Struggling retail sector would benefit from longer trading hours – National Retail Association bid deserves to win

The National Retail Association bid for extended trading hours deserves support because it would be good for consumers and may provide a boost to a struggling retail sector (see my post from earlier this month: Economic weakness hits Queensland retailers). Today’s Courier-Mail reports:

The National Retail Association will today launch a legal bid to overhaul trading hours across the southeast, allowing stores from Coolangatta to Noosa to open from 7am to 9pm, Monday to Saturday.

The proposal, which covers Brisbane, Ipswich, Logan and the Gold and Sunshine coasts, is a fresh push to clarify Queensland’s garbled trading-hours regime, which costs the state more than $100 million in revenue and leaves shoppers stranded outside supermarkets every Saturday.

As I’ve noted before, the huge crowd at the Baroona Rd, Milton IGA every Saturday night around 6pm, after nearby Coles’ and Woolworths’ stores have closed, suggests there is a large demand for extended trading hours at supermarkets. While IGA does a reasonable job, its product range is much smaller than that of Coles and Woolworths, meaning consumers won’t get the maximum benefits from their shopping dollars.

It’s about time we end Queensland’s archaic trading hours restrictions, particular given that traditional justifications for restrictions appear less relevant in today’s economy and society. For example, see my posts:

Traditional small business lobby much smaller than it once was – should make trading hours deregulation easier

24 hour retail trading inevitable and desirable

Posted in Retail trade | Tagged , , , | 5 Comments

Local government regulatory reform process fails to stop silly heritage listings in Townsville

In its report on cutting red tape last year, the Queensland Competition Authority noted that “the Government will consult with local government in late 2013 on a regulatory reform program for local governments.” This consultation obviously didn’t achieve much, because major local governments such as Townsville City Council haven’t got the regulatory reform message yet. For example, it’s reported in today’s Townsville Bulletin that a number of properties of dubious heritage value have been secretly added to Townsville’s heritage register, meaning the owners are now restricted regarding the modifications they can make to the properties (see Dirty dozen get heritage stamp). The silliness of the heritage listings is made clear in a comment from one of the property owners, who points out her house doesn’t really have any heritage value:

The owner of a red brick home in Belgian Gardens, who did not want to be identified, said it would have been nice to know of council’s intention to add her home as a site of heritage value.

“It is a lovely house but it is not even an old Queenslander,” she said.

“I don’t know why I wasn’t told, I should have had a courtesy letter.”

Townsville City Council is a repeat offender on silly heritage listings, but there are possibly similar examples in other parts of Queensland, as well as examples of unnecessary and costly applications of other regulations at the local government level. The Queensland Government needs to revive its local government regulatory reform agenda, and it might be worthwhile for it to commission the QCA to undertake a thorough review of regulations at the local government level.

Previous posts on heritage issues by me and my former colleague Brad Rogers include:

Townsville CC knocks back Nuns’ plans to rebuild convent

Heritage protection could hold back Townsville CBD revitalisation

Old Queenslanders in a New City

Posted in Housing, Townsville | Tagged , , , | 1 Comment

How important is the return of leased out assets in 99 years time in a cost-benefit analysis?

The Premier’s interesting comparison of the proposed leasing out of Queensland Government assets to the long-term lease of Hong Kong, which was eventually returned to China, made me think about how important the eventual return of assets should be in Government decision making (see Brisbane Times coverage of the Premier’s comments). Given that very few Queenslanders alive today will be around when the assets would revert back to Government control next century, it seems obvious to me that very little weight should be given to the fact the assets are eventually returned.

In any cost-benefit analysis of the decision to lease out assets or not, the Government should be mostly concerned about the benefits and costs to Queenslanders over the next few decades. Under typical assumptions for the time value of money (i.e. the fact a dollar today is more valuable than a dollar in the future), the value of the returned assets in 99 years time would be relatively tiny, and likely have very little if any influence on the bottom-line result for the cost-benefit analysis of whether to lease out assets or not (see chart below).

timevalueofmoney

The return of assets to the Government after the lease period ends provides some cover for the Government in the privatisation debate, but it really shouldn’t be a major consideration in the debate. The eventual return of the assets isn’t that important from our point of view today, so we may as well sell off the assets and maximise the privatisation proceeds.

