely agree."

However, along with QEW surely it is blindingly obvious that it is Labour Day, coming in the middle of the 'public holiday season' and just a few days after Anzac day, that needs to move. The reason given by Bligh was that it wasn't the Queens real birthday. This sounds like a purely ideological decision. Perhaps she consulted Bill Ludwig first?

Apart from Queensland only the NT still has a public holiday for Labour Day at the beginning of May. All the others have moved this long ago. The sensible thing would be to follow NSW and move Labour Day to October to provide a better spread over the year.

Thursday, September 15, 2011

Far North unemployment plummets in August

The ABS regional labour force data is out today and the Far North stands out in recent weak data with a quite surprising fall in unemployment. The monthly unemployment rate fell from 8.2% to 6.5%. However, this was entirely due to a massive fall in female unemployment rate from 9.3% way down to 4.9%. In the space of a month this is almost certainly an anomaly and is again flagged with a sample size data warning from the ABS. The participation rate is relatively weak for FNQ but still in line with the rest of Qld.

Despite the monthly volatility, trend data does still remain positive. Last month we posted a comparative regional chart from Queensland Economy Watch and the relative trend there remains with the Gold Coast continuing to deteriorate. This latest stat is only the second time since the ABS series begain in 2007 that the Far North has posted a monthly unemployment below the Gold Coast, the other was July 2008. Far North unemployment has typically been above the Qld average and is now in the range relative to Qld and other regions typical back in 2008 before the unemployment spike.

Wednesday, September 14, 2011

Why Gavin King is NOT an economic Liberal?

"Authoritarian, centralist, a believer in Guvmint as the provider of solutions and a Cairns economy based on an outsized public service and military. I don't believe i have ever seen anything he has written that could be considered pro-market  ..... or even pro-business for that matter!?"

That was my comment to a friend today on news that our King Parrot would no longer be leaving his droppings at the Compost but rather aspiring to political office. KS intends to back this up at length with reference to writings recently questioning the Catholic DLP peasant economic philosophy of Tony Abbott,  as well as some work from one our brightest young economists Joshua Gans on the significant leftward shift in the economics of the (L?)iberal Party. 

So .... can anyone provide me with any reference to anything from Gavin King which can be regarded as economically Liberal ...... or even liberal? I can't find or recollect any?

more media criticism

Criticism of the media and its role has been politically prominent recently following the News Ltd scandal in the UK, and calls for an enquiry here. Adam Carr has taken a whack today at the role of the media in perpetuating a cycle of financial crisis: Circus Act.

Regular readers already know that I think low-quality journalism – when even facts can’t be reported accurately – is a key driver of this never-ending crisis and this has just been hammered home by recent events. If we are ever to contain this crisis, this is the problem that must be urgently addressed.
I mean, how can we have a free press when it’s been enslaved by deceit and stupidity? Journalists and economists, business people, lobby groups and the consultants they employ must not be able to just make alarmist drivel up. I’ve said it before, standards must be maintained, but they are not and this is a major contributor to our current woes – to the current crisis of confidence and in reality this is all we are experiencing.

There is apparently the prospect of a French bank taking legal action against the UK Daily Mail for blatantly false commentary.

Cairns Group Pessimism

KS has posted before on the Cairns Group which has just completed its annual meeting in Canada. The outcome could probably be described as a "frank assessment" for the prospects of the current Doha Round of World Trade negotiations. Agricultural trade reform would assist the potential for agricultural development in the Far North as recently featured in Bill Cummings presentation to Cairns Chamber.

"Cairns Group members unanimously agreed that only by adopting a fresh approach could the Round be saved," Dr Emerson said.

"And importantly, invited special guests, including the United States and the European Union, concurred."

Dr Emerson said Australia was willing to play a leading role in developing a new course for the Doha negotiations.

"You can't fix a problem unless you recognise you've got one, and the Cairns Group has pressed the alarm buzzer in the emergency ward," Dr Emerson said.

Proposals for a new course for the Doha Round will need to be discussed ahead of the annual meeting of World Trade Organization Ministers in Geneva in December.

Food security was also discussed at the Saskatoon meeting, with the Cairns Group agreeing that market mechanisms provided the best hope of matching world food supplies with rising demand from a strongly growing world population that would add two billion people to the earth by 2050.

"Already one billion people go to bed hungry every night and many will join them if we don't get this right," Dr Emerson said.

