#coronavirus

HK Int’l Airport traffic for Jan 2020 – Inbound Asia -43%

HKIA just published figures for January air traffic. It notes,

“Traffic figures at Hong Kong International Airport (HKIA) saw decreases in January 2020. During the month, HKIA handled 5.7 million passengers and 33,210 flight movements, representing year-on-year decreases of 11.7% and 9.1%, respectively. Cargo throughput dropped 10.4% compared to the same month last year, to 359,000 tonnes.

Overall passenger traffic to/from Mainland China, South Korea and Southeast Asia recorded the most significant decreases in January. Visitor traffic remained weak, showing a year-on-year decrease of 43%. However, travel by Hong Kong residents saw a surge during the Chinese New Year holidays, amounting to a monthly growth of 25% year-on-year.

Cargo throughput declined due to closure of factories and businesses in Mainland China during the Chinese New Year holidays. The decrease in cargo was mainly attributed to the 15% and 10% drops in imports and transshipments, respectively. Exports decreased by 9% compared to the same month last year. Amongst key trading regions, traffic to/from Southeast Asia and North America decreased most significantly in the month.”

That’s got to hurt. It is strange how markets are behaving so positively to the impacts here. Depending on the length of such a slowdown, how long can company cash flow last and when do we see the first bankruptcy of a travel/cargo company- land, air or sea as a result of coronavirus.

Expect that cruise companies report mass cancellations after the horrendous optics of passengers being confined to their quarters for weeks on end.

Nothing to be proud about

Biz Ivest

Flipping through the latest RBA Chart Pack, it is no surprise that business investment keeps sliding off a cliff. As a % of GDP, it has slid from a peak of 18% off the short-term trough of 14% (GFC) to 11%, which now puts it at 1994 levels. It proves the old adage that businesses don’t invest because interest rates are low, they invest because they have confidence in the cycle.

Our government should be looking at this with alarm bells. It doesn’t take too much imagination to work out that political instability has played its part.

Australia was once regarded as the vanguard of political stability in the region which made it a sensible investment choice for domestic and international investors as a place to do business. There was a comfort in knowing that there wouldn’t be revolving door prime ministers and flip flops on policy positions. After all, much business investment takes years to get to the production stage.

The Howard years saw our business investment surge. Sensible fiscal policy was a feature too. While Rudd can be forgiven for GFC causing a slump in business investment it resumed until political instability put the mocker on business confidence.

We have been running deficits ever since and cranking up the national debt (we wrote about it here) because it is clear we don’t have sensible free-market conditions to self sustain direct investment at anywhere the levels we need.

Instead, we kowtow to radical activists who try to stop investment in projects like Adani and conduct illegal secondary boycotts on businesses like Greyhound Australia and Siemens without repercussions.

Whether coal is evil or not is irrelevant. The problem is such activism, which is further supported by ideologically corrupted government environmental departments – that push their own agenda on granting approvals – doesn’t endear domestic industries or foreigners to invest in us. These are dangerous precedents. All of this tokenism when we only need look at the realities of what will happen down the line.

Don’t take our word for it. Even our domestic businesses are leaving.

Thanks to Australia’s ridiculous energy prices, Aussie company Bluescope confirmed the expansion of capacity in Ohio. In Feb 2019, the company CEO said, “much cheaper energy in the United States is a major driver of the company’s preparedness to invest in a $1 billion expansion in Ohio.”

In 2017, Tomago Aluminium reported, “We have to grow to be competitive and to be ahead of the curve, but when the spot price went to $14,000 [per megawatt hour] we had to take that load off. It’s just not sustainable. You can’t smelt at that price. We have had to curtail or modulate the load [on occasions] or we get hammered by the price…We cannot continue to keep paying those prices. We have to find a solution. The prices are crippling”

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Unfortunately, 28 years of unfettered economic expansion has made us complacent. We think this economical miracle has no off-ramp.

None of this is remotely surprising.

Can we honestly say that the impact of higher electricity prices hasn’t been a factor in pushing away investment in engineering and manufacturing? So this mad push for renewables will not alleviate this pressure. Germany is the perfect beta-test crash dummy. It predicted flat prices. They doubled from those forecasts.

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Yet our political class is playing with fire.

We never thought Australia was realistically going to have a surplus when it was announced. Secretly there must be a sigh of relief in Treasury that the impacts of the bushfires and coronavirus will provide a convenient scapegoat to miss those targets under the premise of ‘doing the right thing.’  And no that does not mean the government is glad those two catastrophes have happened from a humanistic approach.

