Thursday, August 28, 2014

A new year for Cairns Airport statistics

Cairns Airport Statistics have now been posted for July and the new financial year has also brought a revamp of the format. Domestic passengers through the international terminal (T1) have now been included with domestic terminal (T2) passengers. Previously they were lumped in with international transits and domestic traffic numbers represented only the domestic terminal.

This change is welcome and more comprehensively represents domestic passengers. However there still appear to be some issues with the series here which has previously been a source of frustration. This is an update of previously posted graphs with a comparison between the old and new stats:


 
Mostly fine although with some divergence particularly around 2009-2010 where the updated domestic data is significantly weaker post GFC. So to more directly compare the two series (new - old) we can graph the difference between the two data series. This should derive domestic passengers through the international terminal:
 
 
Clearly domestic passengers through T1 can't be negative so last August becomes a problem, and have also re-checked my numbers for that month which seem ok unless they were subsequently revised. However , the significant anomaly is the period starting in January 2009 and ending in June 2010.
 
It was previously suggested by the airport that I could unravel the former statistics to derive a comparable series to this new format. I tried this last year and gave up when it produced exactly the above anomaly and so have since just followed the T2 domestic numbers as a continuous reliable series. Perhaps I should feel satisfied that the airport have now replicated my anomaly in their own numbers.
 
Anyway, and assuming the more recent years are valid (ex August 2013), there is a clear trend in declining domestic traffic through T1 which is to be expected. This will have had a small offsetting impact on the domestic growth trend at T2.
 
The relatively soft rebound in July is also confirmed with domestic growth just 2.4% following a negative growth month in June. July is always the busiest month of the year so perhaps there may even be capacity constraints at peak times given strong anecdotal reports for the month?
 
Previous post on the July numbers from Auckland International Airport where the domestic passengers reported appear to include transits: A timely Posting of Cairns Airport stats

Monday, August 25, 2014

Master Builders close the gap

I always look forward to the survey of industry conditions from the Qld Master Builders if only to see by how much they missed their forecast for the quarter. My benchmark here is the residential sector conditions. The record may almost be worthy of the Guinness Book of Records so reliable it has become that it will miss their optimistic forecast for the next quarter. It did so again in June but by a record low of just -9.9 index points. This compares with an average miss of -16.2 for the available survey series since 2010:


The actual estimate of residential conditions for the previous quarter has now risen almost to the 50 index midpoint level. However the forecast for the future quarters have been declining all year now to close the historical gap. Who knows what could happen if this trend continues. I have previously opined that the builders fill in these survey responses together down the pub on a Friday afternoon.

Saturday, August 23, 2014

Thursday, August 21, 2014

A timely Posting of Cairns Airport stats

HT to Conus for todays post and link:  Cairns airport stats finally make it to The Cairns Post

This was actually excellent timing by the Cairns Post which managed to report the June airport results the same day that stakeholder Auckland International Airport (AIA) released updated July traffic which includes Cairns Airport:

 
In June there was a rare YoY monthly growth decline in domestic traffic which was attributed to specific factors such as school holiday dates. Going by these AIA numbers there wasn't a profound bounce back in July with domestic growth of 1.8% which is well below recent trends. As discussed last month AIA and Cairns Airport present the numbers slightly differently.

So I will await the passenger numbers from Cairns Airport before updating further .......

ACCC will not oppose Aquis takeover of Reef Casino

It was always highly unlikely it ever would:

ACCC will not oppose Aquis' proposed acquisition of the Reef Hotel Casino

21 August 2014
The Australian Competition and Consumer Commission has announced that it will not oppose the proposed acquisition by Aquis Reef Holdings (Aus) Pty Ltd (together with its related bodies corporate, Aquis) of the Reef Hotel Casino (Reef Casino) in Cairns.

Aquis currently has no existing casino interests in Australia or elsewhere in the world, but proposes to develop a large resort and casino 15km north of Cairns (the Aquis Resort). If it proceeds, the Aquis Resort would be the second casino in Cairns. In a related transaction, Aquis also proposed to acquire the Canberra Casino from one of the main unitholders in the Reef Casino Trust.

