Thursday, May 30, 2013

A kick in the teeth?

Following my latest rant on insurance and stamp duty it is interesting to observe the different reporting by our News Ltd stable mates the Cairns Post and Townsville Bulletin.

The Townsville Bulletin reported specifically on the insurance stamp duty impact on the region with local comment, including the member for Leichhardt, and a front page headline "Kick in the teeth": Stamp duty hike to add to insurance premium woes.


Meanwhile the Cairns Post could only manage a page 7 general report on budget proposals sourced from the Courier-Mail and no local comment or perspective while repeating the $25 stamp duty PR spin not relevant to Cairns: $600 slug to annual household expenses.

Update: The Townsville Bulletin continues to run with this posting another report today featuring criticism of the stamp duty raid by our Federal Leichhardt MP: State MP's urged to 'step up' on insurance
THE North's Coalition MPs appear to be running for cover after their federal counterpart Warren Entsch described the State's planned insurance tax hikes as a "retrograde step".
Mr Entsch also put the lie to Treasurer Tim Nicholls' claim the duty increase from 7.5 to 9 per cent on general insurance would only cost people $25 a year.

Still nothing at the Cairns Post perhaps it is buried somewhere in the hard copy? Surely a split between the State and Federal Cairns LNP members on a significant issue should be news in Cairns?

Mungalli still going strong

An interesting report at the Townsville Bulletin on diversification by Mungalli Creek Dairy: Dairy has a crack at organic eggs.

What was perhaps more interesting were the comments on the dairy business:

Mr Watson first marketed the Mungalli Creek brand in 2000 and with the business now turning over more than $7 million a year, he hasn't looked back.

He said the milk wars between the big supermarkets worked in his favour and people were actively seeking the Mungalli product.

Mungalli should probably be regarded as the Far North's premier regional food brand and seems to have thrived despite the pressures afflicting the tableland dairy industry.

A new normal?

A recent report from Pimco on the outlook for Australia after the mining investment boom peak has attracted some interest: Filling the hole Australia has dug

Pimco have estimated that the neutral cash rate for the RBA has fallen from 5.5% pre-GFC to 3% and so the current 2.75% cash rate is not "meaningfully easy". This also seems to be close to the assessment of the RBA as recently posted here at Loose Change when there were screams that interest rates had been cut to crisis levels: OMFG!

Rather than crisis levels Pimco have suggested that we are converging with the rest of the developed world in a 'New Normal':
After avoiding the worst of the ravages of the global financial crisis with the aid of significant policy stimulus from China that helped boost demand for bulk commodity exports, Australia has so far escaped the clutches of the global New Normal. However, as domestic growth outside the mining sector remains subdued and Australian policy rates appear likely to converge towards their global peers’, we believe the New Normal has finally arrived down under.
There are some similar themes in a post at the new Grogonomics blog: Five myths of the Australian economy. Meanwhile Queensland Economy Watch has posted that resources related construction in Qld remains robust for now: Resources sector investment hasn't peaked yet in Queensland.

Wednesday, May 29, 2013

Regional Profiles

Just a rushed quick post. ABS released national regional profiles 2007 - 2011 this week which include excel downloads and maybe worth a look.

National Regional Profile: Cairns (R) (Local Government Area)

Data is also available for SA2/SA3/SA4.

Tuesday, May 28, 2013

Insurance 'king hit' for FNQ

Treasurer Tim Nicholls has been releasing some of the nastier details to soften up the blows ahead of this weeks Queensland budget. A curious aspect of this has been the use of twitter where some stuff appeared even before the official media releases. The biggest item was an increase in the stamp duty on insurance form 7.5% to 9%.

Insurance stamp duty is regarded as one of the more inefficient taxes and Queensland Economy Watch has a good post on this which I will come back to: Government has to rely on inefficient taxes to fix budget – GST reform needed.

