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?

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.

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               

#Cairns MP's urging the PM to consider a visa overhaul during her visit to #PNG, starting tonight. How would it benefit? Details #WINNews

 

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?

 

 

 

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)

OMFG!

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



"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

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.

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.

 

 

  

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.

Cairns Post does it again!

The Cairns Post has a yarn from Damon Guppy on rising personal bankruptcy in Cairns: Hip pocket pain hits Cairns

"THE region's hangover from the tourism and construction slumps continues, with Cairns recording another annual rise in bankruptcy cases.
  
More than 315 Far Northerners filed for personal insolvency in 2011-12, according to the Federal Government's Insolvency and Trustee Service Australia.

The Cairns postcode of 4870 registered the 11th highest number of bankruptcy cases in Queensland with 96, an increase of almost 20 per cent compared with the previous financial year.

Business leaders say the high figure is not surprising, particularly given the region's industry woes and high unemployment over the past five years."

The Cairns Post has similarly previously reported that we were drowning in debt based on postcode, conveniently ignoring that 4870 is among the largest population postcodes in Queensland so misrepresenting the actual position. The primary data this time can be found at Insolvency & Trustee Service Australia which includes population data in excel format.

ITSA report that the "ratio of bankrupts to the general population in Queensland is 1 bankrupt to 660 people in 2011-12." The ratio for Cairns postcode 4870 is 1 bankrupt for every 691 people. This places Cairns 129th in Queensland rather than 11th. Well done Cairns Post!

Update: This was also subsequently noted in the Cairns Post report: "Cairns also recorded Queensland's fourth highest rate of debt agreements". No, Damon, that is the raw number and not a rate at all. The rate for Cairns 4870 would be 67th highest mate.

Weather Watch

April is at an end so I thought an updated rainfall chart. Again, this is not actual rainfall but variation from the monthly average for Cairns Aero. Black is a 6 month moving average and red an annual moving average.

While there were some good falls reported in some locations around the region earlier in the month these mostly bypassed the city and airport. Consequently April was still 100mm below the historical monthly average at the Cairns Aero weather station. Mareeba and Low Isles both recorded higher rainfall than Cairns.

That is the ninth consecutive month of below average rainfall for Cairns. With Cyclone Zane swirling towards Cape York to start the month perhaps that run could be broken in May.

The fifth pillar?

Loose Change posted last year on the decision by the incoming LNP Government to remove the waste levy which had been only recently introduced at the start of 2012. The Member for Barron River in particular was hyperbolic on the destruction the waste levy had caused: Queensland wasted: doing the sums for Trouty:


"The waste levy effectively brought the economy in the construction industry to a grinding halt." 

"The Labor government were blinkered to the devastating negative onflowing repercussions of this ridiculous tax." 
 

I pointed out at Loose Change that removal of the levy may not be a smart policy and that the laws of unintended consequences may apply. There had been a cost-benefit analysis which appeared sound and the Liberal comrades south of the border had just decided the NSW waste levy was such an effective policy that they would hike the rate.

The relevant minister at the time dismissed the possibility of interstate arbitrage. Later in the year reports started to appear of just such an arbitrage including contaminated waste: Queensland: The dump state?


"Drivers heading north on the Pacific Highway will be jostling a rising number of B-double trucks following a decision by the Queensland government earlier this year to remove a levy on waste going to landfill."

"As a result, an increasing number of trucks are taking Sydney's trash up the Pacific Highway to dump it across the northern border, with the waste industry estimating 1,000 tonnes of waste a week, or around 25 B-doubles, is now on the highway."


Apparently this arbitrage has even extended to digging up landfill in NSW and transferring it to Queensland: Beautiful one day, NSW's tip the next:


"Waste operators have been digging up landfill in Sydney and trucking it to cheaper tips in Queensland to cash in on incentives supposed to encourage recycling.

The environmental regulator has told two Sydney landfill operators to stop exhuming waste and has said it will change licence requirements to stop others doing the same.

The practice, which amounts to digging up landfill and reburying it elsewhere for no environmental benefit, has been triggered by the widening gap between the cost of dumping waste in NSW and in Queensland."



