Wednesday, July 31, 2013

Weather Watch

Time for a seasonal climate update! After a failed wet season and drought further in the hinterland recent months on the coast haven't exactly brought lovely weather for the tourists! The graph is again variation from the monthly average with twelve month rolling rainfall average retaining a shortfall of almost 100mm/month.

 
While recent months have been around average these are the lower rainfall months so wont make up the shortfall. ENSO is currently towards the La Nina end of the neutral band with stable model forecasts.

Regular showery rain has maintained dam levels but Tinaroo remains below levels of recent years.



Meanwhile out west: Creeks that should be running are completely dry in Far North Queensland

Wednesday, July 24, 2013

Chamber Lunch

The annual Cairns Chamber lunch with presentations from Bill Cummings and Rick Carr was held earlier this year and some diversions forced my absence. It doesn't sound like there was really too much different going by the 'daltoned' report in the Post with the comparatively modest headline: Cairns' economy looks brightest since GFC.

A copy of Bill Cummings presentation slides and text have been posted at the Cummings Economics website and I may return and comment on a few aspects later.

THE CAIRNS ECONOMY – RECENT TRENDS & PROSPECTS: Presentation Slides &  Text




Tuesday, July 23, 2013

Three Kings of the LNP

We three kings of Orient are
Bearing gifts we traverse afar.
Field and fountain, moor and mountain,
Following yonder star.
 
So it came to pass that a child was born. Not just any child was to be honoured but "the birth of a baby boy, the Prince of Cambridge, to the Duke and Duchess of Cambridge." The child had a royal title and reported weight (8 pound sixpence) before it even had its own name. Sort of like a thoroughbred horse really!
 
So the three wise men who ruled queensland deemed that their citizens owed gifts to the distant child. However unlike biblical times they could now just do it by a media release. No need to cart gold, frankincense and myhr halfway around the world.

Brisbane shall be lit blue for the boy! Trinkets shall be distributed to babes born on the day! Oh? It was actually not even that day in Australia?
 
O star of wonder, star of night,
Star with royal beauty bright,
Westward leading, still proceeding,
Guide us to thy perfect Light
 
Fuck you Austerity!



Monday, July 22, 2013

Airport update for June

Last month I posted on some apparently softer airport passenger numbers: What happened in May?

In line with seasonal trends numbers at the domestic terminal in June showed a good bounce of 45,112 passengers compared to May. That was an increase of 7.5% over the previous June 2012 which is back close to average growth for the past year. However, trend growth may be difficult to sustain through the latter part of this year because last years numbers were boosted by the eclipse influx in October and November.

 
 
The International Terminal is more problematic which I commented on last month. The airport have changed their reporting this year as explained in their response to my query:
"Cairns has a large portion of international flights that stop at other Australian cities. This means that Cairns is unusual in that up to 1 in 4 passengers using the Terminal 1 are not actually travelling internationally. The data changes were made to reflect the true number of international passengers moving through Terminal 1"
That's good but they have done this by lumping together domestic travellers and transits and it isn't then clear to me how to separate the transits out to determine domestic arrivals and departures at Cairns on international flights. The airport also indicated that weak traffic in May was due to maintenance issues on the Japan route with Jetstar which had restricted flights but had been resolved.

However on any comparative basis the numbers in June recovered only modestly and still don't look that flash. That is before the upcoming seasonal suspension of flights by China Eastern.




Sunday, July 21, 2013

Huge exposure for G20 Moscow meeting!

While the Far North basked in warm winter sunshine there were big events happening elsewhere this weekend! The British Open? The Tour de France? No, it was the G20 Finance Ministers meeting in Moscow!

This is the equivalent annual event scheduled for Cairns next September promised to bring us fortune and fame in the eyes of the world. It's such a high profile event that hardly anyone in Cairns was aware of it and media coverage has been scarce not even getting a mention on ABC news tonight.

If you blinked you may have missed it unless you were watching the financial news over the weekend and that's likely the international exposure Cairns will also get next year. Yes, it is a large meeting in terms of delegates and media attending however as posted last year some of the claims on benefits and exposure have been over the top: G20 Hyperbole?

 The rather mundane final communique can be found here.