FNQ has been particularly hit by insurance premium hikes in recent years. Treasurer Tim's PR spin included the following:
On a policy for a $300,000 home with $75,000 contents the increase will be $25 per year.
So I looked online for a standard quote from Suncorp based on that criteria for the 4870 postcode in leafy flood-free suburban Freshwater and was supplied with a premium of more than $4,000! That would imply a premium and nominal increase more than double the unspecified location of Treasurer Tim!

Update: I also did a Suncorp insurance quote for an address in Taringa which I thought may be a reasonable Brisbane comparison with Freshwater if that matters on the exact same criteria. The quote was just $1,600 which would approximately correlate with the $25 increase in the PR spin.

The $25 is presumably also based on no increase in the insurance premium. However, as we know premiums everywhere have been increasing above CPI in recent years and the increase of 1.5 percentage points, from 7.5% to 9.0% on the premium, is an increase of 20% in the stamp duty you pay. So if your base premium has gone up by 10% you will actually end up paying 32% more stamp duty than last year.

Assume a property where the base insurance premium was $10,000 (inc GST). Stamp duty on this at 7.5% would be $750. An increase in in the stamp duty to 9% of the premium would increase the stamp duty by 20% to $900. However if your base premium has gone up 10% to $11,000 then your stamp duty contribution will now be $990. An increase of 32% over the previous year!

I used $10,000 because the premium for my own strata property was below that as recently as the 2010 renewal and has since increased approximately 200% in two years. There have been larger numbers reported but my guess is that is somewhere close to typical in FNQ strata. That 200% increase will now translate into a 260% increase in my stamp duty contribution to the treasury tin since FY2011.

Perhaps that is why Treasurer Tim is keen on such an inefficient tax, which would also appear to have adverse regional consequences including FNQ? Somewhat hypocritically Treasurer Tim was concerned by such stamp duty issues back in 2011 when in opposition:

Queensland’s Treasury cupboard is bare after 20 years of Labor mismanagement and the extra $44 million the Bligh government will rake in on higher insurance policies following the floods and cyclone will impose even higher costs on families.
Revenue measures will also include an expansion of the fire levy. This is a flat rate on every rateable property and as such is highly regressive with the smallest bed sitter paying the same charge as a five bedroom house, or Clive Palmer's mansion. There have been interesting moves here in NSW and Victoria where both Liberal governments have moved to base their equivalent levy on property valuations.

Property valuation based levies could be considered a small step towards broader land taxes. This was suggested in the interim Costello report before revenue measures went AWOL in the final document. Land taxes also featured in recommendation of the Henry Tax Review.

Queensland Economy Watch has suggested "State Governments will keep using inefficient tax measures in the future because they really don’t have much choice". When it comes to measures that are available Treasurer Tim seems to be falling short?

Thursday, May 23, 2013

Car Crash!

Well,  announcement by Ford that they are exiting vehicle manufacture certainly has been front and centre of commentary today! I think the best I can do on that is link to a couple of papers and posts to consider.

Gene Tunny at Queensland Economy Watch has previously published on the car industry in a widely cited paper:

Nicholas Gruen has also posted on this last year:

Gruen was previously advisor to diminutive Industry Minister John Button in the Hawke Gummint in an era when industry policies particularly for the car industry were front and centre!

My recollection of the 1991 recession which hit hardest in Victoria, and particularly Geelong, was that it induced interstate migration to Queensland. Could it happen again?

Tuesday, May 21, 2013

Sugar Shenanigans

Shenanigans in sugar milling and marketing just keep on trucking apparently, along with the cane itself which may also be trucking down the range from Tablelands to Mossman. That follows a decision by growers to ditch the MSF Tablelands mill in favour of the Mossman marketing arrangements with Queensland Sugar Ltd (QSL).

The last post on this, sugar marketing conundrum, suggested that this didn't really seem to make sense, at least for the reasons that had been stated by the growers. The MSF Tableland is owned by Thailand's Mitr Phol which has the largest presence in FNQ including the Mulgrave and South Johnstone mills. Historically QSL was previously the monopoly single-desk marketing body in the state.