"But Mr Khoury said the only factor limiting the flow of waste north was a finite number of trucks.

''Queensland will continue to increasingly become NSW's dumping ground unless there are some regulatory changes,'' he said.

The NSW waste levy will rise to about $108 in July"

Queensland is the only state without some kind of similar waste levy scheme and remains an inefficient high waste state reliant on regulation (red tape) rather than market based Pigovian solutions. Perhaps landfill garbage dumps can become the fifth pillar of the economy?


Note: With reference to the fifth pillar the previous post at Loose Change: How many pillars should an economy have? is currently being peer reviewed for publication in the Rogoff-Reinhart Journal of Research Excellence. Loose Change has developed patented proprietary software which automatically adjusts spreadsheet results for alcohol consumption!


   

Sugar marketing conundrum

Loose change previously posted profusely on the strategic maneouvres in the sugar industry which saw MSF, the largest FNQ miller, taken over by Thailand's Mitr Phol. Turmoil has now erupted as Tableland sugar growers revolted over marketing arrangements and will direct their cane to Mossman Mill for next years season.

Mitr Phol MFS have invested heavily in a capital upgrade to the Tableland Mill but apparently have lost the cane? This has been extensively reported at ABC Rural: Cane supply shakeup could stretch further. This is particularly noted:

Maryborough Sugar Factory (MFS) rejects claims by Tableland growers they were being forced to break a longstanding relationship with Queensland Sugar Limited (QSL), which markets most of the state's sugar.

But while MFS comes to terms with a 700,000 tonne hole in cane supply to its Tableland mill, there is mounting disquiet in the Babinda and South Johnstone growing areas near Innisfail, where MFS also owns mills.

Innisfail Canegrowers chairman Joe Marano says now more than ever the miller should be listening to the concerns of growers.

"I have repeatedly said to MFS that we're happy for them to mill our sugar but we just don't want them playing with our wallets," he says.

"We have a stake in QSL that's owned by growers and millers, so why wouldn't we go with a company we have a stake in?

"I don't care what Mulgrave and Maryborough want to do... they're happy to go with Maryborough Sugar.

"Tableland growers repeatedly said that [they wanted to market through QSL] and obviously MFS weren't listening so if this doesn't attract their attention I don't know what will."

 

This is all somewhat curious given that the marketing issues are not new but were a significant part of the previous Aussie-owned MFS strategy when it was headed up local CCIQ identity Brett Moller from the Gordonvale CBD! Moving away from QSL (the old monopoly marketer) was then a key part of the strategy!

 

The rationale that marketing should happen though QSL has also not been adequately explained given the history as posted by ABC Rural today:

 

In 2010, QSL was unable to fulfil its export contracts after disastrous weather kept harvesters from getting onto paddocks and cane into the mills.
QSL forward-sold more sugar than it had in its reserves and was forced to buy back futures contracts at premium prices while also importing sugar from other producers.
The incident cost the industry over $100 million and some growers are still in legal disputes with QSL over the individual costs passed on to them as a result.

To be blunt, back in 2010 QSL stuffed up their hedging strategy in a significant way. I'm not sure I would be as forgiving as the growers for the reasons they have stated, and not sure the reasons have actually been stated and explained?

Tourism Satellite Account

The ABS has a release today of a Tourism Satellite Account for 2011/2012 with much interesting information and worth a look:

Tourism is not an industry or product in international statistical standards but it is commonly considered an industry by tourism researchers and economic analysts. In the Australian Tourism Satellite Account (TSA), the direct contribution of the tourism industry to the Australian economy has been measured using the demand generated by visitors and the supply of tourism products by domestic producers.

 

Reinsurance - villain or hero?

The SMH has a report that conditions in global reinsurance markets have improved with increased supply of capital and may ease pressure on insurance premiums: Premiums that soared may soon be on way down

One of the world's largest reinsurance companies says the cost of protecting Australian underwriters against the risk of natural disasters has peaked, and may fall over the coming years.

