Sunday, January 25, 2015

Cairns cargo cult turns cannibal

Media and tourism industry response was almost universally positive to the announcement on Friday of increased airline capacity from China: Australian, Chinese governments make landmark air services agreement
A landmark air services agreement between the Australian and Chinese governments will open the way for new routes. The cap on seats from China's largest cities to the Australian gateway cities of Sydney, Melbourne, Brisbane and Perth will triple to almost 67,000 seats each week by 2016. Routes to smaller cities, like Adelaide and Cairns, will have no limits.
Well almost universal with the Cairns Post reporting it this way: New capital city China flights blasted by Cairns business leaders
AVIATION and tourism leaders have blasted a federal government decision to add extra China flights to capital city airports at the expense of Cairns. 
How can additional capacity above current constraints at the major gateways be described as being at the expense of Cairns. There is nothing at all favouring those gateways over Cairns and no limitations if the economics of direct services to Cairns stack up. In fact provisions continue for the airlines to operate an additional 2,500 seats per week each way above the new major gateway cap if they stopover at Cairns en route.

There is no preferential access at all to the major gateways at the expense of Cairns. In fact what Kevin Brown (Cairns Airport) and Alex de Waal (TTNQ) are effectively demanding is that growth of the entire Australian tourism market be restrained to try and force airlines to fly to Cairns regardless of viability. The Cairns Cargo Cult has turned cannibal on the rest of the Australian tourism industry with a zero sum mentality.

This could never stack up as economically optimal for Australia. While not denying the benefit to TNQ and Cairns from direct international flights it was only last year that Brown was telling us:        
"We had direct China Eastern flights from Shanghai in place for most of 2013 and even without direct flights the Chinese visitor market shows strong growth trends with people willing to reach our destination via domestic services from other parts of Australia."
Growth in the entire Chinese market may increase the viability of direct flights longer term. Veteran aviation journalist Ben Sandilands doesn't seem so pessimistic at the Crikey Plane Talking blog:
It can expect to see a range of regionally focused carriers coming from parts of China outside of Beijing, Guangzhou and Shanghai, and given the capacity constraints at Sydney, some of them are likely to fly 787 or A330 sized jets to Canberra, or even Newcastle, if the access limitations of civil movements at a military airport can ever be fully addressed.
Australian can expect to see such second tier China carriers fly to Hobart, Cairns, and maybe in ten years time, even to Wellcamp (Brisbane’s far far far west airport). Gold Coast airport will be full before we know it, and Maroochydore could see regular flights by 250-350 passenger jets.
The influx will grow not just the hotel industry, including the construction side, but domestic air travel.
The response here from Cairns Airport and TTNQ only demonstrates everything that can go wrong with any Northern Australia policy as the rent-seekers subjugate the broader and national interest for their own self-interest. Alex de Waal continues to underwhelm at TTNQ.

Thursday, January 22, 2015

Regional employment a drag on Queensland

Conus has updated the trend series for todays ABS regional labour force data with some local analysis: Regional jobs data is poor for Cairns

There are some interesting things happening around some of those numbers in Cairns and Townsville particularly the participation rates. However I thought I would stick to a broader state and regional perspective with a few graphs. This from last weeks national data showing the Queensland share of total Australian employment:
 

 
The Queensland share hit its highest level at 20.54% back in February 2009 and has since edged lower to 20.02%.
 
I recently posted a comparison of annual employment growth between SEQ and the Regions. This is compiled from the Conus Trend data amalgamating Greater Brisbane, Gold Coast and Sunshine Coast from the ABS regions to form SEQ. This has been updated and annual employment growth for the Regions remains negative at the lowest levels for the series. Gold Coast has been the biggest contributor to employment growth in Queensland over the past year.
 
 
Similar to the first graph this is then the Regional (ex SEQ) share of total Queensland employment derived from the Conus Trend data:
 
 
I think this last graph can also be added to the list of reasons why the population target in the Queensland Plan for 50% to live outside SEQ is *stupid*.

Wednesday, January 21, 2015

No turbulence at airport in December

Despite an exuberant, lengthy and number laden report at the Cairns Post the traffic numbers at Cairns Airport in December were so boring I almost wasn't going to post anything this month. There is not much different to last month, or the month before that, with consistent but somewhat slower growth from domestic routes than in recent years.