“The ACCC carefully reviewed the proposed acquisition by Aquis of the Reef Casino because it has the potential to reduce the future number of casino owners in Cairns from two to one.” ACCC Commissioner Jill Walker said.

“However, the ACCC’s investigations suggested that there was likely to be limited competition between the Reef Casino and the Aquis Resort in the absence of the proposed acquisition.”
“Development of the Aquis Resort is still at an early stage, and is conditional on a number of factors. Nonetheless, the ACCC understands that the resort, if developed, would be of a scale that is unprecedented in Australia. The total expenditure required to develop the first stage alone would be over $5 billion.”

“The ACCC was satisfied that, if developed, the Aquis Resort will focus primarily on international VIP customers because the size of its proposed investment would require a much higher return than could be obtained from non-VIP customers.”

“In contrast, the vast majority of the Reef Casino’s customers are non-VIP Cairns residents and domestic tourists, making bets at relatively low stakes. The Reef Casino makes most of its revenue from gaming machines, rather than from table games.”

The Aquis Resort is currently one of two proposals shortlisted by the Queensland Government for the award of up to two casino licences as part of regional integrated resort developments. Gaming facilities at the Aquis Resort would include 750 gaming tables and 1500 gaming machines. If it proceeds, the resort will also include eight hotels, high-end retail shopping, an aquarium, two theatres, and convention and exhibition facilities.

The Queensland Government expects to make a final decision on whether the Aquis Resort will receive a casino licence in 2015.

The Reef Casino is a combination hotel and casino complex in Cairns. It has 128 hotel rooms, 38 gaming tables and over 500 gaming machines.

The proposed acquisition is of all the units in the ASX-listed Reef Casino Trust (RCT) and all of the issued shares in Reef Corporate Services Limited and Casinos Austria International (Cairns) Pty Ltd (the responsible entity of the Reef Casino Trust and manager of the casino respectively).
The decision is available on the ACCC's public register.
 
Release number: 
MR 212/14
Media enquiries: 
Media team - 1300 138 917



 
 

 




 

Tuesday, August 19, 2014

There's something about China Poly Group

The Aquis flying circus landed in town at the weekend with an investor roadshow covered in traditional enthusiastic fashion by Nick Dalton at the Cairns Post: Hong Kong tycoon encouraged by interest in Aquis resort plan

There was one potential investor particularly noted:
They included China Poly Group Corporation president Zhang Zhengao – on his first visit to Cairns – who has had a business relationship with Mr Fung for 20 years
Poly Group specialises in international trading and real estate and is ranked 63rd in the top 500 Chinese companies. Its assets total more than $67 billion.
China Poly Group is a large State Owned Enterprise (SOE) with historical links to the People's Liberation Army (PLA). Poly was founded and directly controlled by the PLA until 1999 when it was formally handed over to the central authority. It's reported to retain close links to the PLA.

It does indeed specialise in international trading and real estate. However the international trading component would appear to be mainly military arms which has attracted some controversy: China's Poly Group: The most important company you've never heard of
Picture the China Poly Group Corporation as the first of a set of Russian nesting dolls. Each of the larger wooden baubles represents a new line of diverse subsidiaries that shield its cloistered, princeling-controlled core.
It does sound like an interesting company ideal as an investor in Australia's largest casino:
On any given day, observers say, Poly might ship arms to Zimbabwe or Sudan, announce plans to build a highway from Iraq to Syria or win China distribution rights for Ferrari or Maserati. The next day, it might hold a public offering on the Nasdaq for a movie distributor, win a lengthy exclusive fishing rights deal for Mauritius’ economic waters, be accused of bribing a former Namibian defense minister or get linked to missile sales to Iran or Saudi Arabia.
But, until recently, it was mainly known for Poly Technologies, China’s biggest arms exporter.
The arms trading activities have attracted the interest of Amnesty International for human rights issues and also arms trading violation sanctions from the USA as recently as last year:
On 11 Feb 2013, the US Department of State imposed sanctions Poly Technologies, saying that the company had violated the Iran, North Korea, and Syria Nonproliferation Act (INKSNA). Poly Technologies denied exporting weapons or technology to nations or regions under UN Security Council Resolution sanctions.[9]
With the usual opacity around the Aquis structure and funding 'Fung-o' indicated in the CP report that investors may be tied to specific components of the project but was vague about the gaming licence. So it isn't clear how any potential investors maybe linked to the gaming licence itself where the applicant is Fung as the sole shareholder. Presumably any further investors in the licence if approved would also require probity clearance. SOE reform has been on the agenda in China recently.

