Friday, February 28, 2014

I'm bored ..... so it's weather!

I spent some time this week with ruminating on unemployment stats, whether regional or youthful, and then my spreadsheet came unstuck with an outcome too embarrassing to post. So why not resort to weather?

A weak Madden-Julian oscillation is back in the western Pacific apparently or something, and there is also talk of a possible cyclone next week! With a few hours to go though rainfall in February remains below average. This is monthly variation from average at Cairns Aero:

The uptick in the 12 month rolling average there is mostly because last February was bloody woeful! While this year was below average it was surprisingly not by that much given no outstanding events. Note: doesn't take that much for wet season rainfall to add up! This is monthly rainfall at Cairns Aero:

So far, like last year, no big events to boost the average relative to the median! Unlike the previous years where a La Nina pattern predominated. Currently neutral but BOM suggest model possibility of a developing El Nino.
Meanwhile up at Lake Tinaroo:
May we trust that any imminent cyclone impacts appropriately!

Thursday, February 27, 2014

Reef trading buoyant on ASX

The volume of trading in Reef Casino shares has been interesting this week and spiked well above typical historical levels:

As previously previous posted Reef (RCT) is typically a highly illiquid and thinly traded stock with approximately 70% held by Casinos Austria and Accor which are now locked in to the Aquis agreement.

The top 20 holders published in the annual report is mostly absent the kind of institutions which predominate the large company registers and includes a number of private individuals. I imagine smaller holders outside the top 20 are likely to include a good proportion of Cairns residents. Warren Entsch's boy had a small holding of a few thousand included in his parliamentary disclosure.

However there is no bidding war apparent in this activity as it was sold down slightly today, on buoyant volume again, at prices still way below the takeover bid. The takeover is conditional on 90% acceptance beyond which the remainder can be compulsorily acquired.

Reef (RCT) closed today at $3.98 v the offer of $4.35 to be consummated within 6 months or so. This period may also include an interim half-yearly distribution of around 10c. So at current prices there is still a quite healthy return if the takeover is completed.

Taking a profit to mitigate risk of deal not being finalised, or any other specific reason, is not necessarily an unreasonable thing and may be appropriate in many circumstances.

Wednesday, February 26, 2014

Revisiting the British Virgin Islands

The Aquis saga rolls on. A flying visit from the Premier has again raised the prospect of the Reef Casino licence being allowed to cover the Aquis proposal: Let's get Aquis on the move for Cairns

It was only yesterday that Fung Jnr was reported as saying this approach was "too complicated" and they would continue to seek a separate licence under the current process which allows for two new "integrated resorts" in regional Qld.

Now today there has also surface further news on a proposal in the Whitsundays:  Zelong Group and Esteem Capital Success to develop casino resort in Airlie Beach

As previously posted there may be an obvious reason why Aquis would prefer a separate licence if it restricts competition. The Premier's scheme would appear to potentially imply three new regional developments.

There has also been some confusion on the reported $269 million price for Reef Casino. The bid values the listed trust (RCT) at $216.83 million which is explicitly stated in the announcement. The higher reported amount appears to cover three other entities being:

Reef Corporate Services Limited as responsible entity for RCT.
Casinos Austria International (Cairns) Pty Ltd as the operator/manager of Reef Hotel Casino.
Casino Canberra Ltd which is also currently held by Casinos Austria.

I'm not sure if there has been any detail provided of how the additional $52 million for these entities is split? The Canberra casino is quite small. Agreements on these entities have been entered into by "separate related bodies corporate of Aquis".

The bid for RCT is being made by Aquis Casino Acquisitions Pty Ltd. As previously posted this is a company with 100 x $1 shares held directly by Tony Fung of Hong Kong. The "separate related bodies corporate" are not named however a quick ASIC search throw up five related companies registered on February 7th:


The two (AUS) holding companies here are the ones which hold the shares in the related subsidiary companies. They are all 1 x $1 share companies. The share in the two (AUS) companies are held by an entity in the British Virgin islands (BVI). This is the ASIC extract for Aquis Reef Holdings (Aus) Pty Ltd:

The ultimate holding company for all these entities is listed as: TF Reef - Canberra Holdings Pty Ltd, Org No: 167934607, presumably also a BVI entity. I also presume these are the "related bodies corporate" referred to in the takeover announcement?
I previously posted on the revealed leaked links of Tony Fung to corporate entities in the BVI: The man from the British Virgin Islands
Probably there should be no surprise to find a wealthy individual whose claimed wealth is somewhat opaque linked this way, even if the BVI is among the more notorious tax havens.
I am more surprised to find that direct links from a BVI entity to a casino licence in an Australian jurisdiction should be regarded as appropriate?
1) There is also a new additional director for these new entities: Ching Fai Or. There is a background in HK banking and also chairman of Esprit. The performance of Esprit has been rather dismal since he took the chair with more than half its value wiped out, and his other current public gigs ain't too flash either.
2) There are suggestions again of an EIS being submitted. We still have no idea why the initial EIS was returned.
3) If the Premier is prepared to split a casino licence to include Aquis then shouldn't that mean the value of the current RCT licence may be far above anything included in the current bid price?

