Following news that the number of trips on Brisbane buses increased 6.5% over the last twelve months, the Lord Mayor called on other SEQ councils to help pay for Brisbane’s bus system:

Campbell Newman demands SEQ councils help pay for Brisbane buses

Unlike most other SEQ councils, Brisbane City Council subsidises its own bus service.  In contrast, bus services in other council areas are typically provided by private operators, with subsidies from the State Government.

So Mr Newman has a legitimate point.  When people from other council areas hop on a Brisbane bus – say after catching a train to Toowong from Ipswich – their bus fares are subsidised by Brisbane ratepayers.  Hence there is a reasonable case for a financial contribution (from either the other councils or the State Government) to subsidise non-Brisbane residents’ use of Brisbane buses, partly relieving the burden on Brisbane ratepayers.

But this could be seen as a second-best solution.  The first-best solution may be to beef up TransLink, giving it sole responsibility for SEQ public transport decision making and funding, so decision making occurs on a truly metropolitan scale, ending the squabbling between SEQ councils.

Let’s have a transportation system that recognises that SEQ is a closely integrated economy, with large numbers of workers commuting across traditional council boundaries – boundaries which are no longer consistent with the reality of a joined up SEQ labour market.

Anyone who has queued for a cab after a night on the town in Brisbane knows there are not enough taxis (and forget about catching a cab on New Year’s Eve).  While you have to expect delays during peak periods, part of the problem is the artificial scarcity of cabs created by government regulation.  Regulation means new operators have to jump through a large number of regulatory hoops, discouraging the emergence of new operators.  Nonetheless, one new operator is seeking to break the Yellow Cabs-Black & White Cabs duopoly in Brisbane:

Rogue taxi driver flags third service for Brisbane

The current Queensland Government review of the taxi industry needs to consider whether there remains a public benefit from the existing regulatory regime.  While we need to be mindful of safety concerns, it’s possible we can cut back on the regulatory requirements to make it easier for new operators to start up.  More cabs would mean less time wasted in queues and, over the medium to long-term, lower fares for passengers, as competition puts a brake on fare increases.

The Brisbane Times reports today that Brisbane rentals are a tenants’ market:

Tenants may be spared rental hikes this year, despite predictions demand for rental properties would soar in 2010. New figures published by RP Data show average weekly house rent prices in Brisbane did not budge in the June quarter, remaining about $360.  Meanwhile, the median weekly rent price for units fell 1.4 per cent in the same time.

Despite constant media reports about housing supply failing to keep up with demand, it seems that, at least for now, the rental market is reasonably well-supplied in Brisbane. That said, there is evidence of some tightness in inner city Brisbane.  Queensland Treasury’s rental housing vacancy rate brief reports the vacancy rate for inner Brisbane fell from 3.8% in March quarter 2010 to 2.8% in the June quarter, while vacancy rates in the rest of Brisbane increased from 3.7% to 4.9%.

The good news for renters may not last beyond the current financial year, however, as the recent 8.6% drop in building approvals may lead to a slowing in the growth of rental properties supplied, a tightening of the rentals market, and an increase in rents for 2011-12.

The cancellation of Queensland Rail’s (QR’s) Riverfire party in 2008, following an intervention by the Transport Minister, supports the case for its privatisation, Dr Doug McTaggart, CEO of QIC, argued today (for a refresher on the incident, see QR boss defends $30k Riverfire party).  Dr McTaggart made the reasonable argument that, while this may seem a trivial incident on its face, it would have raised questions in the minds of QR’s clients regarding what other QR business decisions might possibly be subject to ministerial intervention.

The occasion at which Dr McTaggart spoke was the QR Privatisation Debate between Dr McTaggart and leading Australian economist, Prof. John Quiggin.  The Debate was held at Brisbane’s Customs House, and was organised by the University of Queensland’s Economics School.

Both sides made strong arguments, and many in the room were receptive to Prof. Quiggin’s criticisms of the privatisation.  Prof. Quiggin presented his usual arguments that the benefits of privatisation are over-sold.  For example, he argued it is bad economics for governments to sell income earning assets to pay for recurrent spending, such as on education and health.  (The Government, of course, would counter that it is using the proceeds of the sale to invest in important infrastructure, such as roads, schools and hospitals, which will generate returns to the community into the future.)

Prof. Quiggin was most passionate (and entertaining) when he criticised the Government for the reversal of its election commitment not to sell QR, and for the quality of the information produced to justify its decision, which in his view severely limited the prospects for an informed debate.

There was no knockdown argument from either side, but I’d give it to Dr McTaggart on points.  The Riverfire cancellation argument was an effective one, as the cancellation really was unnecessary.  Given the dog-eat-dog nature of the business world, surely its permissable for corporate types to be tossed a few bones every now and then.

Not only did the miners get a win against the federal government last week, with the weakening of the Resource Super Profits Tax, but they also scored a victory against Queensland local governments.  In the Queensland Court of Appeal, Xstrata and three other mining companies won an appeal regarding $440,000 of rates they were charged by the former Bowen Shire Council (now part of the Whitsunday Regional Council):

Xstrata Coal Qld P/L & Ors v Council of the Shire of Bowen

The council had created special classifications for the miners’ land holdings and applied higher than usual rates to them, arguing that the capacity to pay of the miners should be taken into account.  The Court of Appeal completely rejected this argument, as it is inconsistent with the Local Government Act, which specifies rates are a tax on land (its unimproved value), not landholders, and hence the characteristics of the landholders are irrelevant.  The rates notices with the super high rates were struck down by the Court. Today’s Courier-Mail reports that the case may have implications for other Queensland councils (but details aren’t clear at this stage).