Anyway, our local members managed to share a Chinese feed during the visit where Trouty informs us Mr Zhang "asked pertinent questions about the political stability in Queensland and Australia."
 
Source: Gavin King via Facebook


I hope nobody took home any brown paper doggy bags!

Update: The past associations of Tony Fung and China Poly Group have included business deals such as this previous post here at Loose Change:  Tony Fung: Past business deals and the BVI. You can also visit the ICIJ offshore leaks database to explore the extensive British Virgin Islands corporate network around Zhang Zhen Gao.

Monday, August 18, 2014

FNQ annexes Townsville

I only recently became aware of the Vacancy report Australian Government Department of Employment:
The Vacancy Report contains the Internet Vacancy Index (IVI) which is based on a count of online vacancies newly lodged on SEEK, My Career, CareerOne and Australian JobSearch. The IVI is the only source of detailed data on online vacancies, including for around 350 occupations (at all skill levels), as well as for all states/territories and 38 regions.
The regions here on the map don't appear to correlate with the current SA4 data from the ABS. FNQ looks more like the old Far North zone including Cape York and also extending down to annex Townsville. However this still should be quite useful and trend employment estimates in Cairns and Townsville seem to have tracked quite closely in recent years.

Rick Carr has now adjusted his job ad series in CairnsWatch to include internet ads but not yet sure on the validity of this series over such a short time frame. Counting internet ads isn't always easy and I believe there were issues with the long running ANZ series during the transitional phase some years ago.

Anyway, as an initial post a quick compilation of the internet job ads for 'FNQ' by ANZSCO category. This is the 3 month moving average numbers with an index series also provided.

 
 
Indexed series for Queensland regions:
 


Sunday, August 17, 2014

Why does Manunda need roads anyway?

Subsequent to a recent post on benchmarking council rates there was some productive feedback and exchange with council. The difficulty is how to provide a rates benchmark to which the average punter can relate when there are often extreme differences in land valuations between councils. The relationship between land valuations and rates is frequently misunderstood and misrepresented.

While that is appreciated the council methodology still benchmarks land valuations rather than rates. The previous post related specifically to rates for the land category for a residential home on a block of urban land. This is the way I would do it and benchmarked against Townsville.

 
 
This expresses rates compared to the median for each council across a range up to twice the median value. Cairns is lower across the entire spectrum and this included the 15% "early payment" discount on the general rate component in Townsville. Cairns maybe however be less progressive and minimum rate structures generally are actually something I perceive as a problem.
 
The median for each council area is 1.0 irrespective of differences in land valuations between councils. Twice the Cairns median is above the median for any suburb and for perspective probably puts a property higher up the hill in a suburb like Freshwater with an outlook. Babinda is about half the median value.
 
The current median residential value for rates in Cairns is $143k while Townsville is $147k. The average indicated by Cairns is $165k while I think Townsville refers to $161k. This is probably what you would likely expect with a different distribution and Cairns skewing higher on the average with a longer tail above the median. The Cairns average is 1.15 x the median.
 
Fixed charges should also be taken into account although this doesn't make much difference relative to Townsville. Townsville is cheap on garbage and expensive on water access which evens out to within a few dollars. Comparisons on water usage are probably not much use really. If water per kL isn't cheaper in Cairns than elsewhere there would be something wrong. A comparison with Mackay is intended as soon as I get my head around some baffling components of the Mackay banding numbers.
 
That doesn't mean this category is the only consideration. My speciality of strata rates is mind boggling in complexity and would defy any comparable benchmarking of this kind. My own strata general rates would be about 25% less in Townsville. Perhaps revenue per rateable property by category would be appropriate along with revenue per category.
 