This is Y-o-Y monthly passenger growth over the last few years, domestic + international (ex transits), with a 12 month rolling average:

  Source: Cairns Airport

There is commentary this month that domestic passengers increased 4.2% despite slower capacity growth. This is consistent with reports elsewhere with Sydney also reporting improved load factors as the domestic airlines return to commercial sense and profitability.

Tuesday, January 20, 2015

Houses lead rents higher

Latest quarterly data from the Residential Tenancy Authority consolidates Cairns position at the top of the NQ rental costs table based on new rental bonds lodged. Median house rents in Cairns pushed higher in the December quarter while Townsville remains soft and Mackay continues to decline.


Not so much in the unit sector where the median rent in the December quarter was flat on the previous year in Cairns.


Mackay investors must be particularly disillusioned after their successful legal challenge was legislatively overturned by Crisafulli last year leaving them also with a highly unfavourable council rates structure.

Another example of significant demographic variation between the local state electorates with the proportion of rental households based on 2011 census:

Cairns            48.1%
Barron River  33.5%
Mulgrave       36.4%
Queensland    33.2%

Note: Cairns will also be far more heavily weighted to units. Previous post: Cairns rents fit for a King

Sunday, January 18, 2015

Drover's dog set to win Cairns

There is no shortage of material however I have found attempting to post anything during the election period a mentally difficult strain.

However HT to Conus with an update on the Small Areas Labour Market data. I posted on this previously with some concerns and had a good response from the DoE who compile the data. DoE have now compiled the series back beyond the 2011 census. I will post on this subsequently.

An overlay with state electorates and the SA2 data could also be interesting. This is the latest SA2 data for Cairns:

If I were to overlay this with the state electoral divisions and consider the demographics I could quite easily come to the conclusion that the win by the LNP in Cairns in 2012 was something of an anomaly. I would also suggest that someone in the ALP should be deeply embarrassed that the electorate was ever lost or even became marginal before 2012.

The proverbial drover's dog should be able to reclaim Cairns for the ALP!

Meanwhile some links on last weeks labour force data:

https://twitter.com/GrogsGamut/status/555529155622629377/photo/1

https://twitter.com/GrogsGamut/status/555534160794640384/photo/1

http://www.scuttpartners.com.au/news/australias-labour-market-recovery-problems-seasonal-adjustments/

Qld Govt benefits from volatile jobs data – still vulnerable over bulk of jobs growth being part-time over first term

Very strong labour force data; QLD too good to be true?

The economy is not out of the woods yet

Australia's record jobs growth is a game-changer

Monday, January 12, 2015

Election 2015: We are all stupid now #1

The Newman employment announcement yesterday included a target of 209,000 over the six years to 2021. Queensland Economy Watch beat me to an intended graph of historical six year employment growth: Qld Govt’s new jobs target much more achievable than previous 4% unemployment rate target

This indicates that the target based on Treasury advice is conservative by historical standards and particularly when population and labour force growth are considered. I'm surprised this hasn't attracted more attention given that Treasurer Tim was still spruiking the 4% target until quite recently as the two are fundamentally inconsistent.

Conus has parsed a few parameters based on historical assumptions which could still hypothetically see an unemployment rate increase to 7.7%:  What does the LNP pledge for 209,000 extra jobs actually mean?

Another way to look at it I had a very quick preliminary look at the Queensland population forecasts by age group. These are supplied with medium / low / high projections. It would appear to require something close to the low forecast to stabilise employment to relevant population ratios around recent levels, even allowing for aging, if only 209,000 jobs are created over the period. Weak interstate migration has been particularly noted in recent years.

Pete again asks the question at Conus of why politicians persist with such specific targets and perceived promises over something where they have limited influence anyway. Sportsbet is still backing an LNP Premier Tim after January 31 so maybe the focus will then return to the more stupid 4% target.

Friday, January 9, 2015

Polls, pundits and the odds

The star of the 2012 USA Presidential campaign was actually a wonk named Nate Silver. His New York Times blog statistically aggregating polls turned out to be spot-on despite persistent accusations from Republicans right to the end that it was a flawed liberal conspiracy. Apparently even Romney believed this right up to drafting the concession speech.

So we come to Queensland where recent polls show a close contest on 2PP estimates while bookmakers odds currently LNP $1.14 v ALP $5.00 put the probability of an LNP win at 84%.  Polls v Bookies is a topic that has previously been addressed By John Quiggin: Polls and Punters.  Way back in 2009 Possum Comitatus provided an excellent guide on how to relate betting odds with polls: What are the Odds?

