Earthquake risk in Cairns

The excitement around the Bowen earthquake last week reminded me of this now dated 1999 report I stumbled upon some time ago, with a foreword from a more youthful Warren Entsch. The building construction and location data would be well out of date by now I presume: COMMUNITY RISK IN CAIRNS A MULTI-HAZARD RISK ASSESSMENT


The earthquake hazard in Cairns is moderate by global standards, but it is not negligible. Over the past 100 years there have been at least 11 significant earthquakes reported within 200 km of Cairns, the most damaging being the Richter magnitude 4.3 event of 1896. In many places of Australia, probably including Cairns, moderate to strong earthquakes of Richter magnitudes 5 to 6 make up about 90% of the total contribution to the overall earthquake hazard. The occurrence of such an earthquake close to Cairns would be a rare event. However, its impact could be great. An earthquake in this magnitude range (Richter magnitude 5.6) near Newcastle in 1989 caused arguably Australia’s most costly 20th Century natural disaster.
We have constructed earthquake urban hazard zonation maps and, from the building database, produced an inventory of buildings, by construction type and usage, in the zones in these maps. Any earthquake of a magnitude likely to cause damage in Cairns will have an effect across all suburbs. The amount of damage, and consequently risk, will increase with the intensity of the event.
Whilst all suburbs have some degree of exposure, Risk-GIS analysis of the earthquake hazard reveals that some 86% of Cairns buildings stand on ‘soft’ sediments of the coastal plains and riverine deltas, or the sands, silts and clays of the lower footslopes. These sediments amplify earthquake shaking. The extensive ‘soft’ sediments beneath the coastal suburbs, in particular, would aggravate the impact of any significant earthquake. These are also the suburbs that contain many of the critical facilities and have significant concentrations of people, buildings and infrastructure. The remaining 14% of the buildings are mostly modern and are situated on the upper slope soils or rock of the hills where ground motions will be less damaging. Some of these buildings conform to the earthquake loading provisions of the Australian Building Code, and the majority conform to wind loading provisions.
In order to produce a suburb-by-suburb ranking of Cairns for earthquake risk from direct damage to buildings, we have introduced a vulnerability ranking of building construction types. The profile of risk exposure to earthquake and a total earthquake risk profile, which takes account of community vulnerability as well as the exposure to the hazard, are shown in Figures (v) and (vi

June quarter rental data

June quarter rental data from the RTA based on rental bonds lodged for the quarter was released on Friday. I have updated the comparative graphs of the two largest Cairns cohorts, 2br units and 3br houses, at Rental Data. Further insights into this excellent data will be added at that link over the coming millennium.

Cairns renters are now paying a premium of $60 per week over Townsvillians for a 3br house. Mackay continues to search for a bottom.


Despite recent reports of lower vacancy rates and limited supply for Cairns in the recent months that isn’t yet showing up in further increases in median rents.

Sugar Marketing Wars MMXVI

The Productivity Commission has released a report critical of the changes last year to sugar marketing arrangements in Queensland. Reported at the AFR: Queensland sugar re-regulation costs outweigh benefits, says PC.

The Queensland Parliament’s partial re-regulation of the state’s sugar industry has been slammed by the Productivity Commission, which says the move is likely to worsen profitability and curb investment.

Highlighting that a considerable number of Queensland sugar farms are still too small to be profitable, the independent federal government think-tank said legislation passed late last year to let sugar cane growers direct how millers market internationally is likely to restrict competition and deter new spending on mills or more innovative marketing.

“Re-regulating the Queensland sugar industry will limit the competitive forces driving innovation and productivity growth in sugarcane farming,” the commission said in its draft report into agricultural red tape.

“It is also likely to constrain innovation in marketing and continue to limit the premiums available to sugar cane growers. The commission’s view is that costs of the Sugar Industry (Real Choice in Marketing) Amendment Act outweigh the benefits.”

The legislation was passed in December by the Queensland Liberal-National Party opposition with the support of independents. It has since become a sensitive issue within the Turnbull government, which is eager to signal to foreign investors that Australia is open for business while also keeping federal Queensland LNP members on side.

Former trade minister Andrew Robb was warned during a trade mission to Singapore earlier this year that the Queensland Parliament’s move had damaged the nation’s reputation as an investment destination.

