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CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Saturday, 20 August 2016

Resources boom dies; tourism flies

Aviation activity increases

If you've been following my blog for a while you'll know that one of the key themes of recent times has been that as the resources investment boom turns to dust, the weakening currency is helping some dollar-exposed industries to thrive in its place. 

In particular, a range of data series support the case for a boom in tourism and education services.

This week the Bureau of Infrastructure and Regional Development released its June 2016 statistics reporting domestic aviation activity. 

More than 4.6 million passengers were carried over the financial year, for a robust +3.3 per cent increase over the past year. 

At various times this year it has felt as though I was personally responsible for a few thousand of those trips, but since I haven't yet lodged my 2016 accounts that's an unaudited assumption to be fair...

Tourism boom, resources gloom

The year-on-year figures by route are instructive.

The biggest gainers of FY2016 included tourism routes such as Ayers Rock-Sydney (+24 per cent), Brisbane to Hammy Island (+18 per cent), and Melbourne to the Sunny Coast (+17 per cent).

Bundaberg also saw a significant increase in passengers on its route from Brisbane (+14 per cent).

Tasmania saw some parts of its exporting economy hollowed out by the high dollar through the mining boom - notably including forestry - but parts of the local economy should now be enjoying the lower dollar, reflected to some extent in the increased number of passengers on the Hobart-Sydney route.

FIFO

On the other side of the ledger, the worst performing routes which saw passenger activity dry up read like a list of yesterdays resources hotspots, including those to or from Karratha, Newman, Gladstone, and Moranbah. 

All of which had been variously spruiked as property market 'goldmines' through the peak of the mining boom, though not any longer.


The hardest hit passenger route has been flights from Sydney-Townsville, with domestic aviation passenger activity down by 23 per cent year-on-year.

Activity on this route peaked in December 2012, but the 12mMA number of passengers has continued to slide since that time. 



This chart correlates reasonably closely with total Townsville employment which has also shrunk by a quarter since 2010 according to ABS data, pushing the region's unemployment rate towards 15 per cent.

According to SQM Research asking rents for houses have also fallen by 24 per cent over the past three years.

Townsville's economy may be "downtrodden" in the words of its own local bulletin, but unlike many smaller towns it's a diverse city of around 200,000 population, so brighter times may eventually lie ahead.

Passenger numbers on some other regional routes reflect a similar pattern, such as Brisbane to Mackay, for example.


Indeed, when analysing the Australian economy it's amazing how many metrics and charts follow such a similar shape through the mining boom - up very strongly and then all the way back down again - from the terms of trade and foreign exchange rate, to resources construction, to population growth, and so on.

The wrap

Overall, some promising numbers were reported here with total domestic activity rising solidly by +3.3 per cent in financial year 2016. 

Tourism regions are evidently benefiting from a surge in activity. 

On the flip side, resources regions are generally struggling. 

Some positive news is that Commonwealth Bank estimates that the decline in mining construction activity is 80 per cent complete. 

However, related job losses are thought to be only about 70 per cent done, so there is likely to be more strife in the post for a while yet.