We need proper reforms. We need to ditch these notions of political correctness in public policy. We are as unimaginative as many other governments around the world. Living on a low-interest rate fuelled debt bomb. Kicking the can down the road simply does not work. Why aren’t politicians convicting their cases with evidence rather than folding to ideological positions held by fringe dwellers on Twitter?

When we visited Israel on a business delegation in 2018, Israeli PM Benjamin Netanyahu uttered the only 4 words that mattered for investors – “we want your business.” The innovation nation knows what it is good at and is prepared to back it to the hilt.

It would be so nice if our government spent some time in Israel to discover that we have it all wrong. Because we are only storing up a rude awakening. When our economy does suffer from the eventual ramifications of all of that lack of investment, the public will be howling that they can’t pay their mortgages, that they can’t get decent jobs and they can’t keep the lights on. None of that would have been necessary if they had been more open to business.

The ultimate result will be that we’ll put ourselves deeper into debt to fund some monster infrastructure projects that will provide short term relief, not long term solutions.

The foreign investors that could have helped had we treated them in a more dignified fashion will just buy our assets at fire-sale prices instead. Then we’ll have another moment to howl at the moon.

That will be the true price of our complacency. Experience is a hard teacher. You get the test first and the lesson afterwards.

Coronaveristy Cash Crunch will lead to cost-cutting

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Almost 1 million foreign students attend Australian educational institutions.  Of that 28% are from China according to the Dept of Education.

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New commencements are at half a million. These are not small numbers. We are already seeing universities start to fret over the economic impacts.

The latest figures from the Australian Bureau of Statistics (ABS) show that in 2017–18, international education was worth $32.4 billion to the Australian economy, up from $18.9 billion in 2008–09.

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In fees alone, foreign students have forked over $7.4bn in the 2017/18 year from $2.9bn in 2008/09.

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As a % of total university fees, foreign students now represent over 23% from  15.5% in 2008/09.

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By university, we can see where foreign students are most concentrated. Victoria holds 5 of the top 10 destinations for foreign students.

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By number, Victorian universities hold the top 3 places for absolute foreign student numbers, and 31% of the national total. NSW has 25% of all foreign students inside Australia.

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Things will undoubtedly settle down. It is unlikely all of these students will pull the plug and not turn up at Australian universities when Coronavirus issues eventually come under control. As far as attrition rates go in Australia, local kids are far more likely to drop out than overseas students.

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We are already seeing some universities announce they are tightening the purse strings until the situation normalises.

An interesting side topic is a fall-off in permanent residency visas offered by the Dept of Home Affairs to foreign students that graduate in Australian universities. The decadal low numbers don’t seem to have affected foreign student interest.

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Graduate visas have picked up sharply. It will be fascinating to see the post-Coronavirus trends of visas from the DHA.

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Ultimately, Australian schools have been living high off the hog. While the trend of international students has been robust, have any of these schools conducted proper contingency planning if a global recession, pandemic or shock was to ensue?

After 28 years of uninterrupted economic growth, something suggests that most universities have not seriously considered what might happen if the well dried up. Sadly, when such an action plan should have been in place, we will probably see knee jerk cost-cutting in all the wrong places. So much for the educators preparing their customers for the future…

CNN complains about lack of diversity on Coronavirus team

Only CNN could find outrage in the team looking to combat the Coronavirus. Apparently diversity is more important than ability in a crisis.

CNN political writer Brandon Tensley quipped,

“Who are these experts?…They’re largely the same sorts of white men (and a couple women on the sidelines) who’ve dominated the Trump administration from the very beginning...[comparing it to Obama’s handling of the Ebola virus in 2014] Neither was it so abysmal in terms of gender diversity. (Of course, to contextualize, Obama’s administration, on the whole, was far more diverse than Trump’s.).”

Commentator Dave Rubin retorted,

“Sir, I’ve discovered the cure to the Coronovirius! We can create an intitiode and spread it worldwide within 12 hours.”

“Bob, we’ve told you repeatedly if you aren’t a non-binary latinx disabled lesbian you’re not allowed to talk.”

Welcome to 2020. Where finding a cure ASAP takes a backseat to diversity. Liberal logic.

One imagines that the Chinese authorities have a similar lack of diversity on their team to combat the Coronavirus.