After the events of the last few weeks, governments at all levels across Australia will think twice about messing with the miners.

It’s likely that federal Treasury’s push for a Resource Super Profits Tax (RSPT) was partly driven by its view that the China-driven resources boom (and miners’ super profits) would continue for a long time to come.  Indeed, the previous RSPT model ran the risk that the Government would have to refund a lot of money to loss-making miners if commodity prices collapsed, so the Treasury must have been confident the boom would continue.

Treasury’s bullish view of the resources boom was presented again in an Economic Roundup research paper published on the weekend.  Treasury economists Jin Liu and Tony McDonald argue that, given China’s economic transformation from an agrarian to an urbanised society is only partly complete, the resources boom will stay with us for some time:

The potential for further economic and urbanisation convergence in China, along with prospect of strong growth in other large emerging and developing economies, suggest that global demand for Australia’s mineral resources is likely to continue to grow strongly over coming decades.

That’s good news for coal royalties and the Queensland Budget (and for those of us with resource stocks).

In an interview on Sky News’s Agenda program today, Sustainable Population Minister Tony Burke included the push to make Townsville a second capital of Queensland as an important part of dealing with Australia’s strong population growth (Burke interview transcript).

It’s good that we’re looking at alternatives for population growth outside of the capital cities.  However, further thought may need to be given to Townsville’s desirability as one of the cities targeted for population growth.  Townsville is already a very hot place to live in during Summer.  With climate change, it’s going to be even hotter, according to the Queensland Government’s ClimateQ report (p. 44):

By 2070, Townsville may have ten times the number of hot days over 35 °C (increasing from an average of four per year to an average of 40 per year by 2070)…

Climate change is the big unknown affecting population policy.  In choosing regional cities to promote, we need to bear in mind the risks that climate change poses to their livability and capacity to sustain higher numbers of people.  Townsville may well turn out to be a good choice, but we’ll need some hard-headed thinking about how it will fare under climate change before any long-lasting decisions are made.

Today’s ABS Building Approvals figures show large declines in building approvals between April and May of 8.6% in Queensland and 6.6% across Australia.  Building approvals are generally seen as a leading indicator of construction work and economic activity more broadly, so today’s figures may cause some concern.

Of course, we had to expect something like this to occur, given that the temporary boost to the First Home Owners Grant as part of the stimulus package would have brought forward a lot of housing purchases and construction work.

Still, given recent weakness in retail trade as well, economists at CommSec are cautious:

Given the latest round of data, there are good reasons for the Reserve Bank to leave rates on hold for the next few months. Not only are retail sales holding at very weak levels, but the housing sector is showing signs of consolidation.

With the potential cooling of the economy, and the uncertainty around economic recovery in the US and Europe, it would be a brave Reserve Bank Board that put up interest rates in the near term.

Queensland may have smashed NSW in the State of Origin for five years running, but NSW may beat us in at least one endeavour: reforming laws around scalping.  The Daily Telegraph has reported that in NSW ticket scalping could be legalised or replaced with special ballots.

Alas, regarding our scalping legislation (which bans scalping), this afternoon’s Brisbane MX newspaper quoted a spokesman for Stadiums Queensland that “there are no plans to review the legislation at this stage.”  This is unfortunate.  As I argued in a previous post on ticket scalping, there would likely be significant economic gains from legalizing scalping.

With its exquisite food and sweeping panoramic views of the Brisbane River, Matt Moran’s ARIA restaurant at Eagle St Pier is undoubtedly superb, but some diners must be shocked at paying $7.50 for a coffee after the meal.  Is ARIA simply gouging its customers?  Thinking about the basic economics of it, I’d say possibly not.

For a cup of coffee, $7.50 is certainly steep (even if it is a great cup of coffee), when you compare it with the $3.50 Merlo on Mary St charges.  Given the coffee market is highly competitive, you’d expect the price of a cup of coffee in different locations to be roughly the same, with some premium for volume of the cup, quality of the coffee and ambience of the establishment.

However, ARIA isn’t in the coffee business, which is a high-volume, low-margin business. Instead, it’s in the fine dining business, which (relative to coffee shops) is a low-volume, high-margin business.

ARIA may not really want you to buy a cup of coffee, because it means you stay at the table longer, and, if you haven’t ordered a dessert, they’re only making a small margin off you having that cup of coffee.  By ordering a coffee and staying at the table, you may be denying ARIA the opportunity to turn the table over and make a healthy margin from catering to new diners.  This is certainly a possibility on busy Friday or Saturday nights, when some diners will come in at 6 and others won’t come in until 8 or later.

So, in charging $7.50 for a cup of coffee, ARIA could actually be charging you what it costs them to supply that cup of coffee, when the cost is properly calculated to include ARIA’s “opportunity cost” – the loss of the opportunity to turn the table over.

Am I being too sympathetic to ARIA?  Perhaps, but you would be, too, if you’d just tasted that perfectly cooked and succulent chicken breast with king brown mushrooms and toasted chestnuts.  If you haven’t been yet, do yourself a favour and book now.