26 February 2011

In September 2010, Federal Treasury released its advice to federal government, warning that population growth is inevitable, two-thirds of future growth is destined for our capital cities and that the solution to perceived problems lies in reforming planning laws and development levies, abolishing stamp duty and investing in urban infrastructure.

Two-thirds of growth will be in our cities

Federal Treasury published portions of its incoming government brief (referred to as the
Red Book) prepared for the returned Labor Government.

Treasurys assessment of recent national policy issues was refreshing and might bring a touch of realism back to policy debate.

Treasury described population growth as inevitable saying that even if the level of net overseas migration was reduced to a fifth of its 2008-09 level (60,000, compared to 300,000) Australias population by 2050 would still be expected to grow to about 29 million.

Treasury said that given the powerful global forces driving the Australian economy, net immigration figures in excess of that low number are probably inescapable.

Treasury also says that much of the population growth will occur in cities, in line with Australian and worldwide experience over the last century.

Over the next 20 years, around two-thirds of the increase in Australias population is projected to occur in capital cities. The choices of people and businesses to locate in cities is driven by the productivity growth of urban areas that generates economic opportunity and access to services.

The ability of government to counteract these long-established forces through regional policy is limited. Historical experience shows regional settlement policies are expensive and ineffective, and result in an inefficient allocation of resources.

Treasury says that a population strategy must be about investing in the right kinds of infrastructure and using existing infrastructure more efficiently.

Treasury explains that urban problems such as congestion result from fractured and ineffective governance arrangements a clear reflection on the multiplicity of local governments covering most major cities and the lack of coherent state government direction.

To get cities right, existing impediments to the implementation of city strategic plans must be
addressed, Treasury says.

Governments must ensure better integration across relevant agencies and functions, with current failures in these areas imposing significant costs, delays and risk on aspiring home owners and undermining urban infill targets.

Additional priorities include the improve prioritisation, provision and financing of urban infrastructure and, in the case of larger cities, better provision of public transport, particularly along strategic corridors.

According to Treasury the Australian Government could contribute and expedite reform through developing a National Urban Policy Reform Agenda focusing on reforming zoning laws, development approvals processes, strata title laws and development levies.

Treasury also flags that the abolition of stamp duty on housing and commercial property will help ease urban pressures.

Treasurys assessment of the situation is a welcome dose of rationality. The challenges our cities face are not insoluble and nor do they require an end to urban growth.

Treasury clearly understands the challenges Australias cities face and is armed with a reform agenda. Now is the time for the Federal Government to seize on this advice and make the changes necessary to re-invigorate our cities and prepare for future growth.

States and local government should be prepared to co-operate in the implementation of this new national reform effort.

Todays independent advice makes it clear that any attempt to artificially cap our nations population or the growth of our capital cities would come at a great cost to ordinary Australians.

The advice makes it clear that we need to be using our existing urban infrastructure more efficiently that will require more apartments and commercial development around good transport services and that there needs be a greater investment in new urban infrastructure facilitating the outward growth of our cities.

Congestion
Congestion in our cities flows from inadequate public investment and planning restrictions on privately funded housing, retail and office development.

Population growth is not the problem a lack of new infrastructure and misdirected town planning policies are the real culprits.

In the last election campaign, Western Sydney has been often cited as a region suffering from population growth. Yet in the five years to June 2009, Sydney only saw an annual population increase of 1.3 per cent a year, slower than the national growth rate of 1.8 per cent.

The extra 290,000 people accommodated in Sydney over the last five years, has been dwarfed by Melbourne which has been growing faster than any other city or region.

Melbourne has gained 370,000 people over the last five years thats 2 per cent growth a year.

Brisbane has added 219,000 people in five years, with an annual growth rate of 2.3 per cent, and Perth has added 199,000 people with an annual growth rate of 2.6 per cent.

While Sydney is clearly a congested city, its rate of population growth is modest when compared with the rest of Australia.

Within the three largest capital cities, the most rapid increases in population have been in the inner suburbs, not the outer suburban areas, like Western Sydney.

Congestion hot spots occurred when there was insufficient housing, a lack of investment in roads and public transport and restrictions on new retail precincts to service community needs.

Sydney is a perfect case study on what-not-to-do at a national level.

Prior to the dramatic rise in property prices in the late 1990s and early 2000s, NSW maintained a steady share of national net overseas migration, at about 42 per cent.

Over the past decade, the NSW share of overseas migration has fallen substantially, settling at about 30 per cent over the past three years.

The cut in Sydneys share of immigration has done nothing to make Sydney a better place in fact its got worse.

By cutting immigration, local and state governments have been denied the benefit of new taxpayers and businesses have been denied the opportunity to employ new skilled workers.

This has driven economic activity interstate as a result governments have had even less money to invest in making Sydney better.

Declaring a city or a country ˜full drives away both private and public investment and is a sure-fire way to bring about a decline.

Major cities would seem less crowded if the private sector was given more flexibility to:
¢ build apartments near major employment centres and transport hubs reducing the need for people to travel long distances by car;
¢ build new suburbs on the edge of existing cities - reducing upward pressure on house prices;
¢ build new convenient retail precincts where people live and actually want to shop - reducing traffic congestion around existing shopping centres; and
¢ build more workplaces across cities, including outer suburban locations - reducing the need to commute long distances to get to work.