Krugman's China Wall

There has been much speculation and discussion in recent months on the China slowdown and rebalancing from investment to consumption. Paul Krugman (the world's most readable economics nobel laureate) has posted a rather pessimistic op-ed at the NY Times: Hitting China's Wall

Yet the signs are now unmistakable: China is in big trouble. We’re not talking about some minor setback along the way, but something more fundamental. The country’s whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits. You could say that the Chinese model is about to hit its Great Wall, and the only question now is just how bad the crash will be.
Krugman's reasoning here on diminishing returns and the supply of peasants to a industrialising economy seems not dissimilar to his analysis of the booming Asian Tigers way back about 1994 and before the Asia Crisis crunch of the late 1990's.
Wages are rising; finally, ordinary Chinese are starting to share in the fruits of growth. But it also means that the Chinese economy is suddenly faced with the need for drastic “rebalancing” — the jargon phrase of the moment. Investment is now running into sharply diminishing returns and is going to drop drastically no matter what the government does; consumer spending must rise dramatically to take its place. The question is whether this can happen fast enough to avoid a nasty slump.
There are also a couple of associated blog posts from Krugman including an assessment of what impact any Chinese shock may have on the global economy with most fallout likely to be on commodity exporters.

China’s Ponzi Bicycle Is Running Into A Brick Wall

How Much Should We Worry About A China Shock?

Of course there have been plenty of predictions in the past decade of a China crash and a slowdown in trend growth was inevitable as the total size of the economy grew. Success or failure of rebalancing from investment to consumption has potential implications for the different Queensland regions. Macrobusiness has also recently posted on that and provides good coverage related to the Chinese economy: What Chinese rebalancing?

Friday, July 19, 2013

Brisbane v Bush

My last post on the regional unemployment data mentioned weakness across regional Queensland in the June data. So I have graphed the unemployment rate for the Brisbane Major Statistical Region which includes Ipswich against the Balance of Queensland Major Statistical Region which does also include the Gold and Sunshine Coasts.

Again, the regional data here is not seasonally adjusted and there are clear seasonal fluctuations particularly prominent in the Balance of Queensland numbers. A simple 12 month moving average has been added to smooth the trends.

While 'The Bush' unemployment rate jumped in June the most significant trend is the convergence in the 12 month moving averages over the past year or so with Brisbane the main contributor to the higher Queensland unemployment rate. Possibly the public sector cuts have been at least partly responsible for this but something to watch.



 

Note: For the purposes of this graph I allowed The Bush to stay maroon while Brisbane becomes blue.

Update: Queensland Economy Watch has also posted on this today:  Largest unemployment rate increases over 2012-13 in metro Brisbane and Central Qld

Thursday, July 18, 2013

A lousy set of numbers

 A month ago .........
FNQ is the “shining light” of jobs growth in Queensland as unemployment rate drops to 5%
 
Member for Cairns Gavin King is elated at the latest employment growth for Far North Queensland, showing the lowest unemployment rate in recent memory and an extra 7200 jobs in May compared with the same month last year.
 
“Far North Queensland is the shining light in the latest ABS jobs figures with a remarkable drop in unemployment to 5%, down from 9.1% the previous May (2012).
That was the facebooked response from the Member for Cairns after last months "remarkable" unemployment numbers. This month the unemployment rate is back up to 8.3% combined with a participation rate at a record low 64.7%. It's a lousy set of monthly numbers with the unemployment rate being saved by low participation and last months boasted employment growth back to modest levels. That doesn't make it any more or less valid than last months number.

This month the Member for Cairns has posted a photo of a parrotfish on his facebook.

Photo: Cairns MP Gavin King has joined forces with Gavin the parrotfish to launch a unique colouring-in competition for kids at the Cairns Show!

Cairns kids can grab a colouring-in sheet and draw themselves swimming with Gavin the parrotfish for the chance to win a trip to Green Island and an amazing reef Seawalker experience.

Gavin the parrotfish has captured global media attention for his cheeky habit of 'photo bombing' tourists during their Seawalker experience on the Great Barrier Reef.

To enter, visit the LNP display stand in the Fred Moule Pavillion. There are great prizes to be won, including a chance to meet Gavin the parrotfish on the reef!

Why anybody who should know better would be so na├»ve as to hang their credibility on a single month of this notoriously volatile data series I don't know, but he was very insistent on his methodology and it was what really was, so there! Conus Consulting has posted a rundown on the numbers: FNQ employment rollercoaster

The only way to make any kind of sense of the numbers is to consider our Trend series. This is now showing Trend Unemployment at 7.7%, up from an upwardly revised 7.4% last month. The Trend Unemployment Rate has now risen for the last 3 months from a low of 7.1% in March. It is starting to look like the employment improvements we witnessed from the middle of last year may have run out of steam in this second quarter. Trend employment growth has also fallen and now sits at just 2.3% y/y, down from growth around 6% earlier this year.
Two months ago I noted the regional lottery of employment stats where a high profile Commsec economist had included the Sunshine Coast on a list of regions with the lowest unemployment rate in Australia at just 3.7%. This month that unemployment rate was back up to 8.0% and closer to the other end of the scale.