Posted in Budget, Queensland Government | Tagged , , , , , , , , | 7 Comments

Top 10 posts from the first 1,000

Yesterday I posted my 1,000th post, and below are links to the most clicked from the first 1,000. Having grown up in Townsville, and knowing the intense debate the issue causes up North, it didn’t surprise me that a post on whether Cairns or Townsville is the capital of North Queensland was number one. Also, there was a lot of interest in posts on the carbon tax and unemployment. Thanks to everyone who has read my blog over the last four years and a bit.

Posted in Cairns, Climate change, Labour market, Townsville | Tagged , , , , , , | 6 Comments

GST hike appears very likely, but Commonwealth retreat less so

Prime Minister Tony Abbott has, it seems, given the green light for raising more revenue via the GST in a speech at Tenterfield on Saturday (Sir Henry Parkes Commemorative Dinner):

…the Commonwealth could stop funding programmes in areas of state responsibility and stop using its financial power to influence how the states deliver services.

In that case, the Commonwealth would be ready to work with states on a range of tax reforms that could permanently improve the states’ tax base – including changes to the indirect tax base with compensating reductions in income tax.

The obvious change to the indirect tax base would be to raise more revenue from the GST, by either raising the rate or removing exemptions on fresh food, education and health.

The budgetary challenges facing the Commonwealth and State Governments across Australia certainly mean that raising more revenue from the GST is a very attractive proposition for Governments. The Commonwealth can blame the States, saying they wanted it, while the States can say they were forced into it by reductions in Commonwealth funding. The States, which get the increased GST revenue, get more revenue to meet their budgetary challenges, and the Commonwealth can save money through reducing other grants to the States. Ultimately, the States and the Commonwealth all win and everyone blames each other.

While I can see greater reliance on the GST for revenue raising is very likely, I think it’s unlikely the Commonwealth would retreat completely from policy areas such as education and health. Plausible increases in the GST could raise say $20-30 billion extra for the States, but, as the PM noted in his Tenterfield speech, the gap between spending by the States and own-source revenue is some $100 billion. Assuming that State income taxation will be put in the too hard basket, there will likely still be a substantial gap between State spending and own-source revenue, meaning the Commonwealth will still be involved in funding State services and will still want a say.

Indeed, some influential groups in the community would be very concerned about any Commonwealth retreat from particular services. For example, many Catholic and Independent Schools have become significantly reliant on Commonwealth funding (e.g. see my post Large savings for Qld Govt from shift to private schooling), and may be concerned any lost funding from the Commonwealth wouldn’t be replaced by State Governments.

So, while I can see greater reliance on the GST in the future, I don’t think this will be accompanied by a reduction in Commonwealth involvement/interference in State-delivered services such as education and health.

My previous posts on the desirability of GST reform include:

New Treasury modelling supports change in tax mix towards GST

Dr Parkinson right that the GST should be broadened

GST changes should be considered as part of wide-ranging tax and expenditure review

Government has to rely on inefficient taxes to fix budget – GST reform needed

Posted in Education, Tax | Tagged , , , , , , , | 4 Comments

Ticket scalping crack down unnecessary and undesirable

Some unnecessary and undesirable interference in the natural workings of markets was supported by a Queensland parliamentary committee on major events last week (see the Major Events Bill report). It appears the Government is proposing to extent current laws that apply to major sporting events, such as those held at Suncorp Stadium, to a wider range of events. It was reported in Friday’s mX newspaper that:

A Queensland parliamentary committee report has recommended measures to crack down on overpriced black market ticket resales at busy events.

Under the proposed legislation, anyone caught selling their ticket for more than 10 per cent above the original purchase price could face hefty fines.

People will also no longer be able to flog unwanted tickets at major event venues, with face-to-face resale to be considered an offence in some areas.

It seems odd to me that we can accept the efficiency and desirability of secondary markets nearly everywhere else in the economy, including for stocks and bonds, real estate, and anything you can buy over eBay or Gumtree, but we make an exception for concert or sporting tickets.

I’ve previously posted on the economics of ticket scalping. While I can understand the equity argument for cracking down on ticket scalping, I don’t think it makes any sense economically.

