What’s the next level up from biblical?

Posted on January 10, 2011 by Gene Tunny

It’s been around a week and a half since Treasurer Andrew Fraser described our flood crisis as “of biblical proportions.” The news unfortunately keeps getting worse, with flash floods in Brisbane and Toowoomba adding to the ongoing troubles in St George, Dalby and Gympie, among other parts of the State.  I’m not sure there’s another level up from “biblical”, but the scale of this thing is much worse than we could have imagined last week.

No one can forecast the ultimate cost of this crisis until we’re all the way through it. According to Lord Mayor Campbell Newman, there’s now a risk of a major flood in Brisbane (Prepare for the worst, Brisbane residents told), given the massive volumes of water flowing into Wivenhoe Dam each day:

‘‘There are inflows into Wivenhoe Dam that are akin to or exceed what happened in 1974,’’ Cr Newman said. ‘‘There’s a lot of water coming down the system.’’

While previous cost estimates were of at least $5 billion, we must now be in the $10 billion plus ballpark.  Let’s hope our coal mines aren’t out of action for too long, because we’ll sure need the royalties to help pay the clean up bill.

Posted in Floods | Leave a comment

Mackay club almost runs out of beer, but there’s plenty further north

Posted on January 9, 2011 by Gene Tunny

In Mackay last week, the biblical Queensland floods almost brought to life Slim Dusty’s dystopian vision of a “pub with no beer”.  The Mackay Daily Mercury reported yesterday (Stocks run low in city):

IT could have been “the pub with no beer” at Harrup Park Country Club this week with stocks running low and floodwaters cutting off main roads and rail lines at Rockhampton.

However, club manager Michael Jones called in last-minute supplies of XXXX Gold and other draught beer from Townsville.

“We were getting low on beer stocks; however, we’ve managed to purchase some from a different location and we’ve been in conversations with our national supplier about making sure that we don’t run out,” Mr Jones said.

Other Mackay businesses are also going to great lengths to ensure demand for supplies are met, with predictions that the Bruce Highway, which is cut at Rockhampton, will not reopen until Thursday.

Cairns appears to be ok for beer, however, based on a feature yesterday in the Cairns Post on the Cape York Hotel, which is part of a series on “52 Pubs in 52 Weeks.”  Be sure to check out the slide show on the hotel.  It presents a real slice of Australiana, including images of the hotel’s spacious upstairs verandah, which would be perfect for whiling away a rainy afternoon with your mates and a few schooners of XXXX.  Well done to the Cairns Post for this series celebrating an important part of Queensland’s social history and economic development.

Posted in Cairns, Floods, Mackay | Leave a comment

Smart retailers embrace fusion

Posted on January 8, 2011 by Gene Tunny

In response to Gerry Harvey’s push to have GST applied to online purchases from overseas, commentators have been quick to criticise Australian retailers for having tired stores and not adding any value to the goods they’re selling.  Hence it’s good to see that some retailers are adding value by providing interesting retail experiences, rather than simply selling products, as reported in the Brisbane Times (“Fusion” the future of bricks and mortar business) yesterday:

Leading Brisbane fashion boutiques have embraced the concept of fusion, tweaking their business models to blend fashion with art, food, drinks and even beauty treatments.

Some say it’s merely their way of providing customers with a complete shopping experience while others are more frank; diversification in a digital age can come down to a question of survival.

The article mentions two of Brisbane’s best menswear stores, Richards & Richards, which features a cafe-bar as well as snappy Italian threads, and the Cloakroom, which features its own Pistols at Dawn range and a shoe shine service on Thursdays.

While providing a cafe or shoe shines won’t work for every retailer, retailers do have to think hard about how they can add more value and create better shopping experiences. This may involve, for example, providing floor staff with more training so they can speak more knowledgeably about the products  they are offering.  Dick Smith, with its “Techxperts”, has been an exemplar of this strategy.

Soaring online sales don’t just have implications for retailers, but for governments, too, as identified in a great blog post at Core Economics by Stephen King, who notes that, if the current trend continues, governments will find it very much harder to tax goods and services:

Tax avoidance and the on-line economy

Posted in Retail trade, Tax | Leave a comment

Coles Toowong gets big tick for trolley control

Posted on January 7, 2011 by Gene Tunny

On Nine News the other night, one Nundah resident blamed the localised flooding in their street on junk, including a shopping trolley, blocking the storm water drain. Shopping trolleys, while incredibly useful devices, are unfortunately environmental vandals, with many ending up in drains and waterways, when they escape from shopping centres.

Hence it’s good to see that Coles at Toowong has taken steps to stop trolleys escaping, by installing a mechanism that appears to lock one of the wheels when the trolley reaches the perimeter of the centre (see the yellow thing in this picture):

Brisbane Lord Mayor Campbell Newman can chalk this up as a win, after having called on Coles to follow Woolies’s lead in this regard:

Onya Woolies, c’mon Coles

Previous related posts:

Brisbane City Council crackdown on wandering shopping trolleys

Will abandoned shopping trolleys spoil the Ipswich renaissance?