After a spate of bushfires, floods and earthquakes in Australia and New Zealand in recent years, the price of reinsurance has risen significantly for companies such as IAG and Suncorp, leading to sharp rises in premiums.

But in a sign pressure on premiums could be easing, Swiss Re says the higher prices have attracted billions of dollars to the reinsurance market in the Asia-Pacific region.

The influx of capital has increased the supply of reinsurance, which is expected to cause costs to stay unchanged or fall.

Reinsurance costs have taken much of the blame for insurance premium hikes in tropical Queensland, particularly strata insurance. Reinsurance has been difficult at times in recent years and increased availability of reinsurance may also assist greater competition in that market.

This report from Suncorp discusses some issues around reinsurance and raises some points to come back to: Reinsurance - villain or hero?

War on Multipliers

The war on multipliers has scored a battle victory in the NSW Land & Environment Court. Peter Martin has posted on a decision which overturned approval for a Rio Tinto coal mine in the Hunter Valley:  Really Rio? The judge who put its claims about jobs to the test

This is an excellent expose on the Loose Change theme of dodgy consultants multipliers with Peter Martin also posting the court transcript of Richard Denniss v Andrew Searles. In this case Searles is the consultant for Hunter Valley Research Foundation who identified a massive employment multiplier for the Rio Tinto project.

This isn't new and a Senate estimates question last year almost perversely from a Greens senator drew a response from the current Treasury Secretary that there is no industry employment multiplier when an economy (currency zone?) is close to full employment. Resources are rather transferred.

Denniss has estimated that input-output industry multiplier models would employ 200% of the labour force. I think that maybe conservative at a regional level where consultants reports for the Far North economy with multipliers for everything from the Bruce Highway to the Gordonvale CWA sewing bee should easily employ at least 200% of the labour force and eliminate unemployment entirely!

Employment breakdowns

The Labour Force Regions Brief is published each month by the Government Statistician based on the monthly ABS regional data. This provides a summary and some comparisons for each region.

This also includes a breakdown on full-time and part-time employment although the methodology here isn't specified. I presume this is derived somehow from Table 02 which includes this data for Balance of Queensland (ex Brisbane)? A 12 month moving average is used for all data.

 

 The regional summary provides a useful comparison of the Queensland regions.

 

 

This also provides a good demonstration of the interaction between the unemployment rate, employment, and the participation rate. This is particularly evident in the dichotomy that has emerged between Far North and our neighbours in North-NW (Townsville) as posted last month.

 

The 6% point dive in the North-NW participation rate still seems too extraordinary. The consequence is that while North-NW has the lowest unemployment rate in Queensland it is at the opposite end of the regional scale with employment down 4% despite good March numbers. Contrary to that Far North combines decent employment growth with the highest unemployment rate.

 

Note: ACTU economist Matt Cowgill recently posted analysis of the aging population demographic impact on participation rates which also provides something to think about although I doubt it could explain the fall in Townsville:  Why is the participation rate falling

 



 

 

Approvals & Stocks

I have posted previously on the residential land development activity profiles from the Qld Government Statistician (OESR). These were initially presented at an OESR regional roadshow back in 2011 which I attended and subsequently posted. These profiles provide an interesting perspective on building approvals and activity.

They have been updated since but don't think I posted as I have just discovered a previously unposted draft from last year. This is the table for the most recent data to the September quarter 2012 which tracks the stock of approved residential building lots. While the outstanding approved stock is below the peak in 2007 it remains substantial, and is also above Townsville at September 30.

Seasonal moves on employment?

The Far North unemployment rate jumped back up to 9.1% in March. While disappointing it should still be considered within the context of monthly statistical volatility and seasonal factors. Conus has an analysis of this months numbers:  FNQ Unemployment up but the trend improvement remains intact...just

The seasonally adjusted and trend unemployment rates derived by Conus are more stable at 7.8% and 7.7% although there are concerns that healthy jobs growth will be required to maintain the recent unemployment trend given the participation rate.

The employment estimates of Far North are typically weak in the new year, as would be expected with the wet season. To demonstrate I have graphed a comparison of employment (thousands) for the December and March quarters since 2007/08 as a 3 month average.