Finally as an aside, why should there be a progressive element in general rates related to land valuation at all? The principal argument actually relates to the virtues of land taxes of which I am an advocate. However for those living on more highly valued blocks in the suburbs who may complain about progressive rates you were done no favours this week by Joe Hockey: Fuel expenditure and vehicle ownership
 
To re-paraphrase Joe it would seem that more affluent people drive more and with bigger vehicles which contribute proportionally more to road use and damage. Consequently Joe has provided a reason why the more affluent should be paying higher rates on a cost recovery basis. I don't even know why Manunda needs roads anyway?

Thursday, August 14, 2014

Parsing Participation

Regional employment data for July released today by ABS with commentary at Conus: Great jobs results for Cairns in July

The only problem I have is this:


Highlighted is a trailing 12 month rolling average of the difference in percentage points between the Cairns participation rate and the Queensland rate, although the trend does appear also to at least have halted the decline and started to turn around. Still a difficult position to reconcile though and I will resist gender commentary on the role of the female rate in that decline. However I will note that as for the last couple of months the female - male unemployment rate split remains unlikely at 3% - 10%.

Further commentary today at Conus: TSV v CNS; jobs and the Participation Rate

Tuesday, August 12, 2014

Can Chinese tourists fill the mining hole?

A post at Macrobusiness who are sceptical: Can Chinese tourists save Australia?

A good read with some themes previously covered here also on exchange rates and tourism deficits, and which refers to a probably paywalled post at BusinessSpectator The Australian by Alan Kohler:
More importantly, Chinese tourists stay the longest and spend by far the most: $5.1 billion in the year to March, according to Tourism Australia data, or $7343 each — double what the Kiwis spend…
That is possibly correct but perhaps not relevant to future trends. When I looked at this previously, not just here but in the U.S.A,  the Chinese longer stay and spend was skewed by education, family travel, and perhaps less reputable sources. As they say in investment projections past performance should not be assumed as an indicator of future performance. As growth in Chinese tourism moves to the middle class expect this perhaps to revert towards the mean?

Friday, August 8, 2014

Another Aquis EIS blooper?

I wish I had taken the time for a more detailed look at the Aquis EIS before the submission deadline. One aspect I had noted for another look was the Deloitte modelling on employment presented in Table 13-9 TOP TEN OCCUPATIONS PROJECTED TO BE IN HIGHEST DEMAND.

These are presented in the EIS for both peak construction in 2017 and full operation in 2017, with the data sourced from Deloitte. The occupation classifications and skill levels are ANZSCO classifications from the ABS. I have re-sorted the table based on skill level with 5 being the lowest skilled and 1 the highest.

Construction 2017:
Occupation
Skill Level
Jobs
Construction Managers
1
473
Retail Managers
2
231
Office Managers
2
223
Building Technicians
2
210
Carpenter & Joiners
3
532
Electricians
3
515
Plumbers
3
325
General Clerks
4
268
Earth Plant Operators
4
260
Sales Assistants
5
448
Total
3485

So I can also graph the skill profile of the top ten occupations:

 
 

Nothing unexpected there so lets move forward ten years:

Operations 2027
Occupation
Skill Level
Jobs
Bookkeepers
1
810
Retail Managers
2
1707
Hairdressers
3
1304
Real Estate Agents
3
1016
General Clerks
4
1218
Gaming Workers
4
1200
Receptionists
4
954
Sales Assistants
5
3018
Commercial Cleaners
5
1026
Checkout & Cashiers
5
809
Total
13062


As probably expected this is very heavily skewed to the lowest skill level occupations. However this does represent just the top ten occupations which is only a proportion of the modelled 53,000 indirect jobs at 2027. The full modelled skill profile in 2027 compared to the current profile for the regional economy would have been a useful inclusion.

What struck me also though was the inclusion of 'bookkeepers' as the highest skill level 1. This is from the text of the EIS:

Table 13-9 outlines the occupations that will be in most demand during the development and operation of the Aquis Resort by the two digit ANZSCO categories developed by the ABS. Workers in these occupations would either be directly engaged by Aquis or already be employed in supplier businesses. Ratings for skill levels have been defined from 1 to 5, with 1 representing occupations that require the completion of a bachelor degree of higher and 5 indicating a Certificate Level I or no on-the-job experience is needed.