Monday, February 24, 2014

Reef Casino takeover by Aquis (update3)

Reef Casino has been placed into a trading halt on the ASX this morning pending an announcement in relation to a potential control transaction. Presumably this is related to the offer by Aquis? Two weeks ago RCT indicated a timeframe of 6 - 9 months for completion.

Update: Posted last night at AFR: Aquis to make $214m cash play for Reef Casino
Aquis, the developer owned by Hong Kong property player Tony Fung, could lodge a formal $214 million takeover bid for the company that runs the Cairns and Canberra casinos as early as Monday this week, according to sources familiar with the deal.
The previous announcement in November was a non-binding indicative conditional takeover proposal from Aquis.

Update 2: Well RCT is back trading again after formal details of the takeover proposal from Aquis were released. Todays announcements including the takeover implementation agreement itself can be found here at ASX.

There isn't much substantially new and implementation still remains subject to regulatory approvals. It does appear here as though Canberra Casino may have been separated out in the structure.

Aquis Canberra Pty Ltd and Aquis Canberra Holdings (Aus) Pty Ltd have been separately registered with ASIC this month.

There have also been three companies registered by ASIC this month registered with Aquis Reef names where the holder is registered in the tax haven British Virgin Islands.

RCT holders will receive a bidders statement next month and the offer is open until October 31st unless extended.

Previous post: Reef Casino: Revenue up, expenses down

The Australian; The Cairns Post

Sunday, February 23, 2014

Median property price malarkey!

The Weekend Post has continued its fine tradition as an editorial supplement for property advertising: Buoyant property market is hitting a home run in Cairns and Port Douglas

The report cites some booming increases in median house prices in selected suburbs with Edge Hill leading the way at 26.5%. These are median prices and an unusually honest real estate agent is quoted as suggesting the data for the quarter could be skewed for that suburb.

Median prices as an indicator has long been a problem which can misrepresent. More sophisticated indexes have been developed such as Case-Shiller in the USA and the RP Data hedonic index in Australia. The source cited for these median numbers is RP Data. Sadly I don't think their hedonic index is available for regional centres?

The commentary from CairnsWatch February:

Higher property prices in some areas of Cairns are starting to filter through to gentle increases in the median house price. The Cairns median house price trend stood at $369,700 in December 2013, which represents a 2.9% upward movement since December 2012.
I'm sure some sectors and areas have been far more robust and the Post report also notes this is mostly being driven by investors. A 2.9% p.a. (barely above zero real increase) recovery across Cairns from what has been a recessed market does not yet constitute my definition of "buoyant".

Recent weaker labour market trends are also more likely to restrict a stronger broad recovery. Investor activity is interesting given that the decline in vacancy rate trend has also turned recently, despite a weak supply response so far. A component of the increase is likely seasonal in most recent months:

Source: HTW CairnsWatch

Rental vacancy info for Cairns is also available online at SQM Research although not sure on the aggregation methodology here: vacancy rate by region / city

The Cairns Post report also includes a link to Terry Ryder where a report which includes Cairns in Qld top 10 hotspots can be purchased for $180. A positive assessment from Terry on outlook for Cairns property was posted here free at Loose Change 3 months ago:  Reasons to invest in Cairns?

Un-tropical sports institute proposal

The Member for Leichhardt has been an advocate for a tropical campus of the Australian Institute of Sport to be established in Cairns.  However the Winter Olympics performance has brought forth a rival proposal from renowned sports icon Roy Slaven to establish an Antarctic campus:

Roy offered his solution to Australia’s poor performance in winter sports -- set up a training camp in Antarctica.
"All we’ve got down there is scientists studying snow. What that does for anyone I’ve no idea.  We have a boat that leaves from Hobart twice a week taking more scientists and bringing back snow. Why not send the Olympic winter team and the administration and the centre of excellence to the Mawson station in Antarctica?" HG: That’s an elegant solution. We could build a half pipe." Roy: "And Mawson’s hut would get some use again, because it’s had no use since 1924.