This saga took a new twist today when ABC Far Out revealed leaked documents suggesting previously unrevealed negotiations between QSL and Wilmar International: Secret sugar selling plan revealed:

It's the document Queensland Sugar Limited admits it would rather you didn't know about.

A confidential marketing agreement which shows QSL has been negotiating a plan which would have delivered full control of Australia's export sugar to the multinational giant, Wilmar. 

Wilmar established a leading position in Australian sugar through a takeover of Sucrogen, previously the sugar division of CSR, and boasts to be Asia's leading agribusiness group. The Financial Times reported this month: Wilmar joins the sugar big league

Among the commodities trading houses which took delivery of the largest amount of sugar on record on the ICE futures exchange in New York last week, one name stood out.
Wilmar International, better known in the industry as the world’s leading producer and trader of palm oil, was a receiver of sugar along with leading agricultural commodities trading houses Cargill and Bunge. Louis Dreyfus Commodities, Noble Group and Sucres & Denrées were on the delivery side.

The presence of Singapore-based Wilmar shows how the trading house, under the direction of Jean-Luc Bohbot, who moved from Sucres & Denrées, has become a key player in the highly competitive sugar market almost overnight.

Mr Bohbot, whom one seasoned market participant describes as “the smartest trader in the sugar business by far”, built up Wilmar’s sugar trading operations from almost nothing after joining in 2011. Today, the company has businesses along the entire sugar supply chain. Mr Bohbot says that Wilmar is the only leading sugar trading operation with “a large exposure to production, refining, trading and distribution”.

Who would have thought sugar milling and marketing could be filled with such mystery and intrigue? Meanwhile growers may at least be thankful for a lower $AUD as sugar prices continue the downward momentum recent months..

Update: Far North Rural Report Wednesday 22 May

How relevant business starts & exits data?

 The ABS has today posted an analysis of business starts and exits between 2008 and 2012 based, I think, on ABN data. Sadly it is only in PDF rather than an excel download! However, when it comes to state divergences:

! The state with the highest number of businesses operating in 2011–12 was New South Wales (710,733). This was followed by Victoria (551,220), Queensland (428,515), Western Australia (221,918), South Australia (148,138), Tasmania (38,658), the Australian Capital Territory (26,016) and the Northern Territory (14,669).

! The largest increase in businesses for a single state was in Victoria (7,291). This was followed by New South Wales (3,849).

! The largest decrease in businesses for a single state was in Queensland (–2,032). This was followed by Western Australia (–771).
! The highest entry rate for a single state was in the Australian Capital Territory (15.7%). This was followed by the Northern Territory (15.0%).

! The highest exit rate for a single state was in the Australian Capital Territory (14.1%). This was followed by Queensland (14.0%).

! Of the businesses operating in June 2008, the highest survival rate in June 2012

was seen in Tasmania (65.6%) and South Australia (64.7%). The lowest survival rate was seen in the Australian Capital Territory (59.0%)
Queensland showed the largest decrease of any state in the year to June 30, 2012. However it is interesting that the boom state of W.A. also declined over the year. Also, over the 4 year period the highest survival rate was in the economically languishing Tassie!
As previously posted on bankruptcy data one needs to be careful in interpreting this kind of data: Liars, Damned liars & Steve Lewis


Friday, May 17, 2013

Three hypocrits of the apocalypse

There were three particular people who got up my goat during budget week! Coming soon perhaps when other objectives are fulfilled:

1)  David Murray: Ex CEO of CBA
2)  Don Argus: Ex CEO of NAB
3)  Warren Entsch: Ex Chairman of CEC, once upon a time the largest property group in Cairns

Meanwhile an entertaining take on the business response to the budget from Michael West:

We fight them in the brasseries. We fight them on the golf course. We fight them in the Qantas Lounge!
In the early days of the Hawke Government it was John Leard , the CEO of ANI, who attracted much attention as a business critic and many of his criticisms could almost transcend 28 years?

