Disconnecting Allconnex

Posted on April 7, 2011 by Gene Tunny

There was a scene in the classic political satire Yes Minister in which the redoubtable arch bureaucrat Sir Humphrey Appleby reflected on the profound shifts in public policy that occur from time to time:

…I have served eleven governments in the past thirty years. If I had believed in all their policies, I would have been passionately committed to keeping out of the Common Market, and passionately committed to going into it. I would have been utterly convinced of the rightness of nationalising steel. And of denationalising it and renationalising it. On capital punishment, I’d have been a fervent retentionist and an ardent abolishionist. I would’ve been a Keynesian and a Friedmanite, a grammar school preserver and destroyer, a nationalisation freak and a privatisation maniac; but above all, I would have been a stark, staring, raving schizophrenic.

This scene came back to me in a flash after I heard the news about the Government’s policy shift on the SEQ water utilities:

Bligh backflips on water reforms

The incredible thing about politics nowadays is that profound policy shifts – such as this one and the Rudd Government’s abandonment of the emissions trading scheme – are being made by governments of the day, and we don’t have to wait for a change of government. This strikes me as careless.

Our governments are not getting the advice they should be from their political advisers. The water reforms would naturally result in higher water charges, as action on climate change would result in higher electricity prices. Savvy advisers would have picked this up and alerted ministers that, while the particular policies had merits on economic grounds, they would be politically toxic and ministers would be well advised to fully think things through. Clearly our governments need better advisers.

It’s unclear what will happen to the new water utilities. Given the community’s hostility to Allconnex on the Gold Coast, I wouldn’t be surprised if it’s disbanded. On the Sunshine Coast, the Unitywater CEO is appearing stoic (Will Unitywater be disbanded?), saying the show will go on, but his obvious displeasure came through in his not so subtle hint that politics has won out:

“Despite today’s announcement by the Premier, which is a political issue, our staff will maintain their focus on delivering exceptional service to our customers,” Mr Black said.

Obviously this is all going to cost a lot of money. It’s also a bad look for Queensland. Let’s hope the Government can find some better advisers.

Posted in Water | Leave a comment

Shorten’s flood insurance reform paper strikes the right balance

Posted on April 5, 2011 by Gene Tunny

Assistant Treasurer Bill Shorten and the Treasury deserve praise for striking the right balance between looking after vulnerable consumers and free market principles in the Government’s consultation paper on flood insurance reform released today:

Consultation Paper – Reforming Flood Insurance: Clearing the Waters

The public interest is clearly served by promoting a standard definition of “flood” and by ensuring insurance policy holders know exactly what they are covered for. Minister Shorten’s proposals look after the vulnerable and may forestall more interventionist and costly solutions, such as a compulsory natural disaster insurance scheme run by the Government.

Posted in Floods | Leave a comment

OECD upbeat about global economy

Posted on April 5, 2011 by Gene Tunny

Despite the economic uncertainty arising from the tragedy in Japan, the OECD is optimistic about the strength of the global economic recovery. From the OECD newsroom today:

Growth in the G7 economies outside Japan appears to be stronger than previously projected, with accelerating private sector investment and trade boosting recovery, according to new analysis from the OECD.

“The outlook for growth today looks significantly better than it looked a few months back,” OECD Chief Economist Pier Carlo Padoan said during a presentation of the OECD’s latest Interim Economic Assessment.

“Growth perspectives are higher all across the OECD area, and the recovery is becoming self-sustained, which means there will be less need for fiscal or monetary policy support.”

A pick up in global growth, and hence demand for resources, could underpin the record highs of the Australian dollar or push it even higher, which would be good news for consumers and mortgage holders. Leading market economists are crediting the RBA’s decision to leave the cash rate steady today to the high Australian dollar, which is putting downward pressure on inflation because goods from overseas are now cheaper.

The high Australian dollar, however, is causing pain to some sectors including manufacturing and tourism. It’s possible the value of the dollar is partly responsible for the drop off in short-term visitors to Australia from overseas, as reported by the ABS today:

During February 2011, short-term visitor arrivals (492,400 movements) recorded a decrease of 2.2% compared with January 2011 (503,800 movements).

Source: Overseas Arrivals and Departures, Australia, Feb 2011

The depressing effect of the Australian dollar on tourism and manufacturing is part of the necessary adjustment that needs to occur for Australia to take advantage of the resources boom. The global marketplace is telling us it doesn’t want us to make Falcons and Commodores, or to be one giant holiday resort; it wants us to dig coal and iron ore out of the ground instead.

As a supporter of free trade, I’m comfortable with this, but I can also understand why this may cause some Australians to wonder about the future direction of our economy. If the dollar gets to US$1.10 or above, as some market economists expect, the industry policy debate is sure to become white hot.