A close reading of the Committee report suggests that the Committee itself has some reservations about regulating ticket scalping, as it has requested further information regarding at exactly what events the new regulations would come into play. I hope that the Government intends that the regulations apply only in very limited circumstances, such as for only a limited number of events at the upcoming Commonwealth Games on the Gold Coast.

Posted in Arts, Queensland Government | Tagged , , , | 4 Comments

4BC interview on hospital cost blowout – Govts need to crunch numbers properly before spending decisions

I spoke to Ben Davis from 4BC’s Drive program yesterday afternoon about the Auditor-General’s report on the Beattie Government’s decision in 2006 to build three new hospitals, including the Lady Cilento Children’s Hospital and new hospitals on the Gold and Sunshine Coasts. It turns out that the hospitals ended up costing around $5 billion when completed, compared with the initial cost estimate provided by the Government of around $3 billion.

The problem appears to have been that the initial cost estimates were prepared in a hurry, possibly based on incomplete specifications of the projects and out-of-date or inappropriate cost data. As the announcement was made in the lead up to an election, the Government might have been too excited about the electoral appeal of the hospitals to do the detailed analysis that is generally expected before committing billions of dollars. Unfortunately, once the election announcement was made and a public expectation was created,the Cabinet would have felt unable to stop the project, had it wanted to, once it saw more realistic cost estimates in the business cases eventually prepared by Queensland Health.

Ben asked me about the comments former Premier Beattie made earlier in the day, which reportedly included the comment that you can’t expect detailed business cases for hospitals because they’re not built to make money but to treat people. I told Ben I thought this was a distraction from the real issue. The debate isn’t over whether hospitals should be run as private businesses, but rather whether the Government should have done more work assessing the costs and benefits of the new hospitals before committing to build them. Clearly it could have and should have. “Business case” is now a generic term for an assessment of the merits of any project or investment, not necessarily a business investment designed to make money. Business cases could have been prepared for the hospitals with more reasonable cost estimates than the Government announced, after the appropriate advice from construction cost experts was obtained, of course. These business cases could have contained an assessment of whether the three hospitals were the most cost-effective means of meeting anticipated future community needs.

Governments can make very bad decisions when they haven’t done the proper analysis. It’s possible that, if the Government had known the hospitals would cost $2 billion more than expected, Queensland Health would have looked for other options for meeting the identified needs in the community. The hospitals decision reminded me somewhat of the Rudd Government’s decision to build the $40 billion plus National Broadband Network, a project that was heavily criticised for being committed to without a proper business case and cost-benefit analysis.

Where there are billions of dollars at stake, the Government has an even clearer obligation to the community to crunch the numbers before making any decision. While Governments often do the right thing, and there are guidelines and expectations in place for the preparation of business cases in many jurisdictions (e.g. see Queensland’s Project Assurance Framework), Governments sometimes bypass the usual processes, alas, so they can score quick political points.

Posted in Health | Tagged , , , , | 8 Comments

Reflections on Gough Whitlam

Gough

I recall with great sentiment now, after news of the death of former PM Gough Whitlam today, that Gough gave an excellent after dinner speech at the UQ Law Ball at the Hilton Hotel in Brisbane in 1996. The former PM, a class act, didn’t go over old political ground or criticise the current Government, but rather spoke of his love of trains, and how pleased he was that his Government had funded the construction of the Merivale St bridge. Up until this bridge was built in the mid-to-late seventies, the nearest train bridge to the centre of Brisbane was at Indooroopilly, and trains from the south had to terminate at South Brisbane.

So Brisbane has at least one thing to be thankful to Gough Whitlam for, among other things, of course. While the Whitlam Government had many faults, including a naivety on economics until Bill Hayden was appointed Treasurer (too late, alas), there is no doubting that it transformed the country in a number of positive ways. I commented briefly on the Whitlam Government in my speech to the University of the Third Age Redlands in August:

The 1970s saw the end of the long boom we had enjoyed since the end of the war…The end of the long boom forced Governments starting with Whitlam’s to consider hard policy choices. Whitlam, despite his faults on economic policy, actually did make a number of sensible policy choices. For example, the 25% tariff cut in 1974 and the breaking up of the old Postmaster General’s Department and the creation of Australia Post and Telecom, which ultimately led to greater efficiency in postal and telecommunications services. But there was much more reform to be done. Whitlam was too beset with political and pressing macro-economic problems to do much in the way of micro-economic reform…