Efficiency of the betting market is a critical factor. With markets open and trading at Sportsbet current betting market today (Friday) for our regional electorates:

Cook: ALP 1.09- LNP 10.00 - KAP 12.00
Barron River: ALP - 1.50 - LNP 2.00
Cairns: ALP: 1.30 - LNP 3.30
Mulgrave: ALP: 1.01 - LNP 12.00

Translated to probabilities based on this market betting Cook would be lost and there is work to do for the LNP to save Barron River and Cairns. These are the probabilities of an ALP win based on those odds:

Cook 83.3%
Barron River 62.5%
Cairns 71.7%
Mulgrave 92.2%

However that is very early days before even all candidates are known in what would likely be an inefficient market for individual electorates. I have no idea how the bookies set the initial odds but suspect it would be related to the required swing and broad polls. Also this is very different from the Cairns Post last October: LNP in for election fight in Cairns and Barron River at Queensland election according to ReachTEL survey

The Post Pundits all rated Cook as safest for the LNP based on the poll despite being held on the finest margin. A clue here is a post by The Poll Bludger at Crikey who came to the entirely opposite conclusion re Cook based on the same poll: ReachTEL: 51-49 to LNP in Queensland.

The bludger points out that the margin for error of each individual electorate on that Post poll sample may be about 5% so not particularly useful in a close contest. What he then does is aggregate the poll on a regional basis for all and apply this to the required margins. The spread by Poll Bludger, at least between the electorates, more resembles the bookies but with lower probabilities overall for the ALP.

The most efficient betting market for any electorate would likely be Ashgrove which will obviously attract way more money than any other. The probability of an ALP win is currently at 54.7% here despite a relatively tight margin so it can't yet be given away on the odds. Despite that the probability of an LNP Government absent Campbell Newman becomes significant.

The aforementioned Possum Comitatus has been keeping a relatively low twitter profile of late given his role at the Together Union backed WQ4 but did tweet this graph of their Ashgrove polling when the election was announced.

If you add up a quick and nasty analysis of the Sportsbet odds for individual electorates the ALP would currently get to 40 out of 89 where they are currently being quoted over a 50% probability of winning. Pundits are anticipating about 5 or so from independents and minor parties. At this stage I would guess an outcome closer to 30 for the ALP based on the broader numbers consistent with the betting odds.

A more effective opposition in a unicameral parliament combined with a swag of highly marginal seats would be a welcome outcome. Meanwhile I will finish my wonky rant and leave the final word on the early status of the campaign to Possum:

Possum Comitatus @Pollytics  ·  22 hours ago
It's the end of Day 3 of the election campaign, and no one has been caught with their dick in a wine glass. Well done Qld


Update: Poll Bludger on the most recent polls Newspoll and Galaxy: 53-47 and 52-48 to LNP in Queensland; The ABC site compiled by Antony Green is also a useful resource Queensland Election 2015

Thursday, January 8, 2015

Data by Region

Data by Region is an application on the ABS website that enables clients to search, browse, explore to find statistics about different regions in Australia. Available statistics are arranged under the broad themes of People, Economy, Industry, and Energy and Environment.

With this release, data for 2008-12 will be available for Local Government Areas, Australian Statistical Geography Standard regions (Statistical Areas 2, 3 and 4, and Greater Capital City Statistical Areas), States/Territories and Australia.

Updates will be released regularly as new data is incorporated, functionality develops and new regions are supported.

Explore the data in Data by Region.

Tuesday, January 6, 2015

Election unhinging predicted at Courier-Mail

An imminent snap election reminded me of an unfinished post on an editorial from the Courier-Mail on Boxing Day: We had a merry Christmas and can be confident the best is yet to come

This editorial is so blatantly biased, error-ridden and misleading I can only presume someone at the C-M perhaps let Des Haughton off the leash after an indulgent Christmas Dinner. Soviet era Pravda reports on the latest 5 year plan were more objective than this:
While more than half of all new Australian jobs in the past year were created in Queensland, the state’s unemployment rate still hovers around 6 per cent.
This statement may have been valid if it was written some six months ago. Much has changed over that period with the unemployment rate in Queensland now hovering up around 7%. Let me also update for the most recent data on job creation in the form of a pie chart showing the current Queensland percentage of National jobs growth. A pie being something which may be more easily comprehended even by the likes of Haughton:

 
 
Some way short of half but at least it's still positive, just. Whether it be wages growth, business confidence or retail sales the rest of the editorial is similarly more reminiscent of a drunken family political debate over the prawns and vino with dubious data and sauces(sic) being thrown around negligently and completely misrepresents the current position of the Queensland economy.