I have checked out the latest issue of ANZSCO at the ABS. This is a big excel file which progressively breaks occupations down into sub-groups. If I have the right section then 'bookkeepers' appears as a four digit classification (5512) with a skill level 4? This a sub-group of 'accounting clerks and bookkeepers'. Perhaps I am looking in the wrong place or could it be a typo?

Thursday, August 7, 2014

Arrivals older and more feminine

The news will all be all about the latest unemployment numbers but the ABS today also released short term arrivals and departures for June. This month also included a Feature Article: International Movements:
In the year ended June 2014, there were 32.6 million crossings of Australia's international borders (original series). This represents 1.4 crossings per person in the Australian population. Ten years ago (2003-04) there were 18.6 million border crossings, representing 0.9 crossings per person in the Australian population. The majority of movements in 2013-14 were short-term (96.5%). Short-term movements have an intended duration of stay in Australia, or absence from Australia, of less than one year.
As we know the trend over the past decade has been dominated by residents departing with their appreciating $AUD:



 Short term arrivals on our shores girt by sea have also become more feminine in the past ten years:
An equal proportion of males and females arrived in Australia for short-term stays in the year ended June 2014. Previously, more males than females arrived for short-term stays. The short-term visitor arrival sex ratio (the number of male arrivals per 100 female arrivals) was 107 males in 2003-04 and 100 males in 2013-14. The highest sex ratios were recorded in the 40-44 years age group in both 2003-04 (153 males) and in 2013-14 (126 males). The lowest sex ratio was recorded in the 20-24 years age group in 2003-04 (75 males). In 2013-14 it was also in the 20-24 years age group (80 males per 100 female arrivals).
My presumption would be that the 40-44 years age group there is skewed by business travellers but not sure why the 20-24 age group should be so significantly female? Arrivals are also growing older with the proportion over 60 increasing from 13.1% to 17.8%.

Previous post: Tourism and the exchange rate

Wednesday, August 6, 2014

Economic Modelling: a device for bamboozling the public

A column from veteran economics correspondent Ross Gittins at the SMH today includes some cynical comments on economic modelling by consultants: How the renewable energy target affects the cost of living

Disregarding the headline, Gittins takes issue with conflicting economic modelling by two leading economic consultants ACIL Allen and Deloitte Access. His conclusion:
Why have two leading economic consultants reached such opposing conclusions? Perhaps because Deloitte’s modelling was commissioned by the Chamber of Commerce and Industry, the Business Council and the Minerals Council.
Deloitte doesn’t conceal that its modelling is in reply to ACIL Allen’s. Would it surprise you if the fossil fuel industry wanted to see the renewable energy target abolished and was alarmed to know that modelling commissioned by the review had demolished the argument that continuing the target would add to people’s electricity bills? Now the review will be able to pick whichever modelling results it prefers.
How did Deloitte reach such different results? By feeding different assumptions into its model. It seems to have assumed the cost of wind farms won’t fall over time (which it probably will), whereas the price of gas for gas-fired generators won’t rise much (which it already has).
Regrettably, economic modelling has degenerated into a device for bamboozling the public.
Deloitte has also provided economic modelling for the Aquis EIS. I had intended a thorough review of the economic and social chapters of the EIS prior to closure of submissions but procrastinated too long with weekend diversions. However some things noted from the economics chapter include such as this commentary and supporting data:
The recent decline in mining and resource activity across Queensland has also been felt in Far North Queensland where unemployment rates have climbed up to 7.0%, compared to the rest of the State at 6.1%  (see Table 13-3). Workforce participation for this region is also somewhat lower, at 59.6% as opposed to 62.2% for the Queensland level.

The narrative and table appear rather inconsistent here. Unemployment in FNQ only recently climbed to 7% with the resources slowdown? The table appears to refer to 2011 when resources were going gangbusters rather than anything recent? I can't reconcile the numbers for either unemployment and participation rates with anything from any relevant ABS monthly series. The employment figures are presented as FTE (full time equivalent) so perhaps there has been some adjustment for this somehow or the data is related to the 2011 census?