“The re-regulation of sugar marketing in Queensland has the stated objective of allowing sugar cane growers to choose their marketing arrangements,” the commission said in the report. “However, the evidence suggests that the preferred choice of marketing arrangements is likely to reduce the productivity and profitability of the industry by constraining investment and structural adjustment.”

The commission’s report reiterated that the industry continues to fail to take advantage of economies of scale. The average size of sugar cane farms has increased from 80 hectares in 1997-98 to 110 hectares in 2015-16, but is still well below the US average of 495 hectares.

Research cited in the report suggests farms smaller than 125 hectares generate a negative rate of return on capital, while those larger than 250 hectares generate similar rates of return to grain growers with similar capital investment.

If my recollection is correct the legislation was passed in our unicameral Queensland legislature by the LNP and KAP despite being opposed by the ALP government. In the current political circumstances it is unlikely any challenge will go far.

In recent times there have been some spurious claims of adverse sovereign policy risk which have successfully managed to confuse the term. In this case they are valid. Grower owners of the Mills sold their interest on quite nice terms thank you (Mulgrave) trousered the cash then lobbied for the legislation to return marketing power to themselves.

Previous comment on this at Queensland Economy Watch: Premier should definitely call an early election; Guest post by Rod Bogards.

Industry nformation and links at Sugar. PC  here: Regulation of Agriculture Draft Report.

PNG Economy

Cairns has always had particularly close contact and relationship with our neighbour to the north in PNG. The business relationships have been actively promoted by Cairns Chamber. Cairns has also been a favoured haven for less reputable funds from notoriously corrupt PNG governance.

There has been further political instability recently in PNG with a confidence vote in parliament imminent and concerns over the economy. A recently launched blog may be of interest and worth a follow offering “timely, accurate, frank and fearless advice”: PNG Economics.

Conclusion from the most recent post on “PNG’s Recent Recession”:

This new data is of great concern. While turning on the PNG LNG taps has made the headline GDP numbers look good (24% growth over two years), this has been a smokescreen for how poorly the key parts of PNG’s economy have been doing over 2014 and 2015. The combination of economic statistics indicates PNG has just had a significant recession for the parts of the economy that most affect PNG’s citizens.

Looking forward, the economy still suffers from foreign exchange shortages driven by poor policy choices, faces downward pressure on aggregate demand due to the major reduction in government expenditure (related to excessive earlier promises and poor revenue effort) and continuing uncertainty on commodity prices. Announced policies in areas such as agriculture, lands and SME have hurt confidence and will discourage growth. Earlier warnings about a slippery slope were ignored and there is now much more repair work to be done. The causes for the recession include the El Nino drought and falls in commodity prices, but the causes also go well beyond these specific issues and to the heart of poor economic management in PNG over recent years. However, with the right leadership and policies, PNG should be able to realise the opportunities owed to its people by embracing the Asian century.

Reef Casino: bleached by night?

Despite the recent flow of positive tourism news Reef Casino seems to have turned in a weaker first half going by the recent distribution announcement: Reef Casino Trust profits in Cairns falls by $700,000. The ‘reef by night’ slogan may have missed its target on these numbers.

With another week’s trading before the end of the first half financial year, our current estimate of the distributable profit* for the six months ended 30 June 2016 is approximately $5.7 million.   This compares well with the average of the previous 4 first-half years (2012 – 2015) of $4.9 million. In 2015, it was $6.4 million.

I’m not sure that 4 year average comparison works for me as previous years, not inclusive of 2016, also include the additional one-off costs of the collapsed takeover and weaker trading periods, particularly back in 2012 when the upper level was closed throughout the first half for refurbishment. The most recent update on trading was at the AGM in May:

Overall, our performance for the first 4 months is within our expectation for trading during this time of the year.  Table games grind revenue and hotel revenues, especially room revenues are higher than last year.  Electronic gaming revenues were slightly lower compared to 2015 which set new records as I had earlier mentioned.  Premium revenue is lower compared to the same period last year due to a lower premium play win rate however it is not unusual for premium play win rates to fluctuate in the short term.