Thursday, May 16, 2013

Regional Lottery Results

The regional lottery results, otherwise known as the ABS regional employment data, have been released for April. Trends in the Far North remain positive and I will defer to the Conus Blog for a sensible analysis of the results:
As always, we must caution against reading too much into these un-adjusted figures. Our own Conus Trend data supports the positive news however, with Trend unemployment now at 7.4% (with substantial downward revisions to previous months which sees March Trend unemployment rate fall from 7.7% to 7.3%). Trend unemployment in the region has now fallen from 9.8% in the past 7 months. Our Seasonally adjusted unemployment rate has fallen sharply to 7.2% (from an unrevised 7.8% in March).
However, the clear winner of this months Queensland regional lottery was West Moreton where unemployment fell to just 3.7%, the lowest in Qld, from 8.9% last month. Sunshine Coast unemployment also starred with a big fall to match the 3.7% rate from 6.9% last month, albeit with a relatively low participation rate and estimated employment below levels a year ago. There is a rumour that the tooth fairy lives in Mooloolaba and her household may have been surveyed by ABS last month?

Craig James from Commsec has compiled a list of the highest and lowest unemployment rate regions in Australia from the ABS data, as reported at the SMH. West Moreton and Sunshine Coast both appear in the lowest 15 whereas last month both would have been candidates for the highest 15.

The unemployment rate ... NSW regions have some of the lowest jobless rates in Australia.

Friday, May 10, 2013

PNG crime links to Cairns?

Only a month ago I posted on the darker aspects of the links between PNG and Cairns: PNG investors roll into Cairns. Last night a tweet was noted from the Cairns WIN news reporter with politicians and business lobbying for relaxed visa requirements with PNG.

Sarah Greenhalgh @GreenhalghSarah               
MP's urging the PM to consider a visa overhaul during her visit to , starting tonight. How would it benefit? Details
So with perfect timing this appeared in today's Brisbane Times: PNG graft suspect avoids arrest in Cairns on 457 visa; which includes:
"An alleged crime boss wanted in Papua New Guinea over the theft of $30 million has used a 457 visa issued by the Australian government to avoid arrest and prosecution.
Eremas Wartoto, accused of being one of PNG's most corrupt figures by anti-graft authorities, has been living in Cairns since mid-2011"

"Mr Wartoto is linked to powerful PNG politicians, including the country's Foreign Minister, Rimbink Pato, who controls the law firm representing him.
Mr Wartoto obtained his 457 visa after a Cairns car hire company he owns sponsored him because of a shortage of ''general corporate managers''."

"Records show more than 80 properties in the Cairns area have been bought by PNG investors since 2005, including four owned by Mr Wartoto."

The Queensland assets of Wartoto were apparently frozen last month by the courts. I wonder if the Cairns Post will report on it?

Update: Wartoto's visa has subsequently been cancelled and he has apparently been arrested in PNG. The story did get a run in the Cairns Post absent any mention of real estate investments. The Age published photos including the car rental business.


Thursday, May 9, 2013

Data & Policy Conundrums

National labour force data today was more positive than expected. As a result the $AUD shot right up (update: not for long though!) to where it had been before the interest rate cut on Tuesday! So did the RBA get the rate cut right or wrong?

I wont make any comment there is plenty of commentary elsewhere including a summary by Conus from an FNQ perspective. Ex Cairns resident Grogs Gamut also has his usual extensive graph laden illumination of the tea leaf data.

An interesting aspect today was that the South Koreans surprised and followed the RBA with a similar unexpected rate cut! Also noted in today's release was that the ABS is moving to online returns for the labour force sample and also revisions to the sample following the census.

Update: Ricardian Ambivalence also has excellent analysis of the data with his usual warning that the survey is primarily designed to measure the unemployment rate rather than numbers employed. Also Grogs Gamut has a further post with a particular focus on Queensland: State v State (Or don't be a woman in Qld)

Tuesday, May 7, 2013


The Reserve Bank has cut interest rates to a crisis level of 2.75%! Why? Why?