There is modelling on tax revenues but I can't find any reference to what gaming tax rate has been assumed, although they have provided a discount rate for NPV. I previously posted on different gaming tax rates in Queensland with Reef Casino currently at a concessional rate. There is also reference to employment relative to a seemingly undefined counterfactual.

How much validity then should we attribute to any modelling? I would contend that an appendix with appropriate supporting detail and assumptions on modelling may at least be appropriate, as is also suggested by the terms of reference for the EIS. However all that appears to be provided is the following in references: "Deloitte Access Economics (2014). Aquis Resort internal memo regarding economic profile and impacts."

The Initial Advice Statement from Aquis last year included output from KPMG modelling with employment projections widely spruiked in the PR blitz. Any attempt though for either Aquis or the Coordinator-General to release the actual KPMG report was futile. Interesting aspect there is that the number of direct construction workers seems to have shrunk by several thousand with the revised proposal submitted in the EIS.

Renowned model sceptic Richard Dennis from the Australia Institute also posted again recently on economic modelling which includes discussion of input-output and CGE models: Economic models often biased by vested interests:
The only thing that can be said with certainty is that at least one of the modellers is 100 per cent wrong.
 
The Deloitte modelling for Aquis is CGE.

Thursday, July 31, 2014

Building approvals: the south fights back?

Building approvals data from the ABS were generally weaker than expected in June although there was a decent bounce for the month in Cairns. Details and trend analysis at Conus: Building approvals slip but the FNQ data holds up

Pete has some commentary there of an improving trend on the Cassowary Coast. Looking at the regional SA2 data the way was led by Cairns-South with 38 approvals including 18 at Edmonton. That is the first time since 2012 that the South has strung together two successive monthly wins over the Aquis-infused North. So it could be that the southern regions in general may be looking stronger and approvals more balanced across the region.


For the now completed financial year that still leaves Cairns LGA languishing in last place for approvals relative to population compared to other large councils. However there have been reports that the significant strata proposal from Singapore's Aspial may not be far away : Approval sought for $200m seven-tower project on Spence St Cairns

I also previously posted on the most recent land valuation for this vacant Spence St site from the Valuer-General: Land valuation weirdnesses revisited. I did send a query to the V-G but didn't receive a reply.

It will be interesting to see how this project is marketed with overseas investors being significant players in capital city apartments. While this has mostly been from China there has also been growing interest from Singapore following restrictions there to cool the property market: Singaporean investors hungry for a piece of the Australian housing market; Singapore's central bank warns residents against investing in overseas property markets; Singapore house prices are now falling


Note: despite the comment by the Cairns Post that Aspial is a "major builder around Australia" as far as I am aware they haven't yet built anything here, but have acquired some high profile sites in the past year. The acquisition of the Melbourne residential tower project has been suggested by some pundits as brave given the project had been on the drawing boards a while in the well supplied Melbourne market.

Sunday, July 27, 2014

Airport passenger numbers stay grounded in June

Cairns Airport monthly traffic can be sourced either from the airport website or the ASX release by stakeholder Auckland Airport (AIA). As can be seen these don't necessarily provide exactly the same information:

 
My presumption has been that the AIA numbers (top) strip out the domestic passengers through the international terminal rather than lump them in with T1 transits as the airport does, but may not also strip out domestic transits. AIA issued a subsequent correction on the April numbers which hadn't seemed to correlate on any basis. Previous attempts to reconcile some historical numbers from the airport have defied my limited skill-set and patience.
 
Regardless of the precise numbers there was a surprise decline for domestic traffic in June from the previous year which the airport attributed to a later school holiday:    
T1 (International) had a 7% increase of arriving and departing passengers on jet flights which operated in both June 2013 and June 2014.These routes are Auckland, Guam, Hong Kong, Osaka and Tokyo. T2 (Domestic) numbers were reduced by the later start of the mid-year school holidays compared to 2013.
A quick look and the later school holiday start really only applies to Queensland and not interstate while the period for all still straddles the month end. So will have to wait and see how strong the rebound is in July which is always the strongest month of the year anyway. The EAI (Esplanade Activity Index) has appeared quite buoyant so far this month from casual people watching observation.