Perhaps I also should have added the Whitlam Government’s opening up of tertiary education, although free education proved to be a costly policy which future Governments have had to wind back through introducing and continually increasing HECS, now HECS-HELP. As is well known, the Whitlam Government’s progressive social agenda came at a high cost, and locked in a permanently higher level of Commonwealth Government spending as a share of GDP, a point made at Catallaxy Files by Sinclair Davidson today:

The Whitlam legacy: Big government

There is no doubt that Gough Whitlam transformed Australia and has left a lasting legacy. It’s a great credit to this country that the bitterness associated with politics in the seventies has dissipated, and we collectively mourned the loss of our former PM today.

Posted in Brisbane, Transport | Tagged , , , , | Leave a comment

The problem with economic development agencies such as Townsville Enterprise & Brisbane Marketing

It can be very stressful to be responsible for outcomes over which you have very little control. This is the predicament faced by economic development agencies such as Townsville Enterprise and Brisbane Marketing. This predicament was highlighted by the sacking earlier this year of Townsville Enterprise CEO David Kippin, who appears to have been held responsible for Townsville’s relatively poor economic performance in recent years (see this Townsville Bulletin story). But Townsville’s performance hasn’t been that different from other Queensland regional centres that also weren’t major beneficiaries of the resources boom. It seems silly to blame and sack Mr Kippin, particularly given he appears well-regarded in the Townsville business community.

Townsville Enterprise’s Chairman Kevin Gill has committed the organisation to attracting more investment dollars for the Townsville region. Clearly the attraction of Government investment, such as in the proposed Super Stadium, is an important part of this strategy. I’ve often wondered, however, whether agencies such as Townsville Enterprise and Brisbane Marketing are actually focussing on the wrong things. You can spend a lot of time and money chasing after investment dollars that, from a whole economy perspective, aren’t that significant and don’t provide the basis for long-term, sustainable growth. Indeed, one challenge that Townsville now has is that its growth since the War has been dependent, to a large extent, on Government, with Lavarack Barracks, James Cook University and State and Commonwealth agencies all major sources of growth. Townsville doesn’t appear to have developed any important competitive advantages in private sector industries that can provide sustainable growth opportunities into the future.

Rather than waste a lot of time and money chasing investment dollars that may deliver little long-term economic benefit to their regions, bodies such as Townsville Enterprise and Brisbane Marketing should instead focus on lobbying to improve policy settings. These bodies should lobby to remove restrictions on development that are restraining economic growth and also for more efficient local government services (so that people might be attracted by a lower cost of living that other regions). By helping to improve the fundamentals, I expect these agencies would deliver greater value than they do currently.

Regarding how local government policies can restrict economic development, see Bradley Rogers’s post:

Old Queenslanders in a New City

Posted in Brisbane, Townsville | Tagged , , , | 6 Comments

Upcoming Economic Society event on rural & remote service delivery

remoteWith a relatively high proportion of the population living outside of major cities and towns, in outer regional or remote areas (see chart above based on ABS data), Queensland faces an additional challenge in delivering government services such as health and education. Delivering services to rural and remote areas will obviously be more expensive, given the lack of economies of scale associated with service delivery in urban areas. But governments are finding ways to deliver services more cost-effectively in rural and remote locations, including through the use of web-based distance education and tele-health.

The Queensland Branch of the Economic Society of Australia, of which I’m Deputy Secretary, is very pleased to have one of the leading consultants in Australia on the economics of rural and remote service delivery, Dr Abby Kamalakanthan, speaking at an upcoming seminar in Brisbane on Friday, 7 November. If you are interested in how we can continue to deliver government services in a sustainable, cost-effective manner in rural and remote areas, I would encourage you to attend Abby’s presentation. Details are available at the ESA Qld website:

Sustainable Solutions for Rural and Remote Service Delivery in Australia

(N.B. I left Tasmania off the above chart because a very large chunk of it is considered outer regional and including it took attention away from the large differences between Queensland and NSW and Victoria that I wanted to highlight.)

Posted in Education, Health, Population, Queensland Government | Tagged , , , , , , , , , , , | 3 Comments