The member will have his work cut out trying to match the influence of Slaven in Canberra!

Friday, February 21, 2014

New Cairns employment data raises concerns

Conus Business have updated their trend employment series for both Cairns and Townsville. The new data for Cairns actually raises a few concerns on the employment trend as noted at Conus:
"Having now completed the work on the Conus Trend Employment series this new data set throws up a real cause for concern. Trend Employment has been falling for the past 11 months."
The new data set from ABS extends back to 1998 while the previous regional series only commenced in 2007. An updated chart I have previously posted on male and female employment now looks like this for Cairns over that period:

This deteriorating employment trend hasn't been fully reflected in the unemployment rate as it has also been coincident with a falling participation rate:
A lower participation rate is not peculiar to Cairns and has part of a broader trend which can be at least partly also attributed to an ageing population. However the trend and recent numbers here for Cairns are a concern also.
Warning: caution as always on these statistics although one would at least hope that trends over multiple months are valid.

Thursday, February 20, 2014

ABS throws wonks into panic attack!

Detailed employment data out today includes those always interesting regional numbers. The ABS clearly decided that some people didn't have enough to do and changed the regional reporting structure: Analysis of changes to labour force regional estimates.

The numbers are now reported for the Cairns SA4 statistical area rather than Far North. This is the ABS map of the changes with the old Far North boundary reduced to the dark green area for Cairns SA4. The Cape and interior are now included in Qld - Outback SA4.

So the new SA4 area is a component of the old Far North and apart from Cairns City basically comprises Douglas/Daintree, Eastern Tablelands and Cassowary Coast down to Cardwell.

As a labour market size comparison between the two based on the ABS December numbers there were 108k employed in Cairns SA4 while in Far North it was 134K. The new more concentrated area comprises the bulk of the population and labour market of what was Far North.

I suspect many will be more content with this data rather than the broader Far North although it remains just as volatile and seems to have more sample size warnings also. However there is likely to be some confusion in reporting as we can't just compare the latest month with data from the previous series.

What we can do, and ABS have provided similar examples for other areas, is compare how the two series themselves differ up until December 2013.


While the basic patterns and trends correlate (recently very closely) there have been some interesting previous anomalies and perhaps unexpected differences between the12 months averages with Cairns recently moving higher than Far North?

This should all provide hours of fun for some playing with spreadsheets and data. I will await for Conus to recompile their trend series from the new data: FNQ jobs data now becomes Cairns SA4 data

Wednesday, February 19, 2014

Master Builder wage concerns not on the level?

In the past I have found some interesting curiosities in the quarterly survey reports from the Queensland Master Builders. At times commentary seems to reflect their current talking points and political perspectives rather than objective analysis.

The most recent Survey of Industry Conditions (Dec 2013) has catapulted labour costs from nowhere to the talking point du jour:

Labour costs have now jumped to the fore. It is expected that this will remain the case if demand continues to pick up, but will be dictated in a large part by the labour needs of the resources sector.
I'm sure labour costs and conditions are always a significant factor of concern for this industry. However, this is taken further with broad suggestions of an imminent "wages breakout" as "trading conditions in the industry return to the longer term average".

This is somewhat contradictory with all recent indications and concerns of a weaker labour market. The ABS has conveniently come out today with the latest Wage price Index for the December quarter and the news is:
Australian wages are growing at their slowest pace in at least 16 years. This, combined with full-time job losses and job cuts across a number of major Australian organisations, paints a pretty bleak picture for Australian workers and the broader economy.
This trend also applied to Queensland. So on what are the fears based of a "wages breakout"? Well since something happened in September the building boys have turned very buoyant on the outlook for conditions in their industry in Queensland.

The quarterly survey report provides an index of industry conditions for the most recently completed quarter as well as a forecast for the subsequent (current?) quarter. The most recent graph looks like this:

Woohoo! Almost booming and fifty is average. Until you go back and look through all the previous such quarterly reports where a familiar patter emerges. We are not talking long term forecasts here but responses by builders on conditions in their industry within a month or two. So how do those forecasts match up with the subsequent actual responses?

