Saturday, June 30, 2012

Strata left to bleed

If cynicism can be excused there is a response of sorts from the Commonwealth Treasury on the recommendations of the parliamentary inquiry into strata insurance in FNQ:

Cairns Post: Probe into strata insurance hike gets federal government support
ABC: Treasury to probe insurance premiums spike

Contrary to what has been reported in the headlines this is actually not a positive outcome! Treasury has basically rejected almost everything proposed and after some months deferred to further analysis by its own actuary! So the can is kicked down the road again!

This does not reflect well on the political process or the participants. That includes the parliamentary committee, the Government, and particularly our own opposition member, Warren Entsch, who is exposed as simply illogical in his reported Cairns Post comments, and quite frankly is intellectually incapable of contributing to effective solutions!

Much to say on this to come with a deep spray deserved on ALL sides!

Run Wazza! Run! Oops, wrong door! Forrest Gump for Leichhardt?

Friday, June 29, 2012

fighting over the food bowl

Loose Change has posted before on the potential for agriculture in the Far North so it was interesting to see it appear in the weekend column of Paul Kelly, Editor-at-Large of The Australian: Abbotts Gamble on Cultural Change.  Kelly outlines the core philosophical agenda of the coalition including: "promote northern Australia as an export food bowl". The inclusion of northern agriculture related to the core coalition value of "green and red tape".

Environmental groups disagree with the proposal. However recent reports of their disagreement relate to an announcement earlier this month by Trade Minister Craig Emerson of a joint investigation with China into the feasibility of agricultural investment in the north.

This report in the AFR covers the debate, although reaches a generally negative conclusion:
"Our national psyche has been uneasy with the lack of development and population in Australia’s north since before federation. “Populate or perish” described our xenophobic fear of our overpopulated northern neighbours.
Now, in China’s state-owned corporations, we may finally have a partner with deep enough pockets to succeed where we have failed in countless attempts to establish large-scale agriculture across northern Australia.
In the past year, both major parties have turned their attention to agricultural development in the north. Last September Tony Abbott announced that if elected the Coalition would pursue an ambitious plan to double agricultural output by the middle of the century, through a network of new dams.
Now Labor has weighed in, with Craig Emerson launching a joint investigation with China into the feasibility of a northern food bowl."
"This is not to say that the only future for northern Australia is as a development free zone, but dreams of a food bowl to feed Asia are not supported by the science. It is almost guaranteed to be an expensive, taxpayer-funded environmental disaster."
There are many however who would differ from that conclusion. I suspect with no certainty that there is potential for expansion of agriculture in the Far North although maybe not to the extent some dream of? However, it's unlikely we will get an optimal outcome if it continues as part of a partisan values war.

To be continued .......


Sunday, June 24, 2012

Dwelling commencements down

Charting the weak dwelling unit commencement data this week from Mark the Graph:
"This week the ABS released its latest quarterly print for dwelling unit commencements. While all the trends are downwards, NSW appears to be in a particularly deep historical hole."
Queensland is not quite as bad as NSW but remains close to 30 year lows:

Meanwhile RPData have an interesting post that property owners are holding onto their homes for longer:
"Since the middle of the last decade the average hold period of homes has continually increased as affordability barriers and high exit costs result in owners holding on to their properties rather than buy new ones."
"Across Australia, the average hold period for a house is recorded at 9.0 years and at 7.7 years for a unit.  The average hold period has continued to increase over the past year, at the same time last year the hold period was recorded at 8.5 years for houses and 7.4 years for units.  The average hold period for houses and units was fairly static until late 2005 and actually declined during the 2001-04 property boom but it has since consistently increased."

There may be implications in that trend for state budgets which rely on property transaction taxes.

Saturday, June 23, 2012

The mathematics of scamming

A fascinating report in the New Yorker on those Nigerian scam emails following a recent quite wonkish paper which asked the question "Why do Nigerian scammers say they are from Nigeria?"
"Why not also pretend to be from a place that is not known for e-mail scams? Why don’t they make the whole scheme seem a little less ridiculous at the outset?"
"The report’s answer, which involves a lot of math, is fairly simple: scammers only want really gullible people to respond to their initial query. These scams are complicated—they involve lots of negotiations, charm, and conning. Many of them fall through. If Mr. Mutumba sends out fifty thousand e-mails, it’s going to make his life much easier if his claim is so ridiculous—and so easy to debunk through Bing or Google—that only ten, and not a hundred, potential suckers respond. Scammers, like the rest of us, have other stuff to do. Or as the report, which is packed with charts, says, “For a single attacker the return is given by (1). This is maximized when dE{R}=dfp = 0.”"
I guess the same would apply to the more common 'get-rich-quick' and 'seminar spruiker' schemes. These are still frequently advertised here in Cairns and elsewhere, usually depending on what is currently 'hot' whether it be property or currency trading. Again, the advertising claims are such that most people would be immediately sceptical and not respond. The usual follow up is some form of free seminar.