Reef is the only listed Casino operator which doesn’t provide ‘normalised’ profit results with accounts adjusted for theoretical premium win rate. I did query Alan Tan on this at last years AGM and it was indicated that this wasn’t considered a large enough component of the Reef business to be material.

I will await release of full half yearly results to dig out and update my old analysis files from the Aquis takeover. Updated chart:

ReefNote: 2014 results adjusted for one-off costs related to Aquis takeover and a high roller bad debt. 2016 1H is in line with the average of the most recent 4 years (2013-2016).

Employment data on Cape York

A further look at the Cape York employment data following previous post on Aurukun. There was reform to indigenous employment schemes for remote communities from July 2015 with the implementation of the Community Development Program (CDP). This would correlate with the trend change in the Small Area Labour Market (SALM) data from that date.

The SALM explanatory notes do seem to indicate that some account is taken for this in the Centrelink data applied in the methodology. The increased unemployment rate in the SALM data for Aurukun is derived from both an increase in the number unemployed and a fall in the labour force size.

However the SALM methodology is also intended to be consistent with and also derived from the ABS Labour Force Survey for the SA4 region. The SA4 data for Outback follows the same clear trend from July 2015. This is Outback SA4 with a 12 month moving average and also  the Conus Trend (blue):


Again the trend break in July 2015 is significant across all factors reported by ABS (unemployed, labour  force, participation, etc.) contributing to the increased unemployment rate. The 12 month average just like the 4 quarter SALM data tends to  smooth what was a sharp break from July 2015. It isn’t clear to me why the labour force survey results for the entire SA4 region should be influenced so significantly by any CDP changes.

As suggested previously the Outback SA4 region is statistically difficult with a relatively low population (and sample size) covering a vast geography from Torres Strait to Birdsville with not much economic connection between those. It is also possible that much of what we are seeing in the trend reflects issues in the labour force sample for Outback.

The ABS sample rolls over eight months with only an eighth of the sample rolling in and out for successive months. The recent period has seen some extraordinary volatility even for Outback. In the recent March quarter of the SALM data the raw ABS unemployment rate for Outback SA4 has varied between 1.5% and 19.0% in successive months. Which is of course nonsense.

When the SALM methodology is applied to all the SA2 areas in Outback SA4 the unemployment rates look like this.


I don’t know. It may be worth a query to ABS and Dep’t of Employment.

SALM and unemloyment in Aurukun

I intend to add a specific page on the Small Areas Labour Market data as I get back to building this website. Meanwhile there is a current post on this at Conus to which I have contributed some comments on the most recently updated SALM data: Small Area Labour Market data confirms the weaker NQ picture; Townsville losing work force

However I have looked initially at some of the data for the statistically difficult Outback region which stretches all the  way from Birdsville to Cape York and found this:


The SALM quarterly data is smoothed as a 4 quarter moving average. No, not naive. I know there can be difficulties around employment statistics in indigenous communities. Was there some change in employment programs last year or some other factor?


Airport data updated to May

Now hopefully recovering from some debilitating technical frustrations so can update two months of data up to May for Cairns Airport.

May is a seasonally quieter month but domestic growth remains robust at 6% with previous indications from the airport also of capacity growth around that in coming months. International growth pulled back into single digits at 9.5% but that is probably to be expected as previous exceptional growth was off a very low base which is now working through the numbers.

The airport commentary this month has also provided an estimate using passenger surveys, the international visitor survey, and immigration data of all airport passenger numbers, both domestic and international services, by nationality.

Home Country Passengers: Australia 3,340,000 China 430,000 Europe 420,000 North America 270,000 Japan 210,000 Korea/Taiwan/Hong Kong 95,000 New Zealand 80,000 India 50,000 Papua New Guinea 35,000 South East Asia with Singapore 30,000 Rest of World 40,000 Total 5,000,000

I think I would prefer to see Korea grouped with Japan in that as a more closely related market with similar trends.

Comparative airport data from BITRE has also been updated to March. Standout for the month is high growth at  the tourism destinations (Cairns, Gold Coast, Sunshine Coast) with seasonal factors contributing around Easter. Also good international growth numbers at Sydney and Melbourne the two largest gateways.

Graphs and details updated at Cairns Airport.