If there was anything to observe in these numbers it is possibly consistent weakness across regional Queensland in June. The unadjusted unemployment rate in Brisbane and Ipswich actually fell while the 'Balance of Queensland' increased form 5.9% the previous month to 7%. The original 'raw' number for Queensland this month was up from 5.8% to 6.2%. The ABS seasonally adjusted rate increased from 5.9% to 6.4% while the trend rate was steady at 6.0%

Misinformed comments on unemployment statistics for Cairns is certain to follow (ie: it's them dole bludgers up here for the warm weather and registering down at Centrelink) and this week Paul Krugman posted some relevant comments: There Is No “True” Unemployment Rate
"There is no “true” unemployment rate, just various indicators of the state of the labor market."






Wednesday, July 17, 2013

Tourism to fill mining hole?

A transition from holes to houses is often discussed as the RBA strategy as mining investment eases but it is also suggested Tourism can support economy: lobby group:

The $95 billion industry can support the nation's economy while the mining boom and manufacturing decline, Tourism and Transport Forum chief executive Ken Morrison told The Australian.

The Forum has also released a policy paper ahead of the election with a 10 point agenda: Australian Tourism: Backing our strengths

1 Increase funding for Tourism Australia
2 Focus government resources to capitalise on Asian Century opportunities
3 Freeze and review the Passenger Movement Charge
4 Commit to a secondary Sydney airport at Badgerys Creek
5 Review penalty rates to recognise the needs of tourism and hospitality
6 Expand the working holiday maker scheme
7 Establish a $10 million annual business event support fund to secure more international business events and a $5 million annual fund to attract major international sporting events
8 Reform the tax system to encourage investment in tourism infrastructure
9 Commit to streamlining trans-Tasman border formalities and reduce the PMC to $25 for trans-Tasman travel by Australians and New Zealanders
10 Increase funding for federal national parks

Sadly there was no recommendation to entirely abolish State tourism bodies in favour of a national and regional approach. The contentious issues are likely to be around the IR proposals for penalty rates and working visas also commented on this week at Queensland Economy Watch: Tourism sector needs IR reform.

Two years ago I posted on comments by the always interesting Phil Ruthven from IBIS on the prospect of tourism taking over from mining as a driver of export income "tourism, you've got to be joking?". It certainly did seem like a joke back in 2011. However, a stronger tourism sector may not bring so many of those high income jobs associated with mining!

Thursday, July 11, 2013

Final call for FIFO to the coalfields

The FIFO Cairns push was a key part of the strategy to revive the Far North economy and gain a slice of the resources boom. The coal industry in particular has been under pressure and as the resource sector transitions from development to production recruitment has been underway in Cairns for the Caval Ridge mine operated by BMA (BHP).

Caval Ridge coal mine near Moranbah was planned as a FIFO during a boom period and skills shortage in Central Qld. FIFO workers were to be recruited from Cairns and Brisbane. However things have changed quickly in the last year and BMA is under pressure to review FIFO: BMA sticks to Caval Ridge mine FIFO plans:
Mining company BMA says it will not review its plans for a wholly fly-in, fly-out (FIFO) workforce for a new mine in central Queensland.
BMA is recruiting for the Caval Ridge mine near Moranbah but people currently living in the town are not allowed to apply.
There have been calls for the company to review its policy after the recent loss of thousands of jobs in other Bowen Basin mines.
Mind you there was a visitor from CQ to my local RSL bar last week, in Cairns for their first time ever to undergo assessment for Caval Ridge! However, the prospect of any further such FIFO in the Bowen Basin coalfields would now appear remote. Too late for Cavil Ridge which has already committed capital on a FIFO format. Macrobusiness has a few posts on the sharp slow down in the Bowen Basin: Queensland coal bust

Some softness has also shown up in the property markets of Mackay and Rockhampton. The rental vacancy rate in previously booming Mackay has increased to 6.5%. The Mackay Council budget today has responded by keeping homeowner rates low funded by a hike on rental investment properties.