Mining towns in the past have been a strong focus for this kind of activity with high incomes not necessarily matched by financial sophistication. My own experience in CQ some years ago now included an entire dozer team with investments funded by substantial foreign currency loans, and a mine where many workers were attempting to wipe out all their tax with ti-tree schemes. Both these later came unstuck.

I wonder what are the current investment preferences in the booming mining towns?


Thursday, June 21, 2012

Oy vey!

I don't wish to digress into grubby pollytics but a facebook post by the new member for Cairns and former Cairns Post "Editor-at-Large", Gavin King, has exposed the most astounding sensitivity and  hypocrisy.
Just a quick correction of fact needed regarding The Cairns Post's turtle & dugong story today. We made the policy announcement on this way back in September last year, not March as printed in today's story. We didn't just do this in response to TV footage days before the election (as printed today) - it's been our commitment to act for a very long time on an issue that Labor ignored and dismissed for years while they were in government.

I know newspapers are doing it tough with cutbacks and job losses at the moment but it should be standard practise that basic facts are checked before printing.
I confess that my antipathy for the King Parrot is such that it has formed a barrier to my ability to support a party which was once my usual inclination. The particular article which provoked rebuke was all positive for the King Parrot and, in context of the debate timeline, the issue contended is trivial.

However, this is not the first time in just a few months since departing his previous career in tabloid journalism that the King Parrot has fired a shot at his old comrades. The suggestion that he somehow adopted some kind of pristine higher standards as a journalist is just laughable as was previously posted at Loose Change: Black Holes and Supernovas.  

This was where King falsely stated, in an abusive way, from his tabloid tower, untruthful Council rate increases which could only be explained by either deliberate misrepresentation or substantial inumeracy! His claim of a minimum 15% rate increase was impossible even as a maximum except in the most rare extreme individual circumstance!

So much for his "the standard practice that basic facts are checked before printing". Perhaps the Cairns Post should start to abide by the Press Council code and start publishing appropriate corrections for previous errors from Gavin King?

Note: Gavin King was notified at least twice of this profound error and his choice of response was accusation of iliteracy for a typo ......

I think Clive James just said it all and more for me with a powerful performance?

Census 2011

The first data from last years Census has been released today by the ABS. Quickstats is a simple tool to search basic data by statistical areas with a snapshot of some of the basic details for Cairns below.  The Quickstats search does also include more detailed data and charts for the various categories than shown here.

Full details to enable better regional comparisons wont be available for a few months but perhaps of most note is that the median weekly household incomes for the region look weak. For the Cairns Council area in 2006 the median household income was $1,051 compared to Australia at $1,027.  In 2011 this was $1,145 compared to $1,235 for Australia. Albeit there has been a council amalgamation in that period. Update: In 2006 Douglas Shire was quite low at $984 although comprises less than 10% of the amalgamated council area so nowhere near enough to hide the decline.

2011 Census QuickStats

All people - usual residents

Australia | Queensland | Local Government Areas

Cairns (R)

Code LGA32070 (LGA)

People 156,169
Male 77,553
Female 78,616
Median age 36

Families 40,235
Average children per family 1.9

All private dwellings 70,707
Average people per household 2.5
Median weekly household income $1,145
Median monthly mortgage repayments $1,733
Median weekly rent $250
Average motor vehicles per dwelling 1.6
Community profile

Tuesday, June 19, 2012

Cairns tourism demands more red tape?

There was a recent report in the Cairns Post, with lively comments, on the always controversial topic of tour desk commissions. The report relates to an issues discussion paper that has been released by DEEDI and prepared by Tourism Services Pty Ltd: Review of Tour Desk Commissions.

