A perspective on backpackers tax

A recent post on a topical issue: How much tax should backpackers pay?

This analysis is very much based on farm labour and the Seasonal Worker Program rather than hospitality.

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Note: “The figures in the graph are from government statistics. Consistent with the data, it is assumed that 90% of those applying for a second-year visa have worked on a farm. Backpackers who have worked on a farm but not applied for a second-year visa are not included in the graph, which therefore underestimates the number of backpackers working on farms.”

The Cairns Hospital Dichotomy

I posted this just a few short months ago: Cairns Hospital scores for efficiency

Now there is this: Cairns Hospital board resigns in response to questions from Health Minister over $80m deficit

Yes, the efficiency score is now two years old, the most recently available comparative data,  related to the period up to 2013-2014. However, somehow my faith in reliable data over politics is challenged by this situation.

 

 

Revisionism at the Cairns Post

I had wanted to move on from a previous virtual persona but have been challenged in the past week by this at the Cairns Post: Former Cairns developer and bank battler backs ombudsman review

I wont go into detail. It should be history and left behind. However it is significant for potentially repeating past mistakes in a future Cairns where collective memory, particularly at the Compost, is rather limited. This was my post at Loose Change in 2011: The rise and demise of CEC

cec-assets

Not a great graph as I acknowledged at the time but best I could do try and represent the rapid expansion of CEC post 2007 and subsequent implosion. The maroon bit is net. Assets in the last years included a material deferred tax assets component which is where the auditor ultimately had an issue. Best for my own mental wellbeing that I don’t rake over these coals. Anyone so inclined can search the ASX database on corporate releases from CEC notable for the serial failure to meet reporting deadlines.

However, surprised that after all these years this link still exists online: CEG – CommSec 2007 Emerging Companies Conference – Mr Roy Lavis, MD

Please reference the above graph but the key comment here comes just after 27 minutes in.

Roy Lavis: “I want to grow this company to a billion dollars very, very quickly”

Yep, It was the banks what done it I tell ya!

 

 

 

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.

Rental1

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.