Posted in Environment, Retail trade | Leave a comment

Reaction against retailers’ call for GST on online sales is over the top

Posted on January 7, 2011 by Gene Tunny

Australian retailers, most prominently Gerry Harvey, have a legitimate point that they aren’t on a level playing with overseas online retailers for goods priced under $1,000, for which the Government doesn’t (and can’t) enforce the collection of GST.  This is why Assistant Treasurer Bill Shorten has been forced to base his argument against the retailers’ proposal on the Government’s inability to enforce GST collection for imported goods under $1,000, given our limited number of Customs officers:

Shorten puts a dampener on GST push

Shorten makes a good point, and the retailers push to lower the $1,000 threshold will probably not be supported by the current Productivity Commission review of the issue. Nonetheless, a lot of the criticism directed against Gerry Harvey and other retailers has been over the top:

Gerry Harvey retreats from war on online shopper

Geoff Kitney in the Financial Review this morning is particularly fired up:

The economic Neanderthals are not dead yet but, boy, are they out of touch.  It should come as no surprise that a section of the business community that has some special pleading to do for a cosy little bit of protection would believe that revving up a public campaign was a sure way of forcing the Gillard government to cave in and give it what it wants.

I admire Mr Kitney’s passionate distaste for industry protection – of which there remains too much in Australia, particular on the auto industry – but this isn’t an industry protection issue.  It’s an issue regarding the equitable application of the GST in a world in which online sales from overseas are rapidly increasing.

Posted in Uncategorized | Leave a comment

Cost of floods over $5 billion

Posted on January 6, 2011 by Gene Tunny

This is sobering news from Premier Anna Bligh (Flood recovery kicks into gear):

If you count everything from the cost to homes, the home rebuilding effort, public infrastructure rebuilding effort and economic loss, I think we’re well above $5 billion territory.

Based on the media reporting and commentary, my best guess of the breakdown of the costs at the moment is:

Plus there will be a wide range of flow-on impacts – for example:

Meatworks suffer from floods

Whitsunday tourism falls

And the rain and floods aren’t over yet:

Get set for more wet

St George set to fight floodwaters

Treasurer Andrew Fraser was close to the mark when he called the floods “biblical.”

Posted in Agriculture, Floods, Infrastructure, Mining | 1 Comment

Battle brewing over infrastructure charges

Posted on January 5, 2011 by Gene Tunny

Developers and Councils are waiting anxiously on the State Government to announce its reforms of infrastructure charges, which Councils impose on developers of new housing estates.  These charges result in higher new home prices, as developers pass these charges on to new home buyers.

Infrastructure charges enable Councils (and their water businesses) to fund essential infrastructure for the new housing development, including public transport, local roads into and out of the development, and water and sewerage pumping stations and trunk mains – i.e. the major pipes into and out of the development.

The November 2010 Infrastructure Charges Taskforce Interim Consultation Report (available here) recommended capping infrastructure charges at between $20,000 to $30,000 per new house.  Councils aren’t happy with this recommendation as often the costs of infrastructure exceed $20,000 to $30,000 per house.  The Local Government Association of Queensland (LGAQ) has made the fair and logical point that, if Councils can’t recover their costs through infrastructure charges, they will have to put rates up:

LGAQ warns of rate hikes

Arguably, this would be inequitable as the cost of new developments, which benefit new residents, would be partially borne by existing residents of the Council area who don’t live in the new housing development.

Furthermore, from an economic efficiency point of view, it makes sense to charge developers – and ultimately new home buyers – the full costs they are imposing on Councils.  Otherwise they may expand development beyond the level that is socially beneficial.  This is because part of the additional infrastructure costs would be borne by existing residents rather than new homebuyers.  This means new homebuyers would pay lower prices than they otherwise would (i.e. taking into account the full costs of additional development), and hence demand for new homes in the development would be higher than is optimal.

Regardless of the compelling economic logic behind infrastructure charges, there are calls to drastically cut these charges even further – i.e. to below the proposed $20,000 to $30,000 cap – with a view to stimulating the construction sector:

Housing market needs intervention

But this would be to use the microeconomic tool of infrastructure charges, which are designed to promote efficient levels of housing development over the long-term, to deal with a short-term macroeconomic slowdown in the housing sector, which is likely to right itself once the broader economy gets moving again.  Hence the Government would be well advised to ignore this call.

On the $20,000 to $30,000 cap, the Taskforce is correct to seek greater certainty in developer charges and a cap is one way of achieving this.  According to some commentators, uncertainty over infrastructure charges has led to delays in housing developments.  Hence, there is some merit in considering a cap.  However, the Taskforce needs to consult extensively with major Councils to determine whether the proposed range for the cap is too low (and regarding the appropriate periodic escalation factor for the charges).  Hopefully it is doing just that as it prepares its final report for the Government.