Most of the media reports and commentary seem to focus on issues of regulation and licencing to an almost disillusioning degree. Only a few months ago business surveys in Cairns said that 'red tape' was the biggest problem!? I'm not sure how a licence is supposed to solve the principal issue, which was supposed to be the cost of tourism product for the consumer? The discussion paper itself suggests that it would be a difficult business to licence and so regulate.
"There are no precise numbers of distributors operating in each Queensland destination. Operators in Cairns estimate that there are 800 tour desks between Mission Beach and Cape Tribulation. One operator advises that their sales representatives service 450 local tour desks. In Airlie Beach, one operator estimates there are 70 tour desks in town with 12 located in shops along two blocks of the main street. One Gold Coast operator estimates there are 600 tour desks on the coast. One operator’s sales staff service 200 Gold Coast tour desks. At a rough estimate, there would probably be close to 5,000 businesses in the state that would operate as tour desks."
"A rough estimate is that there would be at least 4,000 to 5,000 tour desks in Queensland that would have to become licenced and some government policing mechanisms and resources would be necessary to ensure compliance."
There are also suggestions of behaviour which should rightly attract the attention of the ACCC. There are comparisons with such as real estate agents and financial planners. These are hardly areas where commission regulation has proven effective. The word 'competition' appears only five times in the discussion paper so perhaps it should be expected that the key discussion issue was mostly neglected:
This approach is multi-faceted, and involves changes to industry practice and industry self-regulation; with strong government support. It includes:Operators providing net rates to distributors and scrapping current commission arrangements; Moving away from parity of pricing to dynamic consumer pricing for all tourism products; Developing cooperative, destination-based, inventory/pricing/yield management systems for all operators to use
This approach addresses other structural issues within the industry and provides opportunities for operators to better control distribution and manage their yields more effectively; thus assisting increased profitability and increased reinvestment in product quality and service.
The context is that this aligns with the way other consumer choice and marketing has developed, particularly such as air travel:
It proposes that the current practice of parity of consumer pricing, regardless of the location, time and method of purchase, be dismantled. This practice is now unique to only some tourism products and is out of sync with the dynamic nature of current consumer purchasing practices.
Operators would offer net rates to distributors; different net rates to different types of distributors if necessary; and allow distributors to sell products for whatever prices they choose. This would increase consumer competition and distributors would compete for business on their own terms (and on their own margins).
Consumers would have choices of when, where and how to purchase tourism products, just like all other products; and their decisions on purchase timing, location and method could influence the price they pay. This is not something new to consumers. They currently have these choices for air travel, accommodation and for all other purchases – fruit and vegetables, TV sets, computers, clothes, etc.
Regardless of that, in the Cairns Post report both the CEO of Quicksilver and Col Mackenzie appear to dissent in favour of a licence and commission regulation? A previous media report suggested that online tour bookings were growing but obviously not yet to an extent to challenge tour desks distribution power and pricing. There are many innovations happening such as this posted at Springwise recently in Madrid for rental of pre-loaded ipads.

Interesting to think about in comparisons to media upheavals and changes at Fairfax this week. I was actually surprised by this chart on the rapid descent of print advertising in the USA rather than a long slow erosion from online competition. Something to think about for tour desk distribution? In the end the world will not give you a choice.

China flights

Business Spectator has a post today on discussions for direct flights from China: China Eastern mulling flights to Cairns.
Chinese carrier China Eastern is in talks with Cairns airport over potential plans to enter the Queensland market, including offering at least twice weekly services to Cairns, according to The Australian.
The newspaper reports that China Eastern, which already runs services in Shanghai to Sydney and Melbourne, is in advanced negotiations with Tourism Australia on the deal.
China Eastern chairman Liu Shaoyang, Tourism Australia chairman Geoff Dixon and chief executive Andrew McEvoy met earlier this month in China.

Talks centred on the service being operated seasonally, from November to March, according to The Australian.
A seasonal service between November and March is interesting if correct as it would be counter-seasonal, so to speak, although does include the Chinese New Year period. 

Coffee High & Low

Interesting to see this story in the Cairns Post reporting a good coffee harvest on the Tableland.
"COFFEE producers on the Tableland are expecting an excellent crop due to ideal growing conditions earlier in the year."
"Both Skybury and Jaques have planted a large number of new trees in recent years which will start to produce coffee beans in commercial quantities from next year."
The explosion of coffee culture in recent years extends the importance of the Far North coffee industry well beyond agriculture as a key component of the growing food tourism sector. Coffee is second only to oil as the most traded commmodity in the world by value. However, global coffee prices have been falling recently after a strong run in previous years.