I expect further unhinging and degradation of journalism standards over the coming month. Meanwhile in the blogosphere Gene Tunny at Queensland Economy Watch has produced an excellent objective summary of the state of play: Queensland economic outlook for 2015

Wednesday, December 31, 2014

Tungsten vitality goes missing for shareholders

There has probably been more lost in metals mining ventures in the Cairns hinterland over recent times than has ever been returned to shareholders. Never mind, Nick Dalton has found a screaming bargain: $1b tungsten mine proposed near Cairns in “perfect” economic storm
The $178 million construction phase is expected to start late next year, employing up to 250 workers at its peak over 20 months while 150 staff would be needed to run the operation. The 2.5 million tonnes per annum 10-year project is estimated to earn $526 million from revenue of $1.08 billion.
Unfortunately, the market response for Vital Metals on ASX has not been so positive in recent years:


The managing director of Vital Metals as reported by Nick Dalton in the Cairns Post is a Mr Mark Strizek. I can only presume this is the same Mark Strizek reported here by the ABC on Four Corners in 2010:
MARK STRIZEK, MINERALOGY GEOLIGIST (in helicopter, Pilbara): I mean we've got a truly world class, a huge iron ore deposit located right on the coast. We’re close to, it’s the first deepwater port that’s going to be built in the state for about 30 years or so.
SARAH FERGUSON: Mark Strizek is Clive Palmer’s chief geologist.
MARK STRIZEK: I think there's potential here between 50 to 100 years worth of iron ore product.
SARAH FERGUSON: Palmer’s first project here is being developed by Chinese owned Citic Pacific. They’re spending $US 5 billion to develop infrastructure, including a new port.
SARAH FERGUSON (to Mark Strizek): So that’s going to be Port Palmer?
MARK STRIZEK: That’s exactly right, yes, Port Palmer.
SARAH FERGUSON (to Mark Strizek): If we come back in five years there’ll be ships loaded on their way to China?
MARK STRIZEK: Absolutely, I think we’re going to see that at the end of this year or early next year, yes, definately.
SARAH FERGUSON (to Mark Strizek): So long as the boom keeps rolling in China you’ll be producing from here?
MARK STRIZEK: Absolutely. That’s right.
SARAH FERGUSON: The investment for this development was secured before the super profits tax was announced. But what about the project that Palmer said he had canned?
MARK STRIZEK: All approvals are done and we've also submitted the environmental approvals for the other, other three or four projects there.

There is no mention of the previous association with Professor Clive listed in Strizek's CV on the VML website. With more than 300 million shares on issue at less than 3c, a market cap of just $9 million and limited financial resources raising the substantial capital required to fund their 70% share of the project may be a dilution issue for existing shareholders.

Wednesday, December 24, 2014

Dreaming of a white-shoe Christmas

Who said it was a slow news time of year? Amidst a rush of news overwhelmed by human tragedy there was a story perhaps lost in the last week that proves God does indeed have a sense of humour. What else to make of the Queensland Police defending Professor Clive Palmer as an "innocent victim"?

It was this: Clive Palmer’s adviser Andrew Crook held in police raids; Kidnap accused released on bail; Kidnap accused released on bail

To cut to the quick the high profile media adviser to Professor Clive was bailed with passport removed on charges that he was involved in a kidnap conspiracy.

The allegation is that a trio of Crook, Tony Smith, and a dubious Gold Coast PI, who was previously removed from the Qld police service, lured a NAB banker to Indonesia for a job interview. The position was the financial controller for the global empire of Clive Palmer. They then attempted to coerce him to change his evidence in a previous civil action.

Bail conditions exclude going anywhere near the Southport NAB branch. This is the related episode: Tony Smith sues NAB for his lost fortune

Tony Smith had previously sold the tourism accommodation group Breakfree to MFS before the GFS hit. Tony then embarked on building the biggest home on the Gold Coast. This all came unstuck when the shit hit the fan and we found out who was swimming naked.

Tony Smith doesn't seem to have been directly related to the murky circumstances around the subsequent collapse of MFS. He had mostly removed himself as an independent investor and sought to employ the funds to build his white-shoe emblem.