Yep, on their index scale the forecasts are wildly wrong and consistently over-estimate by between 12.7 and 21.2, with an average of 16.2! On that basis the next conditions outcome is unlikely to exceed 48 or so rather than the 59.9 survey outcome? The slope of the upward curve could be telling indicator? It was extremely erect in September!
Surely someone within the Master Builders has twigged that either: 1) There is a methodological problem with the survey and index. 2) Their members don't actually have a clue what is currently going on in their industry 3) Their members are all down at the pub and just filling in bullshit responses on a form?
Would their buoyant forecast actually matter anyway for the "wages breakout" yarn? Not really, and the "wages breakout" that wasn't has become something of a subject of ridicule. The prospect of a "wages breakout" in 2014 is about as remote as an Antarctic research station. Perhaps that's where the Master Builders spent their summer holidays together? 

Joint Select Committee on Northern Australia

The Cairns Post has a story today on the submission by Cairns Regional Council to the parliamentary committee delegated with the white paper on Northern Australia: The four limitations of growth in Far North Queensland

There are today currently a total of 95 submissions listed on the committee web page: Joint Select Committee on Northern Australia.

There are sure to be some interesting submissions to provide rainy day reading! I just hope someone has been delegated to provide a summary for the committee chair?

The Cairns Post report also includes some robust population forecasts:
Mayor Bob Manning said infrastructure investment was needed to meet growth in the area, with Cairns' population expected to almost triple by 2050, from 145,986 in 2011 to 406,400. 
This forecast is actually an extrapolation based on 1991-2011 population growth and would see Cairns easily surpass Townsville by 2050. However, we may have some catching to do already after the past three years?

Queensland Economy Watch has recently posted on the Queensland Plan population projections and infrastructure:   Regional infrastructure plan should be based on updated population projections

Sunday, February 16, 2014

Folks are dumb where I come from (updated)!

"Right across Queensland, tourism is surging ahead" Gavin King, Ass. Tourism Minister and Member for Cairns, facebooked following the latest Cairns Airport numbers. "The tourism turnaround hasn't happened by accident" with policy measures cited.

Source: ABS international arrivals & departures
Queensland recorded a new historic low share for this series in December 2013 with no indication yet of the trend being turned around. And the winner is those southern sophisticates at Visit Victoria. What, an indigenous arts festival in Melbourne! Now who would have thought of that dumb idea?

OK, I have removed my cynical YouTube clip of Judy Garland 'doin what comes naturally' and have updated and rewritten what was a somewhat flippant Sunday session post to try and make more coherent sense.

My trolling efforts have produced more thoughtful and appreciated contributions from Conus: The tourism "turnaround"; and Queensland Economy Watch: Qld's falling share of international tourism in Australia, which includes a better graph than mine.

Perhaps Queensland should stick to what it knows best and attempt to recapture the bogan market rather than compete with the Melbourne sophisticates?

Airport numbers don't fly straight

Nick Dalton has reported on the most recent airport passenger numbers: Cairns Airport smashes another record as 300,000 pass through domestic terminal for the first time

It was indeed a good month and will return to seasonal factors. However, it is reported that international traffic continues to struggle despite Chinese New Year falling in January this year:  "there was marginal growth of 0.7 per cent in the international terminal to 48,500".

The monthly passenger numbers from the airport comprise a two page report. The first page is a rounded summary and while the second provides detailed monthly numbers for the current year. These numbers don't match for January at T1 (international). Page one says 48,500, while page two gives the equivalent number as a far more impressive 52,134 (now corrected to 48,472) which would be an increase around 10% (0.7%)

I wonder if the difference may be Chinese New Year charter flights? I have had some issues for a while with correlating some of the airport data but won't divert into details and will get around to resolving one day.

The January traffic follows on, and is seasonally in line with, the good numbers and growth in December. There have been generally good anecdotal summer reports from all tourist regions. The seasonal effect of the lunar new year alternating between months will also be a factor in comparing the monthly growth stats.

January domestic recorded the highest Y-o-Y monthly growth (13.4%) since February 2013 (14.4%). Last year CNY* was the 10th February. That growth number then followed on the previous year when the CNY* period fell earlier on January 23. This year it was January 31 so could be expected to fall more evenly between the months.
This is where a seasonal adjustment methodology to apportion between months as adopted by ABS would be essential for any meaningful comparison.
*CNY - Chinese New Year not a Chinese Yuan Renminbi
Update: Thank you to the Airport for a quick response to query. Yes, there was a double counting error related to domestic passengers at T1 which has now been corrected. Growth as low as 0.7% at the international seems quite weak given that the previous January didn't include CNY and direct flights from Shanghai recommenced at the beginning of the month?

Friday, February 14, 2014

RevPARing the supply side

There was a story by our friends at the Cairns Post this week on the most recent Dansfield Hotel Futures 2014 report. proclaiming that "Cairns and Port Douglas hotels are leading Australia in growth according to new RevPAR report".