"The Cairns Group agreed that greater trade and investment flows among countries would increase global food production, while trade and investment barriers would deprive hundreds of millions of the world's poor of basic nutrition," Dr Emerson said.

The meeting agreed there was no better time to eliminate agricultural export subsidies and strictly limit farm subsidies, with budgetary pressures in the United States and Europe making farm subsidies legitimate candidates for spending cuts.

Monday, September 12, 2011

Cairns Chamber August Lunch Presentations

Had meant previously to post the annual presentations to the August Cairns Chamber of Commerce lunch by local economists Bill Cummings, and Rick Carr from HTW.

Trying to sort the best way to post these but here is presentation by Bill Cummings,  There may be updates with comments ..... or there may not  :-)

Queensland Unemployment

Christopher Joye has posted this graph from UBS on the impact of Queensland on the national unemployment stats.  Queensland Economy Watch has also recently posted on this and the effect of the participation rate. Regional unnemployment stats for August are released this Thursday and differences between regions will be of interest.

Sunday, September 11, 2011

Reading List: "Grand Pursuit: The Story of Economic Genius

The current book launch by Sylvia Naser, author of "A Beautiful Mind", is drawing some attention in prominent economic circles. Bloomberg are currently publishing a series of short extracts:

The Beautiful Minds That Created Modern Economics

Webb, Churchill and the Birth of the Welfare State

Keynes, Schumpeter and the Great Post-War Mistake

Fisher, the Crash and ‘Economics of the Whole’

Hayek, Keynes and preventing economic crises

When it comes to economic history there often appear black holes in memory of even recent events let alone those a century or more ago. An interesting chart of the very long term GDP share over some centuries should put the more recent growth in China and India in some perspective.

Many may not be aware that it is only in the last few decades that global trade has reached and surpassed the levels it reached pre- WW1. The export component of GDP in Victorian UK was astounding. A substantial component of more recent growth is in intra-Asian trade. That has correlated with a massive lift out of poverty in China and India. The link above on the 'Great Post-War Mistake' maybe relevant.

On that theme a comment from US liberal Democrat Keynesian Nobel laureate Paul Krugman: "The raw fact is that every successful example of economic development this past century--every case of a poor nation that worked its way up to a more or less decent, or at least dramatically better, standard of living--has taken place via globalization; that is, by producing for the world market rather than trying for self-sufficiency."

Given the overwhelming economic evidence, it becomes a moral question as much as economic? The case for protection and self-sufficiency is self-interested inhumanity?

Tuesday, September 6, 2011

Queensland housing finance from macrobusiness

The typically pessimistic macrobusiness have posted on the latest housing finance with particular relevance to Queensland.

In fact, month on month, only NSW and QLD grew, the former up 0.8% and the latter a huge 5%.  VIC was down slightly, SA was down 2.4% and WA was down 0.7%.
So, it’s also something of a QLD bounce this release. It was awful low.

That Queensland bounce comes from quite a slump, after a long boom, even relative to other states as can be seen in the chart from macrobusiness.


Entrance to Cairns RSL. I presume it relates to proposed pre-commitment for pokie gambling?

If ever there was an action that could be said to be ''un-Australian'', it's profiting from the addiction of gamblers and all the misery caused to them and their families. The killer statistic is this: according to the Productivity Commission, about 15 per cent of regular poker machine users contribute about 40 per cent of all the money put through pokies.
So the whole edifice of the licensed club industry rests heavily on the exploitation of a small minority of their own members. All the cheap meals and shows, all the grants to local sporting groups - much of that money is coming from the pockets of the spouses and children of problem gamblers.

“Grand Pursuit: The Story of Economic Genius”

Thursday, September 1, 2011

Local (Non)Sense

An excellent post at The Conversation from Maxwell Winchester, Senior lecturer, School of Hospitality, Tourism and Marketing at Victoria University. The Buy Australian theme is as similarly flawed as the 'buy local' theme prominent in Cairns.

"While such programs may have a slight impact on consumer preferences, the evidence is pretty clear that they do not make significant differences to market share of locally made products."

"Academic research suggests that consumers are more concerned about product quality and price than country of origin. So why do we expect them to buy Australian?"

"Australian companies who export are suffering enough; to ask them to lose more revenue to support other Australian businesses just won’t work."
A marketing strategy based on convincing locals to buy local per se is unlikely to be sustainable as a business strategy long term unless competitive on price and quality.