Sunday, June 17, 2012

Audit Commission Report

The Queensland Audit Commission report attracted the expected media headlines but so far not much analytical comment. There are a couple of comments at Queensland Economy Watch and also this commentary with an incisive opening paragraph:
"The case for fiscal consolidation in Queensland was already strong, but the Commission of Audit just couldn't resist overstating it."
....... and concludes with:
"As such, the historical trends scenario was no more than a rhetorical flourish.
But it was a flourish that made it absolutely clear that the report, which called for tight control of public sector wage costs and sales of public assets to pay off debt, was above all a political document.
And that's a shame, because the flames of concern over Queensland's financial situation could have been fanned perfectly well with a bland recitation of the facts."
Much in the roport was to be expected particularly on public sector wage costs which  have also been a focus in NSW and Victoria. Also something noted here previously with regard to the Council budget which was similarly identified in a QTC report. There were a few interesting things on the revenue side, first up being a recommendation for a levy on all rateable properties.
The Commission recommends that the Government consider a general contribution
to the deficit reduction task from the broad section of the community who are owners
of either residential or commercial property.
A temporary deficit reduction levy applied to all rateable properties would raise
approximately $200 million per annum for every $100 of levy.
By applying to all ratepayers, the amount of the levy would be minimised.
While the levy would apply at the same rate across all properties, irrespective of
value, it will be progressive in that multiple property owners will pay the levy multiple
The cheapest bedsitter unit paying the same as the grandest mansion would seem to challenge the concept of progressive taxation. However, I don't want to be accused of starting a class war on Frank Lowy! It's also only temporary which doesn't seem totally consistent with structural fiscal reform.

Perhaps Costello had his eye on the subsequent recommendation for broader land taxes? Land taxes were a key part of the Henry tax review. Mind you, wouldn't be doing myself any favours here with my own position to support a land tax if it was applied to a principal residence, but that also relates to the problem that the land valuation system is not as theoretically robust as Ken Henry may have imagined.

Update: Courtesy of a Possum Comitatus tweet a link to this blog on Queensland's finances apparently from a former senior bureaucrat.

Thursday, June 14, 2012

unusually consistent unemployment

The typically volatile ABS regional employment data has displayed an unusual consistency in recent months with no real change in any of the Far North stats for May. The unemployment rate remains the highest in the state at 9.1%. However at least the Far North participation rate remains in line with state averages compared to laggards such as Wide Bay-Burnett where an 8% unemployment rate coincides with a participation rate of just 58%.

AEC confirms no mass depopulation of far north

The AEC has released updated enrolment numbers as at the end of May. Leichhardt now has 95,872 voters on the electoral roll. This is an increase of 2,759  in the 21 months or so since the 2010 federal election, an increase of 2.9% in that period.

Comparisons can't be made prior to 2010 because of a redistribution when an extra electorate was created in Queensland and lucky punters around Edmonton and Kuranda were moved to Katter Kountry. Both Leichhardt and Kennedy are above the average divisional enrolment.

ABS monthly employment data seems to imply growth in the working age population somewhere between 1.1% p.a to 1.4% p.a. in that period. I think the first release of data from last years census is scheduled by ABS next week?

Tuesday, June 12, 2012

More on queensland's debt

Following my previous post on unsustainable debt, Queensland Economy Watch has a good post on a media report of a potential downgrade to Queensland's credit rating by Fitch. Gene refers to the Fitch  outlook as "bizarre" and concludes: 
"The Under-Treasurer should pick up the phone to Fitch and tell them to re-assess their rating or they won’t have any credibility in the future whatsoever."

The rating agencies have come in for a lot of criticism post the GFC and the comments from Gene are mild compared to recent remarks from ICAP economist Adam Carr writing at Business Spectator:
"The surprise obviously is that the ratings agencies are still in business and that anything they say is news. They do help keep the fear alive, I guess and fear, as we know, helps keep treasury yields low. So they are good for something then, if not ratings."

Carr has previously suggested that such ratings announcements seem to coincide reactively with PR opportunities for the agencies to mainatain relevance. This makes the timing of this Queensland report interesting, with the audit commission report due and before a budget, or am I too cynical?  It is interesting that QTC make no reference to Fitch on their website with only Moodys and S&P listed.