The report is indeed positive and a reason for optimism with improved occupancy and room rates driven by a recovery in demand. However it was also noted that the recovery had been from a low base and perhaps more relevant to our local economy is the supply side.

RevPAR = revenue per available room. The demand recovery has also coincided with a contraction in FNQ room supply in recent years. There is some good commentary on Cairns & PD in the report and this is their chart on actual and forecast supply:

FNQ is the only region covered in the report where (Aquis not yet included) forecast supply is entirely based on market response with no current construction or proposals.  I have copied the report commentary on supply below and note the reference that the recovery is not yet sufficient to generate a substantial supply response.

Supply Actual

In CY2012 supply decreased by 2.2% against 3.5% growth expectations
In FY2013 supply growth remained in decline with a 1.9% decrease
Supply growth has averaged a 0.3% p.a decline in the last 5 years

Supply Forecasts

Long term supply expectations to FY2022 have been slightly upgraded with 2.1% p.a average growth expected.
Supply growth for FY2014 is expected to be consistent with previous forecasts of 1.0% growth with no live projects currently in the construction phase.
Supply increases in the medium term to FY2016 continue to be low and are again on par with previous forecasts of an average 1.0% p.a.
Long term supply growth is expected to average 2.1% p.a over the forecast period to FY2022 with a slightly stronger back half. This represents an upgrade on the previous forecast of 1.7% growth.

Market Response Allowances

In Cairns and Port Douglas, all of the supply forecast relates to anticipated new projects as the market responds to favourable development conditions. They are not live or specific projects which are separately allowed for as construction and proposals activity.
Room rates and RevPAR remain well below other regional destinations, and demand and rate performance would need to be well above current expectations to encourage substantive new supply.
Market response makes up 100% of all supply in the next 6 years
Our forecast allows for a modest market response of 620 rooms over the next 6 years.

The report also notes an ageing stock in need of refurbishment. Investment in supply and refurbishment would be a boost for employment and the regional economy.

There is also some recent positive commentary on FNQ from reports by the Mantra Group: Summer travel boom for Mantra Group

Thursday, February 13, 2014

Reef Casino: revenue up, expenses down

Reef Casino previously indicated with their distribution announcement a 30% lift in distributable profit. Full year results and preliminary report were released yesterday and presented as A truly excellent year. A significant contributor to that result was actually a decline in operating expenses.

Total revenue was up by 14%. Total expenses declined by 1.2% driven by a fall in operating expenses of 2.6%. That combined to provide the 28.7% lift in profit. So the big jump in profit may not be quite so significant?

This is the CEO report on component performance:

Complex performance


Casino visitations: Casino visitations were up 4.4% on last year with both our “Locals strategy” and “China strategy” contributing to this growth.

Table games: Total revenues were up 15.2% on last year with growth from local, domestic and especially international tourist (mainly China) markets. Premium play performed very well with an excellent “above theoretical” win rate. The Reef Casino achieved a record level of table games revenue in 2013.

Electronic gaming: Electronic gaming machine turnover was up 6.2% on last year and revenues were up 4.1% on last year. Patron support from local and domestic markets was strong throughout the year. The Reef Casino achieved a record level of electronic gaming machine turnover and revenue in 2013.


Rooms: Rooms revenues were 4.5% lower compared to last year, an expected outcome because of the refurbishment of all hotel guest rooms throughout the first half of 2013 which reduced the number of rooms available for sale.

Food and beverage: Beverage revenues were up 2.5% on last year reflecting increased casino visitations with regular special promotions throughout the year. Food revenues were lower by 4.6% compared to last year due to lower banquet/conferencing activity.

Complex cost control, Trust rental

Due to continuing excellent cost control outcomes throughout the complex and growth in complex revenues, the overall rental paid to the Trust was up 14.1% on last year.
The performance on table games and the premium play win rate is particularly noted. I may have a look through the full preliminary report later but there doesn't seem to be much else of particular note in comments except for an update on the Aquis takeover proposal:

The Board understands that Aquis, the bidder of the proposed takeover offer for the Trust, is seeking government and other approvals in order to complete the takeover. As is usual with acquisitions of gaming businesses, the probity review and approval process is expected to take some time. In this respect, the Trust expects that the takeover, if successful, would take not less than 6 – 9 months to complete. In the meantime until completion, it is “business as usual” for the Trust and the Reef Hotel Casino, subject to customary obligations which may be agreed in relation to the operation of the business in the bid implementation agreement and other transaction documents relevant to the proposal.