Posted in Industry policy, Macroeconomy, Mining | Leave a comment

Brisbane – a perfectly balanced city

Posted on March 31, 2011 by Gene Tunny

The ABS’s regional population figures released today confirm Queensland is second only to WA in population growth, and that the Brisbane metro area’s population growth is concentrated in the Western Corridor through Ipswich and West Moreton. The ABS has also uncovered this elegant and striking fact about the population centre of Brisbane (which is a demographic concept akin to a centre of gravity):

The centre of population for Brisbane SD [Statistical Division] at June 2010 was in the Botanic Gardens on the banks of the Brisbane River, just south of the city’s central business district.

So Brisbane, it appears, is still a reasonably balanced city without the uncontrolled urban sprawl of say Sydney, where the population centre is near Parramatta, or Melbourne, where it is in Glen Iris, 10km south-east of the city.

If Brisbane is to maintain this balance, we’ll need to continue to increase population densities in our inner city and surrounding suburbs such as Coorparoo and Indooroopilly, while ensuring that the development of outer suburbs occurs in an orderly fashion.

Incidentally, the population centre of Queensland also lies in a pleasant spot:

Queensland’s centre of population at June 2010 was in the LGA of North Burnett (R), roughly 100 kilometres west of Maryborough. The centre moved approximately 1.7 kilometres east-north-east in the five years to June 2010, reflecting sustained population growth in Queensland’s coastal regions over this time.

Posted in Brisbane, Population | Leave a comment

Xenophon’s war on supermarkets

Posted on March 30, 2011 by Gene Tunny

In defiance of basic economic logic, Senator Nick Xenophon has called for the Gillard Government to dismantle the Coles-Woolworths duopoly that dominates 80% of the groceries market (Call to dismantle duopoly):

THE Federal Government needs to consider dismantling Coles and Woolworths’ dominance of the Australian retail market, according to Independent Senator Nick Xenophon.

Mr Xenophon was speaking after a tense day of testimony from Coles and Woolworths senior executives in Canberra on Tuesday, appearing before the Senate Economics References Committee’s hearing into the impacts of supermarket chains’ pricing decisions on the Australian dairy industry.

The milk price discounting war stated on January 26 when Coles slashed its home branded milk products to $1 a litre – a marketing move followed soon after by Woolworths and other retail supermarket chains.

There may be a case for government intervention if Coles and Woolworths were abusing their market power – i.e. price gouging and earning monopoly profits. But so far we’ve seen the opposite. They’re engaged in vigorous price competition which is detrimental to their profitability.

Sure you can argue that this will drive the IGAs and 7-11s out of business because everyone is shopping at Coles and Woolies now due to the cheap milk and bread, but I doubt this will happen. These stores will always attract customers who just want to pick up a couple of items on their way home from work.

Also, at least in Queensland, the smaller retailers are protected by our backward retail trading hours, which mean Coles and Woolies shut at 9pm during the week and 6pm on weekends. The packed Milton IGA at 6.20pm last Sunday night left me in no doubt about the viability of the smaller retailers.

And the idea that this is predatory pricing that will destroy smaller retailers is just a hypothesis which hasn’t yet been proved. Before we go and break up successful Australian businesses, not to mention big employers, we better make sure we have a solid case, including evidence of a large increase in the duopoly’s market share as a result of this alleged predatory pricing.

Posted in Retail trade | Leave a comment

Winners and losers from Aussie dollar at 103 US cents – is Ford the next Mitsubishi?

Posted on March 28, 2011 by Gene Tunny

The Aussie dollar at 103 US cents (Dollar sets new post-float high) will be welcomed by Australians shopping online and holidaying overseas but, by making Australia a more expensive holiday destination for international visitors, it’s likely to prolong the slump in Queensland tourism.

Queensland, however, will be propped up by the mining sector and our economy should be firing again by later this year. The largest adverse consequences of our high dollar will be felt by the Victorian manufacturing sector, which will experience reduced exports as its products are now more expensive to overseas buyers.

It’s worth keeping a close eye on the car industry. Knowledgable industry observers have previously commented that Ford is the next Mitsubishi (i.e. the next global car company to pull out of Australia). Recent sales figures for the Falcon would suggest this is possible, and a higher Aussie dollar may force Ford to reassess its commitment to its Australian operations. For more on Ford’s recent troubles, see:

Is the Falcon going the way of the Dodo?

Posted in Macroeconomy | Leave a comment

Government right to push back on Townsville Convention Centre

Posted on March 26, 2011 by Gene Tunny

A new convention centre in Townsville would not likely attract any new conferences to Queensland, and it would simply serve as a competitor to the major convention centres in Brisbane and the Gold Coast, taking conference business away from these sites. Hence there is no compelling case for Queensland Government funding, and the cost should be fully met by the developers and the Townsville City Council, if it deems that it is a good investment of ratepayers’ money.