Also alluded to by Carr was what was suggested by my previous post, that well rated bond yields are historically low and have been falling. The risks suggested by Fitch (China & europe) would also likely imply continued historically low bond yields. It is interesting even today Tim Nicholls being quoted talking of "debt crisis" and higher funding costs at a time when his bond yields have been hitting record lows.

That doesn't mean I would not prefer that Queensland's fiscal position was stronger and debt lower which does warrant a policy response. However, an unsustainable "debt crisis" and the apparently common perception that Queensland is "broke" are misplaced.

To maintain an appropriate perspective below are the ratings definitions from Standard & Poors who maintain their Queensland rating currently at AA+ and outlook stable. The definition of "very strong capacity to meet financial commitments" is not consistent with "unsustainable" or "broke".

‘AAA’—Extremely strong capacity to meet financial commitments. Highest Rating.
‘AA’—Very strong capacity to meet financial commitments.
‘A’—Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.
‘BBB’—Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
‘BBB-‘—Considered lowest investment grade by market participants.
‘BB+’—Considered highest speculative grade by market participants.
‘BB’—Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.
‘B’—More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
‘CCC’—Currently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.
‘CC’—Currently highly vulnerable.
‘C’—Currently highly vulnerable obligations and other defined circumstances.
‘D’—Payment default on financial commitments.
Update 22/6: David Bassanese at AFR seems to agree: Governments' war on debt defies reason


Saturday, June 9, 2012

PNG High Rollin'

A report from Reef Casino last year referenced their strategy to promote the PNG high roller market. Reef also reported a higher than theoretical win rate from its high roller business. The idea of a high roller market from PNG may seem incongruous but perhaps an incident at Star Casino in Sydney last year provides some insight.

A gentleman from PNG was asked to leave the high roller area for allegedly being intoxicated and requesting sex from a blackjack dealer. It was alleged that the casino then allowed him back in when it was revealed he had $800,000 in a gambling account at the casino. The gentleman concerned was Belden Namah who happens to be Deputy Prime Minister of PNG.

Corruption in PNG is endemic and Namah has come in for his share of allegations. No suggestion is made of anything improper at Reef Casino. The casino is critical tourism infrastructure and has attracted favourable comment here as a well run business. Neither does it suggest that the PNG high roller business is entirely related to political corruption with extremes of unequal wealth being created by resources development.

However, perhaps there should be some circumspection around the close links between Cairns and PNG. Given those links there is a history of Cairns being associated with corruption allegations in PNG, including property deals by Sir Michael Somare and other politicians. There has also been a suggestion of bribes channeled into PNG from Singapore via the Cairns branch of an Australian bank.

In this context the report yesterday of customs cuts including Cairns and T.I. is of related interest. Business groups have been calling for visa requiremnents for PNG to be relaxed. Also yesterday there is a report of increased tourism links.

PNG is a key strategic component for diversification of the Cairns economy and with an election this month political stability in PNG is very much in our interest.

Update: Interesting what comes through in a timely way on a Sunday morning with this being posted from Sean Dorney, the veteran ABC correspondent in Port Moresby on visa policy, with a promise from Julie Bishop to relax standards. There is also a recent speech from Dorney on corruption and journalism.

Thursday, June 7, 2012

Mug investors buy up unsustainable queensland debt

Over at Cairnsblog, Mike has pursued the prevailing unhinged populism on the pagan evils of all and any debt by posting a parliamentary question time performance from new Treasurer Tim Nicholls:

"Feedback from QTC's recent financial markets interactions indicates that market participants consider the State's fiscal position to be unsustainable and are looking for the Government to deliver a credible strategy to address the State's level of debt and ongoing budget deficits as a matter of priority"
Nicholls apparently did not table direct advice from QTC on "unsustainable" debt? So what of the actual market behaviour of recent market participants? QTC released its weekly market update on Monday which included this chart reflecting the actual bahaviour of market participants with real money on the table rather than seeking media attention:

Note here Queensland bond rates have been plummeting which is hardly reflective of a perception by investors of an unsustainable debt or fiscal position. Actually the reverse, as QTC also noted in the latest weekly update issued only this Monday:

Another week has passed and yet again long-term global, Australian Government and QTC bond yields have fallen to record low levels as investors continue to flock to the safety of selected government bond markets.
What's that? The market is buying up all it can get of "unsustainable" debt in Queensland? Ah Queensland, safe haven one day, unsustainable the next?