June also coincides with weaker post-budget consumer sentiment which have included warnings of weakness from such as Flight Centre and the airlines. The start to winter down south was also comparatively balmy although has since turned a tad more chilly.

Interesting commentary also there to try and make something positive from the weaker international traffic although including the comparative data is a good move. This was the June commentary from AIA: 
In the past year passenger volumes at North Queensland Airports have been impacted by a number of factors including service reductions, schedule changes, cyclones and the downturn in the mining industry (impacting predominantly Mackay). However, total passenger numbers at Cairns have grown 2.6% for the 12 months ended 30 June 2014 on the back of 4.6% domestic passenger growth. This domestic growth has developed due to more international passengers visiting Cairns on domestic flights from within Australia, following reductions in direct international services to Cairns.
June is the first Y-o-Y negative growth month since last November which was itself coming off the back of high traffic for the previous years eclipse. This is my graph of monthly domestic growth with a 12 month moving average based on domestic terminal numbers (ex transits) from the airport:

Source: Cairns Airport
 
Note: I think I made a comment last year that September school holidays in Queensland had shifted to align with NSW and Victoria rather than the previous weeks overlap. The mid year break has now also shifted back a week to align the three rather than a weeks overlap. Is this a positive or negative for tourism? I would have thought negative?

Friday, July 25, 2014

Benchmarking council rates

A report noted at the Cairns Post this week: Aquis: ‘A whole new paradigm‘ to finances and infrastructure Cairns would need to support it. Also reported at the ABC: Mayor warns of Aquis project 'wild ride'

Behind this story was a rates benchmarking analysis tabled at this weeks ordinary meeting of Cairns Regional Council, as reported by the Cairns Post:
The report compared rates and utility charges across several council areas for a residential property paying the minimum rate; a residential property with the average Cairns valuation of $165,000; and a strata title property, (which is usually an apartment or townhouse), paying the minimum rate.
Here is the graph from council benchmarking the average cairns valuation of $165k for a residential property.

 
The first thing to note is why use an average valuation at all? It is more typical to refer to the median (middle number in a count) than an average for property and land valuations. This is what the Valuer-General reports. Almost the only people who consistently refer to and use averages this way are councils in their budget spin.
 
The average will typically skew above the median for property which is why it is typically ignored. The average adopted in the council analysis is well above the V-G reported residential land median for Cairns of $143K from the most recent valuation. I have previously posted the V-G medians by suburb and if it isn't too confusing you have to go out to Kewarra Beach, which is nearer the top of the range, to find a suburb with a median which matches the Cairns average being used here by council. Perhaps there is some intricacy in council land categorization I am missing but don't think it makes much difference to my criticism of the flaws in this analysis anyway.
 
More critically, why apply the Cairns average (or median) to a benchmarking comparison with other councils? There are substantial differences in land valuation between the regions and particularly SEQ. General rates are determined by the relative valuations within each council area so the median (or average if you really want) for each is what is relevant.
 
To illustrate let me graph the median land valuations for the larger relevant councils in the study provided by the V-G and the general rate component for each council based on the $165K valuation across all:
 

 
 
There is a clear inverse correlation here. Yes, the council methodology effectively provides a benchmark comparison of land valuations between councils rather than any rates benchmark. Councils with higher land valuations will have a lower rate in the dollar for general rates.
 
So let's more appropriately graph the general rate based on the median valuation for each council from the most recent V-G data available:
 
(data to be confirmed and reformatted in a subsequent post)
 

Compiling the data on this from each council can be a tedious task. I need to go back and confirm some of this data compiled last night and particularly Townsville and Mackay. Unlike council staff I am not being paid for the time. Median valuations for Sunshine Coast and Rocky were not updated this year and de-amalgamations there may have some influence. Also these numbers don't account for any early payment discount.
 