 

The fall this year is typical of previous episodes and retains the comparative employment growth of recent months.

 

Update: Rick Carr has also today posted his latest CairnsWatch. 

 

 



Breaking News!

The Great Barrier Reef has been left off  the Lonely Planet list of the world's top ten dive sites! The Cairns Post front page today shows the outrage at this snub: Big blue over Great Barrier Reef's omission from world's best dive sites

Travel guide publisher Lonely Planet snubbed the world-famous Reef in its new list of the top 10 dive sites in the world, instead including the little-known Cocklebiddy Cave beneath the Nullabor Plain in Western Australia.

Google provides a link to the list at Lonely Planet: Top 10 underwater marvels

Dive into the big blue

13 April, 2010

1. Great Blue Hole, Belize
2. Chuuk Lagoon, Micronesia
3. Manta Ray Village, Hawaii
4. Samarai Island, Papua New Guinea
5. Pulau Sipadan, Malaysia
6. Cocos Island, Costa Rica
7. Gansbaai, South Africa
8. Ras Mohammed National Park, Egypt
9. Cocklebiddy Cave, Australia
10. Rainbow Warrior, New Zealand

What's that? April 2010? News travels fast at the Cairns Post!

PNG investors roll into Cairns

The Loose Change office usually has the radio tuned to ABC Far North. However sometimes, led astray by Hillbilly Watch, should Auntie become a bit dull then local commercial talkback provides a diversion. So it was that yesterday I happened to hear John Mackenzie talk to the state member for Cairns who was in Port Moresby.

The Australia PNG Business Forum is being held this week in Port Moresby and as would be expected given our proximity and links there was a strong representation from Cairns including all levels of Government. The King Parrot made mention of the extreme wealth disparity in PNG and related how, along with Warren Entsch, he had just been on a tour of Moresby backstreets with an ex PNG Government Minister who was looking to do a development project in Cairns. He chose not to name the person.

Loose Change has previously posted on the darker aspects of our connection with PNG. This is rarely (if ever?) mentioned in local media even when directly relevant to Cairns. A quick search threw up some interesting links including this report last October in The Australian:

At a presentation in Sydney last week, Mr Koim told the Australian Transaction Reports and Analysis Centre (AUSTRAC) that six PNG politicians had invested heavily in property in Cairns, and he intimated that the money invested far outweighed their salaries.

Declining AAP's request to name the politicians, who are the subject of the "intelligence gathering" stage of an investigation, in conjunction with Australian agencies such as the Australian Federal Police, Mr Koim told AUSTRAC the funds amounted to A$11.5 million in property deals in Cairns and northern Australia.

The property deals are divided into tranches of A$3.8m, A$1.9m, A$2.3m, A$2.3m, A$2m and A$1.45m, he said." They have bought property and other assets, put money in bank accounts and gambled heavily in your casinos and have never been troubled by having their ill-gotten gains taken off them," Mr Koim told the conference on Thursday.

"Unless the money can be prevented from leaving our country or prevented from entering Australia, the bad guys win and the rest of Papua New Guinea suffers."

Koim is the head of the PNG anti-corruption task force and estimates that almost half of the PNG development budget is lost to corruption. He also commented that "Australian financial institutions have been complicit by turning a blind eye to dirty monies being redirected to Australian connections"

I had intended a post back in February on the latest annual result from Reef Casino. The Cairns Post reported this as though there had been some kind of high roller raid on the casino. The reality seems to be that win rates in that sector had returned closer to the theoretical after an abnormal win rate the previous year for the Casino where PNG high rollers scored a specific mention. Reef then even had the PNG high roller market as a strategic target but there has been no mention of this since.

While a stable and prosperous PNG is in the particular interest of Cairns a previous post at Loose Change suggested some circumspection re dealings may be warranted in the relationship. I'm not sure boasting on talkback radio about cavorting around the backstreets of Moresby with un-named politically connected PNG investors is too circumspect?

Previous PNG posts:

PNG High Rollin'

Transit visas for PNG

FNQ surrounded by unicameral majoritarian tyranny