There is a local white-shoe connection here in Cairns in that Crook Media have also been doing the work for Aquis. Crook split early in the year with Andrew Crook looking solely after Professor Clive while the remaining partners took the other clients. Ben Ready now looks after Aquis at the new firm with a new name.

Crook Media also acted previously for the now failed MFS / Octaviar. Michael King who was most implicit in the MFS quagmire subsequently turned up at Aquis: King gets back on the horse; Former MFS boss Aquis project manager; Fungs back Aquis project manager; Crook Media and Aquis. King has also been recently reported to have been bidding on behalf of HK interests for the mortgagee horsey assets of notorious boganaire Nathan Tinkler in the Gold Coast hinterland.

Michael King has now been moved on from any association with Aquis,  apparently on the basis that his involvement was limited to the Reef Casino gambit and not Yorkeys, which is different from what was previously reported. King is facing charges from ASIC on misappropriation of funds including allegations of fabrication of documents related to the collapse of MFS. Can't work out why that could be a probity question? Consultant moves on after Reef Casino bid fails

I'm dreaming of a white-shoe Christmas .......

...... just like the ones we used to know 

I can't wait for 2015.


Profiles: Andrew Crook, Tony Smith and Mick Featherstone

Update: Conspiracy allegations against Clive Palmer’s adviser detailed in court documents

Saturday, December 20, 2014

Bob gives good headworks

Cairns Post, July 26: Approval sought for $200m seven-tower project on Spence St Cairns
The first stage, a high rise on Spence St behind the police station, is set to be completed in 2016.
Aspial bought the site in February this year for $18.9 million and plans to start building on it by the end of this year.

ABC, November 12: Green light for first stage of $200m Spence St tower development
Mayor Bob Manning said he hoped construction of the first high-rise could begin before the end of the year.
"I understand from the Aspial people that there is an urgency to get this work underway, so I'm hoping that we might start to see some activity down on the land even before Christmas, although it may be after but one would hope to see that things are starting to move down there very, very quickly."

Cairns Regional Council, December 17: New incentives round to boost development
To be eligible for the discount, construction must start before 1 July 2015, with a completion date of no later than 30 June 2017.
The projects must have a construction value in excess of $15 million, with at least 80 per cent of the workforce sourced from the local area.
"Council considers that the value of the incentive scheme – that is, the money that Council is forgoing to bring these projects on - will be recovered in additional rates income from these developments inside five years of the completion of projects," Cr Manning said.
The previous round of the incentives program ended on 30 November. Nine projects with a combined value of $63.4 million were completed.

Cairns Post, December 18: Singaporean developer commits to new $120m towers in Cairns; Aspial sees city on rise
Meanwhile Aspial has been waiting for some sign or incentive to get the first $120m stage off the ground.
As soon as the Cairns Regional Council decides on a new round of infrastructure rebates to spark investors to get some projects moving, Aspial acts, with a headworks discount of about $1 million being all it takes for its chief Koh Wee Seng to give the first stage of two towers the green light with the aim of a July 1 start.

Perhaps I have missed some nuance but trying to figure out how a $1 million infrastructure incentive to start a project in the same timeframe that had already been intended can be anything other than a direct subsidy transfer from ratepayers onto the bottom line of a foreign developer for no return. I would like some of the Council numbers and assumptions on that payback period as it would seem to me to be infinite in these circumstances?

As previously posted Aspial may have already been recipient of an unintended subsidy via mis-valuation of the subject land for rates and land taxes, unless corrected: Land valuation weirdnesses revisited.

Friday, December 19, 2014

No change to flight path at Airport

Cairns Airport numbers for November are pretty much in line with recent trends:


The international recovery suggested last month was again hampered by schedule changes in November, with Auckland becoming seasonal to recommence in April, while traffic continues to grow on routes comparable with last year. Seasonal direct flights from China have now recommenced in December. The Chinese lunar new year falls late in 2015 on February 19.

Domestic passenger growth maintains a consistent trend above the national average. Meanwhile Flight Centre issued a profit warning yesterday which it attributed to a flat domestic leisure market:
"While several countries, including the large United Kingdom and United States businesses, are on track to achieve record results during the year to June 30, 2015, trading conditions in Australia remain challenging following the leisure travel spending slowdown late in 2013/14. This slowdown has led to lower than normal leisure sales growth in Australia during the five months to November 30, 2014 and slightly lower margins, as FLT's sales people have reduced commissions to lower overall ticket prices and stimulate demand."
"When we set our full year growth targets in August, we expected the uncertainty surrounding Australia's Federal Budget would have abated as the first half drew to a close and consumer confidence and spending would have started to rebound. Unfortunately, we are yet to see tangible signs of a full recovery and the overall leisure travel market in Australia continues to be flat year-on-year."
Note: Domestic passengers at the Airport will also include international travellers flying on domestic routes.