Posted in Infrastructure | Leave a comment

Economic cost of the floods

Posted on January 4, 2011 by Gene Tunny

The Mackay Daily Mercury’s Melissa Grant has written a very useful article on the economic cost of the floods:

Economies lose billions

On the impact of the floods, with a particular reference to mining in central Queensland, Ms Grant notes:

Production has come to a halt or slowed at dozens of mines in the region, costing tens of millions of dollars each day, while the cost to Queensland’s agricultural industry is expected to top $1billion.

A resource economist has also predicted the State Government could lose between $200million and $300million in mining royalties, as mining operations face production losses of between 10 and 20 per cent.

Resource economist John Rolfe, based at CQU’s Rockhampton campus, said loss of coal production from the floods would exceed that resulting from 2008 floods.

“After the 2008 floods, mining companies lost $2billion in production and were left with another $1billion of additional costs,” he said.

“This one will be more expensive but we won’t know how expensive for some time.”

Posted in Agriculture, Floods, Mining | Leave a comment

Recovery from natural disasters

Posted on January 3, 2011 by Gene Tunny

With Queensland experiencing an unprecedented flood, “biblical” according to Treasurer Andrew Fraser, and with an estimated cost now in the billions of dollars, it’s timely to review what we know about the capacity of communities to recover from natural disasters.

There is a nice piece at the Library of Economics and Liberty on Disaster and Recovery, written by the late UCLA economics professor Jack Hirshleifer, who refers to the classic example of the recoveries of West Germany and Japan after the devastation of World War II.  These recoveries were remarkable even taking into account the substantial assistance provided by the US and other western nations.

Much depends on having the resources to repair the damaged infrastructure, but Australia is a rich country and we will be able to repair the damage, and the long-term consequences for economic growth will be negligible.  Of course, the Queensland and Commonwealth Governments will have to endure temporarily higher budget deficits, and it may take longer for Queensland to get its AAA credit rating back.

In his article, Hirshleifer cites a brilliant passage from the great 19th-century philosopher and classical economist John Stuart Mill, who notes that destroyed infrastructure would have to be replaced or refurbished eventually anyway, and that, as long as the population is intact with all its skills, recovery is pretty much guaranteed.

Regarding the relative ease of replacing destroyed infrastructure (capital) – compared with replacing skilled people, that is – Mill makes the following observations (from Chapter 5 of Book 1 of Principles of Political Economy):

This perpetual consumption and reproduction of capital affords the explanation of what has so often excited wonder, the great rapidity with which countries recover from a state of devastation; the disappearance, in a short time, of all traces of the mischiefs done by earthquakes, floods, hurricanes, and the ravages of war. An enemy lays waste a country by fire and sword, and destroys or carries away nearly all the moveable wealth existing in it: all the inhabitants are ruined, and yet in a few years after, everything is much as it was before.

What the enemy have destroyed, would have been destroyed in a little time by the inhabitants themselves: the wealth which they so rapidly reproduce, would have needed to be reproduced and would have been reproduced in any case, and probably in as short a time. Nothing is changed, except that during the reproduction they have not now the advantage of consuming what had been produced previously. The possibility of a rapid repair of their disasters mainly depends on whether the country has been depopulated. If its effective population have not been extirpated at the time, and are not starved afterwards; then, with the same skill and knowledge which they had before, with their land and its permanent improvements undestroyed, and the more durable buildings probably unimpaired, or only partially injured, they have nearly all the requisites for their former amount of production.

Posted in Uncategorized | 2 Comments

Springfield data centre helps Ipswich attain smart city status

Posted on January 2, 2011 by Gene Tunny

IT-savvy Ipswich has impressed the New York-based Intelligent Community Forum (ICF), which has short-listed Ipswich for its smart city award, along with 20 other cities including Birmingham (UK), Shanghai and Quebec City:

Smart city list whittled down soon

A contributor to Ipswich’s listing was the high-tech, high-security Polaris Data Centre at Springfield, which appears to have been designed to withstand an intrusion from Ethan Hunt or Jason Bourne.  Security features include:

Biometric man-traps on each floor, video surveillance, bullet proof glass

Despite the Polaris Data Centre and Ipswich’s early participation in the National Broadband Network, the city will face stiff competition.  Birmingham, one of the centres of the Industrial Revolution, and Shanghai, China’s financial capital, would have to be the favourites.  But all the cities on the list have impressive credentials.

Chattanooga, Tennessee, for example, has implemented a smart electricity grid. According to the ICF website:

The city-owned electric utility built a fiber network that will collect billions of data points and provide real-time management that will significantly boost the grid’s reliability and performance.

Also deserving special mention is Riverside, California, which provides second-hand computers, refurbished by former gang members, to the poorest residents of the community – a clever combination of innovation and social policies.

So good luck to Ipswich, but the Council shouldn’t be too disappointed if it doesn’t win the top prize.  Making the top 21 list among such impressive competitors is a great achievement, and a testament to a well-designed and executed economic development strategy.

Posted in Ipswich | Leave a comment