As such, it’s great to see the Queensland Government is pushing back on the Townsville City Council’s funding request (Convention centre funding in doubt):

TOWNSVILLE’S proposed new entertainment and convention centre is in serious doubt, with the State Government looking increasingly unlikely to fund a $48 million share of the $150 million project.

Obviously relations are tense between the Queensland Labor Government and the Liberal Townsville City Council. Mundingburra MP Lindy Nelson-Carr isn’t pulling her punches:

Nelson-Carr: sick of picking up slack

Let’s hope the bitterness isn’t long-lasting, and the Government and Council can cooperate on future projects where the numbers stack up.

Posted in Townsville | Leave a comment

Westminster system needs reform

Posted on March 24, 2011 by Gene Tunny

With his bold bid to jump from City Hall to the Premier’s office, Brisbane Lord Mayor Campbell Newman is thinking laterally to overcome a major deficiency of the Westminster system, which requires the Government to be formed in the parliament.

Given the hardships of political life and the vicissitudes of party politics, which discourage many good people and reward some bad people, it’s unlikely that the parliament will contain either sides’ best candidates for Ministerial positions. A lot of very good people wouldn’t run for parliament and endure the mud-slinging and the risk of a long boring time in Opposition while they pass up rewarding and enjoyable work opportunities on the outside.

The US system, where the Executive (i.e. the President and the Cabinet) is separate from the Congress (i.e. the US parliament) is a much better system because it means the best people can be brought into the Cabinet, even if they are currently a university president or corporate CEO. This has worked well for both Democrats and Republicans, with first class people such as George Shultz, Robert Rubin and Larry Summers brought into (and back into) the Cabinet from outside government.

Nature abhors a vacuum. If there is a lack of leadership in the Queensland Opposition, then it appears natural that someone from outside the parliament would try to fill it. Mr Newman – who with his positive mental attitude comes across as a modern day Napoleon Hill – may well succeed in his bid for Queensland’s top job. Regardless, we should debate whether our system of government requires reform, so we can get the best people in Queensland into ministerial positions.

Posted in Uncategorized | Leave a comment

Productivity Commission stumped by effective carbon price question

Posted on March 23, 2011 by Gene Tunny

The Productivity Commission has essentially admitted it’s not possible to produce the credible estimates of effective carbon prices (i.e. dollars per tonne of CO2) in the world’s major economies – US, UK, Germany, Japan, China, and India – that the Government has requested of it. This will make the carbon tax harder to sell, because the Government won’t be able to point to credible numbers showing the rest of the world is truly acting on climate change and we’ll get left behind if we don’t.

The Commission’s Methodology Working Paper Emission Reduction Policies and Carbon Prices in Key Economies, which was released today, is highly technical and won’t provide the media with any embarrassing quotes, but the Commission is signalling that the estimates it ends up producing will be pretty unreliable.

On page 23 of the report, the Commission refers to “considerable measurement challenges”, which probably means the Commission will have to make a lot of assumptions and guesses in deriving its estimates. Also, the Commission notes “the estimates will not be true measures of total costs…” In such a highly charged and political debate as the one around the carbon tax, this question about the credibility of the effective carbon price estimates will render them useless.

Posted in Climate change | Leave a comment

Country living is dangerous – New ABS Social Trends report

Posted on March 23, 2011 by Gene Tunny

Sea changers and tree changers may well reconsider city life once they learn about the downsides of country and small town life, including higher fatality rates from heart attacks and traffic accidents.

In part, the higher fatality rates are related to poorer lifestyle choices among non-metropolitan people, who drink and smoke a lot more than people in metropolitan areas. But the higher fatality rates are also likely to be related to regional areas having less accessible health services, longer travelling distances and dangerous roads. The relevant statistics are in the new ABS Social Trends Report:

Health outcomes differ between those living outside major cities and those living within them. In 2008, people who lived outside major cities were more likely than people in major cities to die from certain causes. They were three times as likely to die from transport accidents, almost twice as likely to die from high blood pressure, 1.7 times as likely to die from heart failure and 1.6 times as likely to die from diabetes.

Contributing to poorer levels of health, people living outside major cities were more likely to be daily smokers (1.3 times as likely as their major city counterparts) or risky drinkers (1.3 times as likely). On the other side of the coin, they were also more likely than people in major cities to eat their fruit and veggies (1.5 times as likely to have met the national guidelines for fruit and vegetable consumption).

Different levels of access to, and use of, health services may also contribute to differing health outcomes. In 2009, people living in outer regional/remote areas of Australia were more likely than those living in major cities to have reported that they had waited longer than they felt was acceptable for a GP appointment (23% compared with 16%) and more likely to have gone to an emergency department because the waiting time for a GP appointment was too long (12% compared with 2%).

Posted in Health | Leave a comment