Thursday, December 18, 2014

Preliminary: employment & population

A quick preliminary post on todays regional unemployment data until the Conus Trend is available. The volatile raw monthly unemployment rate fell to 6.7% while employment did not change much. The bigger story may be that the participation rate also fell to an all time low for the series at 59.4%. The decline apparent here even on these raw numbers remains a concern:


Not unusually the Cairns unemployment rate this month comes with a warning flag on sample variability too high for most practical purposes.

The ABS also released updated national and state population stats today which will require a closer look before posting with particular interest in the interstate migration numbers.

Tuesday, December 16, 2014

Reef Casino treads water

Following the recent collapse in dubious circumstances of the Aquis takeover bid Reef Casino Trust (RCT) has today updated with its estimated distributable profit and distribution for the period ending December 31.
Our current estimate of the distributable profit* for the full year 2014 is approximately $12.1 million. This estimate is after deducting project costs of the lapsed Aquis transaction of about $600K. The premium play win in 2014 is expected to be lower than 2013 which had an ‘above theoretical’ win rate.

Adjusting for the Aquis costs and also the $250k high roller bad debt incurred in the first half would lift the 2014 result close to $13 million. That would still be well below last years result at $13.9 million. Results for the last 5 years adjusted for the extraordinary items in 2014:


Reef Casino reports results on a calendar full year with the second half (2H) typically stronger than the first (1H). Longer term comparisons are complicated by a pokie tax hike in 2009. Closure of the upper floor for renovations in 2012 had some impact that year also. Looking through all that the recovery from the Post-GFC hit doesn't seem to now be going anywhere much.

The extent of how much the above theoretical premium win rate in 2013 influenced results isn't clear. Have to wait for the full results in February but I would call this a slightly disappointing result. The 2013 profit result included EBITDA of $19 million. This was the number adopted by the 'independent expert' in the takeover documentation for the assessment of a fair value range on an EBITDA multiple.

Media reports subsequent to the infamous Junket to Macau included indications from Fung Snr of $20 million EBITDA. Difficult to see how it would not fall short this year on these latest numbers but will wait and see.

Meanwhile trading in RCT has recovered with reasonable liquidity in historical terms following the deep collapse after the Fung Fiasco. RCT have maintained the 2H distribution at last years 17.25c which is above the distributable profit and topped up from reserves.

RCT 2 year Chart

Friday, December 12, 2014

G20 eclipses Zumba

Queensland Economy Watch has employed Google Trends to assess that G20 had only minor impact on Brisbane’s profile worldwide.

I have replicated this for the Cairns G20 finance event with the trend for a search on "Cairns". This is the result for the last 90 days. The output here is daily and relative to the peak for the period which was the first spike in September at the start of the G20 weekend. This was just ahead of the second spike there in October which was when the nurse was admitted to Cairns Hospital with the suspected ebola false alarm.


However when we take a longer term perspective over the past year with a weekly trend the G20 (A) is not so prominent. The relative peak here back in April was Cyclone Ita. The other flagged news events with a label are mostly irrelevant or sport related.

 
 
Without any expertise on the nuances of Google Trends another perspective is to add a second search term "G20" shown in red. The relative peak here is the Brisbane leaders summit with the minor bump at label 'C" being the Cairns event.
 



In recent years it has been Cyclone Yasi in 2011 which has dominated the trend relativities which is similar to the Brisbane result where it was the floods at that time also. So to take a longer term perspective this is the available trend on a monthly basis from 2004.



The impact of G20 here would appear to have had minimal impact on the profile of Cairns based on Google Trends. The G20 month is only modestly above the Zumba world record attempt in February 2012.

Previous post back in 2011 on the trend for search terms 'Cairns Australia' and 'Great Barrier Reef': Google Trends & Insights

Tuesday, December 9, 2014

A comment in which I demonstrate some frustration on the insurance debate

I'm blocked by the Cairns Post on FB so this as my quick response to todays latest insurance beat up and subsequent comments presumably designed as a smoke screen for last weeks adverse finding from the Australian Government Actuary. When rationality fails, derp works:


The ignorance and misunderstanding which continues to be actively promoted by Warren Entsch and Cairns Post continues to astound. The Cairns Post can't even get a basic primary school percentage calculation right in this one!