I don't think any of that is going to refute the criticism here that the council analysis methodology on general rates comparison is flawed. The Mayor in comment specifically drew attention to the lower rates base in Brisbane. However as soon as we adopt an appropriate median comparison for each council this illusion evaporates like the SEQ water supply in a drought.
 
The Brisbane general rate on this remains just a few dollars below Cairns but from eyeballing the other council data on their graph total rates in Brisbane actually go past Cairns, mostly attributable to water usage. Note also that on any measure Cairns rates are not comparatively high as is sometimes claimed, and were not either under the previous administration.
 
Note: I left out some of our neighbouring regional councils from the council analysis for simplicity and relevance but this may be taken up further at Conus: How NOT to compare rates across councils

Wednesday, July 23, 2014

Reef Casino trading well below Aquis offer

There has been some interesting media reports and comments from our local vanguard re the ACCC intervention on Aquis bid for Reef Casino deserving of a further post: Cairns civic leaders join forces to reject Aquis anti-competition claims

Submissions are now closed on that with a decision next month. I would have thought it probably unlikely the ACCC will block the takeover although the risk of that is possible and the ASX market action in Reef (RCT) has appeared less than fully confident in the outcome.

RCT is currently trading down at $3.68 following the ACCC announcement, well below the offer price of $4.354. That would provide a nominal return of 18% should the takeover be consummated. An annualised return calculation on that could be quite impressive depending on time to any successful completion. The offer is open until 31st October although could be extended depending on the probity and licence process.

A simple chart of trading over the past year and three significant events stand out. The initial announcement last November, followed by a formal takeover implementation agreement in February, then the ACCC intervention this month.


As previously mentioned RCT is a thinly traded stock with comparatively low daily trading volumes. Trading activity in RCT during this recent period appears more indicative of a relatively substantial player(s) reducing risk persistently feeding the sell side rather than nervous mums and dads bailing out.

Disclaimer: This is commentary and NOT investment advice. I maintain a small holding in RCT.

Saturday, July 19, 2014

Boneheaded Stupidity

Way back in 1990 was when I made my first trip to Cairns on an east coast sojourn. The subsequent year I migrated to Queensland from an only slightly more southern state. At that time a prominent local business in Emerald attempted to secure its monopoly on local tyre supply with a new mining development by displaying, a 'keep out not wanted here' sign to all new employees who had come to work in the largest underground coal resource development in Australia, and where Queenslanders had limited skill depth and experience.

I recall my first weekend voyage into Rockhampton subsequent to migration. I was confused. Why were all the shops in the largest shopping centre pulling down their shutters at lunchtime on a Saturday? Well, that was Queensland apparently and it was for the good of our local economy and the virtue of decrepit undercapitalised independent retail outlets with a stock range less than the expectations of the average consumer, or possibly even the proprietors themselves.

Roll on twenty-three years and things have changed in Queensland, not much.  Unlike less fortunate locations in the state as an international tourist centre we privileged in the Cairns CBD can now decadently buy lamb chops right up until 9pm of a Sunday night. Almost unthinkable in Joh's day. Well most days we can, but yesterday was Cairns Show day.

A fine day it was too. An evening walk and a pleasant view to take in the ambience and then a detour through the local CBD Woolworths to gather supplies for the nights culinary adventure. But what? The door was blocked by security at 5.30pm right in the middle of the evening tourist rush attempting to stem the flow of shoppers. Was it a terrorist threat or perhaps a mass shooting I asked? No, it was Queensland shopping laws.

The unpatriotic disgrace of consumers attempting to consume on Cairns Show day! How dare they! Why weren't they doing the proper thing and attending the show to smell cattle faeces, observe prize-winning sugar cane varieties, or partake of a dagwood dog?

A group of Chinese tourists appeared particularly confused and only my heroic intervention prevented a riot overwhelming the security man and looting of the entire stock of homebrand milk powder at the CBD Woolworths!*

Queensland open for business while tossing tourists out of shops? Cutting red tape? Give me a break, surely even an Ass Tourism Minister wouldn't swallow that when it comes to shopping regulation?

Note: Queensland Economy Watch has been a keen advocate for reform of retail regulation.


*Possibly exaggerated.