The takeover proposal was announced 3 months ago in November and it isn't clear to what period the 6-9 months relates?

Wednesday, February 12, 2014

Chinese confusion in visitor arrivals mix

ABS numbers for international arrivals and departures were released today for December 2013 with commentary from Conus: Arrivals numbers up strongly; but still some concern from China

Both short term visitor arrivals and resident departures have increased since December 2012 by 7.5% and 8% respectively in trend terms. However the Chinese numbers continue to create some uncertainty with trend growth sliding in recent months following their legal reforms to sale of package tours.

This is the ABS table for arrivals from our top 10 visitor nations:

Trend growth from China over the past year is now down to just 1.5% although growth from other Asian nations (ex Japan) top the table. There are suggestions the package tour changes may have more limited impact in FNQ.

Anecdotal reports and observations so far following the resumption of direct flights last month and the Chinese New year have been positive. Sustainability of the direct flights over the full year this time around beyond their peak season maybe a factor to watch.

BTW I note that a previous query on ABS monthly seasonal adjustment for Chinese lunar new year is covered in explanatory notes:
Chinese New Year often falls in February but on some occasions falls in January. The movement of Chinese New Year between the boundary of January and February can cause biased seasonally adjusted and trend estimates. The Chinese New Year proximity adjustment method takes into account the graduated increase in activity in the days leading up to the holiday period followed by a graduated return to the normal activity levels in the days following.
Source: Australian Bureau of Statistics

six months waiting ....... and finally!

Last year, on August 15, intrepid young Attorney General Jarrod Bleijie announced a review of Queensland property law.

This was of particular interest here at Loose Change as it was set to review strata body corporate lot entitlements and a submission was intended. So a watch was kept on the relevant web page for updated information: Review of property law in Queensland

I'm pleased that after six months today the page has been updated. Yes, the dates at the bottom have been updated from last August 15th to today February 12th. Nothing else seems to have been updated so far?

Update: There has now been a further update this afternoon and the promised issues papers have now been posted. After 6 months to get to that stage there is now 1 month for the public to submit a response after digesting a 70 page issues paper on strata lot entitlements! At least that will provide something to do on rainy days!

Sunday, February 9, 2014

More wonky stuff on rentals data

Conditions in the Cairns rental market has attracted more interest in recent times including further weekend commentary at the Post:
With a vacancy rate at just 2 per cent in the Cairns region, good luck if you are on the hunt right now.
Despite concerns the most recent CairnsWatch report indicates that the vacancy rate has stopped falling in the last 6 months or so and been edging up again despite still weak building activity:
Vacancy rates in the Cairns rental market have been creeping up over the last six months, albeit they remain at tight levels still indicative of a limited rental supply. The trend vacancy rate for houses stood at 2.3% in December 2013, while units recorded a trend vacancy rate of 2.5%. The market vacancy trend overall stood at 2.4%.
At least the Post is taking an interest, as they should. The rental sector in Cairns is a larger share of housing than our regional coastal neighbour cities, based on both census and rental data. However the supply response to low vacancy rates has so far been limited going by the building approvals?

Cairns also has a higher proportion of unit accommodation with the current split based on rental bonds at 31st December:

Down in Townsville the number of rental bonds for flats are less than two thirds the number of houses. Within Cairns the proportion of flats are overwhelmingly in the 4870 postcode:

The quarterly data of rental bonds held is available on the RTA website from March 2011. Total growth in rental bonds within Cairns LGA has been 11%. An interesting aspect is that the fastest growth in that period has been in the 4877 postcode around Port Douglas. That applies to both flats and houses. This is the change in rental bonds for flats by postcode with March 2011 indexed to 100 for comparison:
Albeit from a lower base total than other postcodes I'm not sure why there would have been such higher growth rates in Port Douglas over this period? Possibly it relates to outstanding developer / receiver stock coming onto the market following the construction crash and / or a significantly higher vacancy rate than other areas back in 2011.
The other suggestion has been holiday accommodation transferring to longer term rentals. Both those could also apply to 4879 at the beaches which has also had higher growth.