1) No, despite the current storms down south NQ actually is higher risk based any empirical study that has ever been done. 2) No, requiring a regulated market to impose red tape on where and what insurers should cover is not a workable solution. 3) No, a state insurance office won't make the difference people think it will as Darwin actually is lower risk, and it wont happen anyway.


There are many criticisms that can be made of the insurance situation in FNQ but none of them have ever been addressed by either the Cairns Post, where innumeracy is apparently required for employment, or Warren Entsch who leaves no doubt every time he opens his mouth on anything financial why CEC went down the gurgler with him on the board as chairman!

http://www.cairnspost.com.au/lifestyle/edge-hill-homeowner-receives-14400-insurance-bill/comments-fnjpuwet-1227149108059

 

I'm thinking of joining a quiet monastery somewhere ........

Friday, December 5, 2014

A Dalton too far?

Facebook post from a smiling Member for Cairns and Assistant Tourism Minister:

 
I can't yet find this posted online so let me attempt an accurate transcription:
"The tropical north has beaten the Gold Coast for the first time as the most popular destination in Queensland for international holiday makers"
"According to international visitor survey figures for the year ended September 30 this year, 665,000 international holiday-makers visited the region, 23,000 more than the Gold Coast and 155,000 more than Brisbane."
 
The International Visitor Survey breaks visitors down into categories such as holiday, business, education etc. This information is available at the DestinationQ website where it can be interactively graphed and downloaded. There were indeed 665,000 visitors to TNQ in the holiday category. This was 23,000 more than Gold Coast for the year to September 30 2014.
 
I have downloaded and graphed the Queensland regional data for the holiday category to enable comparison and analytical interpretation:
 
 
Yes, here we can clearly see that TNQ has surpassed the Gold Coast in this holiday visitor category for the first time ever! Oh, wait?

Accurate commentary on this recent International Visitor Survey can be found at Conus: International Tourism numbers continue to climb but TNQ still underperforming

Tuesday, December 2, 2014

Doing the sums for Crisafulli



The numbers in the video currently promoting cyclone preparedness come from Risk Frontiers a research unit at Macquarie University. I never did get around to another insurance post following the recent distressing experience of listening to Warren Entsch for an hour on the topic. Relevant to this disaster scenario, Wazza expressed that Cyclone Yasi shouldn't impact on Cairns premiums because there wasn't much damage in Cairns. Homer Simpson for Leichhardt  o_O

Among other risk delusions are that the insurers are ripping us off by exaggerating cyclone risk relative to event such as storms in SEQ and bushfires. This is a common misconception frequently also heard on talkback radio. It also popped up this week from Local Government Minister Crisafulli down in Townsville: NQ insurance rip off must stop
“I’m not asking insurers to charge people in other parts of the state any more but I am asking them to stop unfairly targeting the north,” he said. “This storm proves there is no greater risk in North Queensland, which has been the reason used by some insurers to jack up premiums.
“Whether it is bushfires in Vic, hail storms in Sydney or Brisbane or floods in central Queensland, we all live with a level of risk. “North Queenslanders are happy to pay our fair share for coverage but we just don’t want to be the whipping boys because of an unfair ­perception that there is a greater risk in our part of the country.”
Crisafulli is just plain wrong and is also directly contradicting the findings of the Australian Government Actuary. It also reminded me of a blog post discovered a while ago written by John Devaney at local FNQ insurance broker Joe Vella. This was I think written a couple of year ago and John has done a very simple back-of-the-drink-coaster analysis. It doesn't pretend to be anything sophisticated with some loose assumptions but is certainly superior to the public-bar-windbag anecdotal derp of Entsch and Crisafulli. This is an extract:



CRUNCHING THE NUMBERS
Written by John Devaney.

There are some parts of Warren Entsch's Opinion piece [Time to find answers on North's insurance crisis Cairns Post Oct 20] that correctly challenges the Insurance Council of Australia [ICA] to be more frank with consumers. Clearly there is an issue with the massive hikes in certain classes of property insurance.

That said I have a fundamental problem with the Entsch article. He focusses on what he sees as the inequitable price of insurance compared to other regions of Australia. It's good politics that score emotive points and much of that is understandable but it's inaccurate none the less. And it distracts from how we must face and attempt solve the problem.
 