Policy Interest Rates – Advanced Economies graph

"So with all these things, at least at the moment, my sense is that the appropriate interest rate for the economy’s circumstances is in fact the pretty low one we have, not because we face an emergency like we did back then but because we face some other forces of a more slowly evolving nature that combine to mean that the correct rate really is lower than it was a couple of years ago. So I am not uncomfortable with this setting of rates." - RBA Guvnor Stephens

Note: The RBA chart pack is updated monthly and always worth a browse: Chart Pack

Update: Hitler finds out about negative interest rates

Friday, May 3, 2013

A Debt History

Browsing around some of the debate going on around the errors, criticisms and responses following the Reinhart-Rogoff controversy there is a link to their spreadsheet data including Australia: Debt-to-GDP Ratios.

The Australian data for gross central government debt has been compiled from back in the 1861 up until 2010. Promoted by shock-jock peddling and political spin there still seems to be a perception held by many that current debt is at record levels and some kind of anomaly. However Debt-to-GDP remains at historically low levels from a long term perspective.

I'm not sure about the continuity of the R-R data series here around WW2 where there is a 100% increase in a single year (1945), or the pre-federation data? However apart from the WW1 and WW2 periods there were two episodes of substantial debt accumulation relative to GDP in our earlier history. These are 1890-1895 and 1929-1934 which correlate with the two serious depressions in Australian economic history.

Much of the R-R controversy debate has been around correlation and causation of debt and growth rather than spreadsheet errors. The Australian history suggests that if one is averse to public debt it is best to avoid world wars and depressions.

Thursday, May 2, 2013

Unit approvals still dead

Building approvals for March have been released and Macrobusiness has a posted with a summary and array of graphs: Dwelling approvals fall on units:

"The Australian Bureau of Statistics (ABS) has just released dwelling approvals data for the month of March. At the national level, the number of dwelling approvals fell by a seasonally adjusted -5.5% to 12,599. While detached house approvals rose slightly, (+0.4%), this was more than offset by an -8.3% fall in apartment approvals. Consensus was for a total rise in approvals of 1.0% over the month."

However there is variation between states and the trend in Queensland remains more positive:

"As you can see, dwelling approvals are in a short-term uptrend in New South Wales, Queensland and Western Australia, whereas they are trending down in Victoria and are going sideways in South Australia. Overall, there still isn’t much evidence that Australia is shifting to houses from holes."

A positive trend remains elusive in Cairns with 25 houses approved in March and a total 306 dwellings in the last 9 months. So the trend within CRC continues to drift sideways near the bottom of its recent historical range as noted in the most recent CairnsWatch Report:

"The building approval trend has eased off over the last three months, but in our view this stems from ‘bunching effects’ in new construction approvals rather than any fundamental slowdown in housing demand."
The multi-unit sector in particular remains Dead in the water with no further approvals. I also recently posted on Approvals & Stocks.

Wednesday, May 1, 2013

Still Growing!

Amidst a busy week the ABS released updated regional population statistics: Regional Population Growth, Australia, 2011-12. This also includes lots of interesting commentary. Data is provided for Local Government Areas, Significant urban Areas, and SA2 level to June 30, 2012.

Growth was 1.9% for CRC and 2% for the Cairns SUA. The SA2 data within that area shows the highest growth rates were on the northern beaches with Trinity Beach-Smithfield at 3.4% and Kewarra-Clifton at 4.3%.

So growth in Cairns is in line with broad Queensland growth also at 1.9%, and above the national growth rate of 1.6%. Given the weak local economy and unemployment in recent years population growth at such rates should probably be regarded as positive.

Growth in surrounding council regions was not so strong with Tablelands 0.7%; Cassowary Coast 0.1%; and Cook 0.5%. Not surprisingly Weipa was the standout SA2 in the Far North with 5% growth.