Saturday, February 8, 2014

Chrissy Pyne applies Gonski gap-filler to Cape York

Chrissy Pyne flew into the Far North this week to talk education. There seem to have been some mixed reports with this appearing today at the Cairns Post. Puzzling messages from Federal Education Minister Christopher Pyne.
Federal Education Minister Christopher Pyne has puzzled indigenous education experts after stating current funding levels may not be raised, but instead funding could be spent in a "better way".
The Pyne visit also included a day trip up to Bamaga with Warren Entsch. Numbers previously released last year indicated the state school at Bamaga would receive a 75% boost in funding over the 2013-2019 period from the Gonski reforms. Previous posts on this here have been:

Gavin's Gonski Gap

Gavin glosses over Gonski Gap

Mind you some confusing funding messages should probably have been expected from the duo. Chrissy and Wazza are always such a hoot when they get their heads together to sort out numbers!

They also previously had problems with confusion and conflicting reports on other issues:  Mothers, take note of this pair.

Wednesday, February 5, 2014

Not The Cairns Post Property Report

Recent months have seen a flow in the Cairns Post of rather  bullish reports on the local property markets. The word "boom" has even been noted today. HTW provide the CairnsWatch report from Rick Carr and also a general monthly report from their offices around Australia: February 2014 Month in Review.

The wrap up here in the monthly review for the Cairns residential property section is actually quite a good measured summary so will take the liberty of a cut & paste:

The Cairns economy is progressively improving, aided by much stronger tourism seasons during 2012 and 2013, combined with the expectation of further growth during 2014. However improved business conditions do not yet seem to be feeding through to greatly improved labour market conditions, with total employment remaining soft and unemployment higher than the state average. We expect relatively subdued economic growth conditions in Cairns to prevail during 2014.
While the Cairns residential property market entered the start of recovery phase during 2013 and will continue to improve and consolidate during 2014, the economic drag will constrain the market’s recovery pace during the course of this year, compared to what might have otherwise occurred in better economic conditions. The tight rental market and low rates of new construction will maintain pressure in the market and provide further impetus to market activity.
A significant factor in the market recovery thus far has been the expected flow-on from the proposed $4.2 billion Aquis resort development, which if the project eventuates, will provide a massive stimulus to housing and development in the wider Cairns area. A delay to the proposed construction start date for the resort from mid 2014 to mid 2015 will take some immediate latent pressure off the Cairns market, but is unlikely to stall the recovery process seen thus far.
In our view there is sufficient market momentum in the Cairns market to sustain its recovery through 2014 without any added stimulus from the Aquis project commencement. If anything, a 2014 start to the Aquis project would have placed housing pressures on Cairns beyond its absorption capacity, and a delay to the project will provide some breathing space.

The bold is my emphasis as it's a good point which has been previously alluded to. A more balanced report today also in the Post related to 
this weeks building approvals although not sure some of the numbers look quite right?

Abbott set to outsource fiscal policy to Coca-Cola Amatil?

What can one say. Sharman Stone, Liberal member for Murray, has branded the PM a liar over the SPC Ardmona brouhaha! It would be so much easier to feel some sympathy for Sharman had not her own efforts on the parliamentary committee on strata insurance in NQ been somewhat feeble.

The PM has responded to the brouhaha this week by bravely penetrating enemy lines to appear before Leigh Sales on the 7.30 report where he made this somewhat curious comparison:
"Coca-Cola Amatil is a $9 billion business in market capitalisation. In the last six months it made a $215 million after-tax profit. Coca-Cola Amatil has a better balance sheet than the Commonwealth of Australia, a stronger balance sheet than the Commonwealth of Australia ..."
It is surprising that this drew almost no comment given that it is a head-bangingly stupid and irrelevant comparison of a sovereign nation to a corporation. Having been sacked from Education perhaps CCL chair David Gonski should be doing the Commission of Audit? Hey, he may be a failure at tinned peaches and ideologically impure on the theory of learnin' but boy does he get a balance sheet!

CCL is indeed a well rated corporate with debt/equity about 90% and interest cover around 6x EBIT, but it's credit rating still remains somewhat short of the Commonwealth. It isn't clear exactly what comparable 'balance sheet' metric the PM has in mind?

Meanwhile there have been a number of reports on industry assistance in our brave new world post the age of entitlement. Peter Martin has a report today including a table breakdown of industry assistance to various sectors: Line in sand washed away by ocean of obfuscation

There are a number of other good reports, including a history of government handouts, and I may add some further links but also recently was noted a relevant IMF paper which features Australia as top of the list for tax concession entitlements: tax expenditures- we're number 1!

Go Straya! Oi! Oi! Oi! There is also a good post on this from Greg Jericho at Grogonomics: Billions lost in tax concessions exposes Australia's hypocrisy over federal aid

Meanwhile in other globally significant developments The Economist has declared the $AUD now undervalued on the Big Mac Index.