I think I have posted previously that this common policy is something I find objectionable and without any valid justification that I have been able to find except the worst political motivations. Comments from the Mackay Mayor are interesting:
Cr Comerford said the increase was unlikely to result in more expensive rents.
"For the first time, tenants have choices... with a vacancy rate of 6.5%," she said.
"If owners try and pass it straight on they (tenants) can choose to go to another property."
I'm not sure anyone who has invested substantial money into Mackay residential property should be overwhelmingly impressed by the attitude expressed here?

Anyway, the Cape York Coal Rush is now looking much further away .........


Note: Some similar themes may also play out in PNG also a part of the Cairns economic strategy: LNG revenue fallout

Monday, July 8, 2013

Cairns Post backs higher land prices?

Last Friday the Cairns Post published a report by Daniel Strudwick: Building industries high hopes despite approvals falling.

FAR Northern councils have approved fewer new homes in the past financial year than they did a year earlier but builders and construction industry experts are confident of a turnaround.
Data from the Australian Bureau of Statistics released yesterday shows 602 new homes with a combined value of $163 million were approved in the 11 months up to May, in an area from Tully to the Daintree and west to Herberton.
That figure is down from 720 approvals worth a combined $189 million for the same period in 2011-12.

I haven't checked the detail on period comparisons but this appears to be a mostly balanced and accurate report based on annual data rather than monthly fluctuations. Today, business editor Nick Dalton returned to his typical Cairns Post format with a somewhat hyperbolic report suggesting an imminent land crisis in Cairns: Growth squeeze on land in Cairns.

CAIRNS risks running out of land to build new homes as the latest figures show increasing growth in housing approvals.
The Australian Bureau of Statistics shows a 20 per cent boost in May from 65 in April to 78.
May was indeed an improvement on the previous month albeit the numbers here while representative do no appear to be precisely accurate. Dalton also reports supporting comment from the Master Builders and UDIA although timeframes for the looming shortage are unspecified?

The Qld Government Statistician recently also updated their excellent Residential land development activity profiles up to December 2012 quarter. What does this show you may ask?


What it shows is that there is a stock of 5,896 approved but uncompleted residential lots in Cairns. 1,824 of these lots, or 31%, had progressed to the stage of operational works approval at December 31, 2012.

That is for Cairns LGA and given a 'boom' in building approvals to 60 in a month for the same area it hardly appears to flag an imminent land shortage? The numbers also compare more than favourably with other regional centres such as Townsville with higher building approvals currently. Cairns would appear if anything to currently sustain an oversupply of approved available land?

Substantial receiver land stocks which had been tied up were cleared in 2012, particularly the CEC holdings on the south side. Any land shortages would raise serious questions re land banking supply constraints. Is there is a subtextual agenda in this report? Is the Cairns Post really going into bat for higher land prices for developers or Council concessions?

Commentary also at Conus Blog who was recently also unimpressed by a dalton on house prices: House price rise in Cairns.

Meanwhile I am open to suggestions on a definition of a new verb specific to Cairns: "to dalton"?

Snarky P.S: There is also a dalton on the Metusik numbers in the Post report which refers to ALL property sales and not just land as indicated by Dalton :-P




Tuesday, July 2, 2013

Airport Data: What happened in May?

My last post on the latest CairnsWatch report made some mention of softness in airport passenger numbers in the most recent month. The airport do publish these statistics in PDF format with the most recent month being May.

I have graphed this for the domestic terminal as a monthly percentage change from the previous year including a 12 month moving average. As can be seen growth in May was negligible compared to May the previous year and the lowest since 2011. That follows a period of consistent above average growth over the past year with the highest growth months around the total eclipse and also February, possibly related to Chinese New Year. There was also a long weekend removed from May this year.

 
 

The international terminal is more complicated as there has been a reporting change for domestic passengers through the international terminal which has me head scratching a bit. However May was also very soft with a substantial decline from the prior month and soft on any comparative numbers. Total passengers lowest since March 2010.

My understanding was that some of the Chinese flights introduced last year were a seasonal trial (China Southern) for 4 months and not sure on what has happened there. As previously suggested the counter-seasonality of Chinese tourism may be among its most positive attributes.

Anecdotal reports seem to be mostly positive in recent weeks with the adventure festival and long weekend kicking early in June followed by the school holiday period so will await updated data from the airport.

Update: A response to a query from the airport the substantial fall in international passengers in May was mostly a result of Jetstar removing an A330 for maintenance resulting in flight reductions on the Japan route.