Yes it's true that house and other property insurance in Brisbane, Sydney, Melbourne or even Darwin might be cheaper than Far North Queensland but Darwin has had one Cyclone in fifty years. Our region has had several major Cyclones in thirty years, two of those in the last six years.
The brutal reality is the mathematical imperatives that are in play. The following is pretty crude but it illustrates my point. The cost of claims is sourced from the ICA website.
 
The population figures are courtesy of Mr Google.
Table 1: Cyclone Yasi Cost per North QLD "Dwelling"
  • Total Cyclone Yasi Insurance Claims Cost $1,412,239,000
  • Population of Cairns 150,920 + Townsville 190,000 + Mackay 121,000 = 461,920
  • Divide Population by say, 4 persons representing 1 Family Unit = 115,480 "Dwellings"
  • Spread of Claims Cost across each Dwelling or Family Unit: $12,229
Now let's look at the Brisbane Floods
Table 2: SE QLD Flood Event Cost per South East QLD "Dwelling"
  • Total SE QLD Flood Event Claims Cost $2,387,624,000
  • Population Brisbane in a 200 KM radius from the Brisbane Post Office: 3,005,000
  • Divide Population by say, 4 persons representing 1 Family Unit = 751,250 "Dwellings"
  • Spread of claims Cost across each Dwelling or Family Unit: $3,178
This is the harsh, stark reality. The Flood event was almost double the cost of Yasi yet spread across the respective population bases Yasi cost Far North "dwellings" 4 times that of the Flood Event's cost to an equivalent "dwelling." Sure, the above figures include commercial losses in North QLD but they include commercial losses in South East QLD as well. The numbers would still crunch the same way.

Warren Entsch suggested we compare ourselves with Darwin. Fair enough.
Table 3: Cyclone Tracy amortised over 38 years (there have been no other major weather events)
  • Cyclone Tracy Claims Cost $ 200,000,000
  • Population of Darwin 120,000 divided by our 4 family average = 30,000 "Dwellings"
  • Spread of Claims across each Dwelling or Family Unit = $6,666
  • Amortised over 38 years = $175
Compare that to our region
Table 4: FNQ Cyclones & Weather Events amortised over 38 years
  • Winifred ($40 M) + Aivu ($26M) + Rona ($4M) + Steve ($11M) + Tessi ($15M) Larry $540 + NQ Deluge 2009
  • ($19M) + Yasi ($1,412,239,000) = $2,067,239,000
  • Spread of Claims cost across each dwelling or Family Unit = $17,901
  • Amortised over 38 years = $471
We have two fundamental problems we have to solve. We don't have the spread of numbers to sustain ever increasing losses from more frequent weather events.

So what happens now?

In my almost forty years in the industry there has only been three occasions that I can recall where the insurance market corrected itself, sometimes known as a 'hard market.' They were the 1990's recession, the 2001 post HIH crash and September 11 tragedy and in 2012 the floods, and Cyclone Yasi. In between those 3 corrections the market has been relatively defined as 'soft' in short, too under-priced.

Some insurance industry commentators suggest that the market will start to soften in the next two years. This time, I'm not so sure. There is far more accurate technology than ever before. In my view we have entered the age of computerised actuarial discipline – certainly when it comes to commoditised insurance products like house and motor vehicle policies. Insurers used to think – "let's dominate the market by cutting the price." The other classic rationale was "Jeez those chaps in North QLD are caning our profits. Thank goodness the Brisbane, Sydney, Melbourne markets can prop up the figures." That thinking is redundant. Now the market mantra is "Each region must be self-sustaining."



I think the Brisbane storm is currently up to about $200 million but it will go nowhere close to a big cyclone hitting a regional city relative to the written insurance premiums in each area based on historical experience and wont shift the analysis much. I have plenty of issues with the recent insurance situation in Tropical Queensland but sticking our heads in the sand and deluding ourselves on the relative risks avoids the core issues and understanding. It is simply seeking a subsidy from the rest of Australia.

Crisafulli is in fact asking other people to pay more even when he says he isn't. It can't be otherwise on any analysis of the numbers. Perhaps Crisafulli should instead take on the issue of state insurance stamp duty in cabinet which as posted here previously is a fiscal transfer from his constituents to Brisbane.


Update: Allianz has been selected as preferred buyer of TIO: https://theconversation.com/will-the-territory-insurance-office-sale-push-up-premiums-33741