Monday, February 3, 2014

Building momentum slows for the wet season

Building approvals were out today with some contradictory reporting again on weaker than expected seasonally adjusted numbers versus a trend which remains positive. Macrobusiness has a good post with numerous graphs on the national data, although they don't seem to have picked up the previous months revision in Qld. There is also some very positive comment from Stephen Koukoulas.

In the Far North a seasonal weak period can be expected as shown in an updated North v South graph for Cairns. Note: this is from the SA2 data and not the Cairns LGA.


More concerning is that the Conus Trend series is also showing some weakness:
Our own Conus Trend series confirms this slowing picture with Trend approvals falling to 48 in Dec (from a downwardly revised 50 in Nov). This is the lowest rate of Trend approvals we have seen since May. Although things are still looking more positive than they did back in 2011/12, it is clear that the seemingly robust recovery has run out of a great deal of steam in recent months.
Conus also notes a weaker trend down in Townsville.  In a recent post I did note rents in Cairns rising while both Townsville and Mackay were flat or weaker in the past year, quite substantially so in Mackay albeit from previously elevated levels.

That data from the RTA also includes total rental bonds held for each city since March quarter 2011 representing the number of rented properties. A comparison could be a tale of three tropical cities over the period. March 2011 indexed to 100 for comparison.

Mackay has shown growth of over 20% in that period while Cairns has grown by 11%.  I had intended a separate post with some further comparisons but it is also of interest when looking through the current building approvals data. Dwelling approvals for the first half of this FY so far have been: Cairns 314; Townsville 808; Mackay 687.

Cairns and Townsville are comparable in population while Mackay remains somewhat smaller. Cairns also has a higher proportion of rentals to owners then the other cities, and also a higher proportion of flats (units) to houses. Mackay rentals are weighted far more to houses.

There have been reports of higher rental vacancy rates in Mackay as well as the softer rents indicated. An interesting aspect here is that all that growth in number of rental properties over the past year in Mackay has been in houses. Rental bonds held for flats have actually declined over the period. Despite that there have been 169 units approved so far this year in Mackay while unit approvals in Cairns still remain stuck on zero.

Trends in both rentals and approvals seem to indicate there has been no problem with a supply response to the housing demand in either Townsville or Mackay.

REIQ: Queensland rental market easing

Insurance Council preference distribution

The AEC has released details of political donations for the 2012-13 year. The Mayne Report may be a good place to track any news on interesting donations or you can do your own searching at the Annual Returns Locator Service.

The donations from our good mates at the Insurance Council provide some items of trivia from an NQ perspective with $90,957 donations in total. This was predominantly to the Coalition although there was $25,000 for an ALP business forum and $1,361 for a dinner with Bill Shorten. All I can say given his (no) response on NQ insurance issues is that they got their moneys worth out of dinner with Bill.

There was also some enthusiasm for raffle tickets from the Victorian Liberals. Presumably they do a good meat tray? Most of the rest relate to relevant fundraiser events and spokesmen such as Hockey, Robb and Cormann. Although the items of $3K "LNP Ryan Fund" and $2K "Prentice" are curious.

Jane Prentice is the member for riverside Ryan in Brisbane. I wonder what she did to earn such preferential support? No mention of Leichhardt or Entsch. No wonder Wazza is filthy with the Insurance Council.

Saturday, February 1, 2014

Life's like a box of chocolates.

'Listen to us' - Cairns tourism operators feel abandoned and slam council and State Government.

All over a sign and the label "Gateway to the Great Barrier Reef".  Really, it could be something out of Muriel's Wedding with the Mayor of Porpoise Spit!

Angry operators

Here most of us were thinking this GBR gateway and sign fetish had been sorted back a while ago, and that Fred Ariel had moved on to a scheme to pipe water from PNG to the Sahara or somewhere? When this came up previously there seemed to be some kind of misconception that the Whitsundays was stealing our lunch.

The Cairns Post have done a good job though of dredging up a new headline to replace a cyclone that didn't really happen. Is there another sign related agenda here beginning with the letter 'A'?

Anyway, currently if any potential tourist googles  a gateway to the Great Barrier Reef they are more likely to come up with a link to dredging. There has now been a quite reasonable query as to why we need a 'great' reef when an 'adequate' one would suffice:  Government: “An Adequate Barrier Reef would be good enough”

The marketing question for Cairns shouldn't be the triviality of a sign at the lagoon. I'm not technically informed to judge the merits of the recent dredging proposal for Abbott Pt. I am technically equipped enough to do a google search and quickly determine that regardless the controversy is damaging to the brand.