Blue-red-and-black-tape

National Competition Policy is Essential for Planning Reform

Brian Haratsis
MacroPlan
Thursday, 6 November 2014

My book, Australia 2050, published in 2010 argued that because Planning Reform was not part of the 1992 National Competition Policy Review, black, green and red tape controlling the use and development of land had spiralled out of control.  Over regulation has caused house prices to spiral, food prices to increase, childcare prices to increase, not to mention the price of fuel.  In 2014 Australia is faced with a cost of living crisis.

The 2003 National Competition Policy (NCP) assessment took a soft option and assessed jurisdictions as meeting its requirements if legislative restrictions used the following principles:

  • Planning processes minimise opportunities for existing businesses to prevent or delay participation by new competitors; and
  • Jurisdictions have considered and, where appropriate, provided for competition between government and private providers in planning approval processes.

All states currently meet these minimal requirements.

Subsequent inquiries by the ACCC (2008) Productivity Commission (2011) and (2014) found that planning and zoning regulations were overly restrictive and often anti-competitive.  The PC noted in 2014 that Victoria was leading the way in Australia.  Competent strategic planning documents like the Plan Melbourne put into context Regional issues and how local issues need to be guided by a bigger picture. Removal of floor space caps, flexible zoning to permit bulky goods and opportunities to locate in industrial zones (up to 2000sqm supermarket/1000sqm retail) were key elements of the Victorian approach. All planning systems need to be more strategic and outcome focused rather than regulating and risk focused.

In 2014 the NCP Panel view is as follows:

Effective economic objectives and proper consideration of competition are lacking from planning and zoning legislation and therefore processes.  Planning and zoning requirements are a significant source of barriers to entry, particularly in the retail sector.  They are also overly complex, geared towards very local issues and can place undue weight on the impact of incumbents.

The panel has recommended that all governments should include competition principles in the objectives of planning and zoning legislation so they are given due weight in decision making.  The NCP panel argues that the principles should include:

  • A focus on the long term interests of consumers generally (beyond purely local concerns);
  • Ensuring arrangements do not explicitly or implicitly favour incumbent operators;
  • Internal review processes that can be triggered by new entrants to a local market; and
  • Reducing the cost, complexity and time taken to challenge existing regulations.

MacroPlan is currently reviewing the performance of planning systems nationally and has reviewed in detail the Melbourne, New South Wales, Perth, Canberra and Queensland proposed and actual changes to planning systems from 2012 to 2014.  The draft NCP recommendations would dictate major changes in these jurisdictions as well as other states.  In our view, while the biggest impacts are likely to be in NSW, ACT, WA, South Australia and Tasmania, both Queensland and Victoria will require significant reform albeit off a more deregulated base.

The draft NCP recommendations do not go far enough.  They should require not just the inclusion of competition principles in the objectives for planning and zoning legislation but should amend planning processes to facilitate required outcomes.

For example, in Victoria and several other states this would mean the opportunity for applicants to apply to rezone land without cumbersome authorisation processes and also have the right to appeal if the rezoning request is denied.  In addition to process changes, all planning schemes will require content changes ranging from removal of floor space caps, designation of allowable expansion levels and a host of associated anti-competitive provisions including stratospheric car parking requirements, ingress and egress restrictions and in most states, requirements for infrastructure charges which are so high that they discourage competition.

Throughout Australia the long term interests of the community would be taken seriously as opposed to the interests of the green, black and red tape community and its reliance on tweaking old school regulatory frameworks rather than systemic review.  Monopolies, barriers to entry, excessive time delays and costs as well as more penetrating reforms should be contemplated.  For example planning could be mandated to deliver lowest cost housing or to ensure that retail turnover levels per square meter are not excessive.  Further, this suggests a new approach to the control of levies, taxes and charges on land possibly utilising a ‘Regulator General’ type approach.  These ideas are the tip of the competition and consumer led iceberg.   Planning systems around Australia are broke – just consider the price of housing – and that is the reason every state is annually reviewing its legislation. The GFC has prompted the realisation for all states to take away the suffocation of “process” – now is the time to fix it.

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Brian Haratsis
Executive Chairman
E: haratsis@macroplan.com.au
P: 03 9600 0500Brian Haratsis is MacroPlan’s Founder and Executive Chairman. Brian is an economist and future strategist with over 30 years’ experience as an advisor to governments and major corporate clients throughout Australia.  Brian commands an unparalleled, on-the-ground knowledge of residential markets across Australia, having worked extensively and regularly in all capital cities and key regional markets.

 

About MacroPlan
MacroPlan’s experienced and qualified economists align their understanding of macro-economic forces with micro-economic variables such as geographic and industrial characteristics, demographics, labour market shifts, resource demand and commercial realities.  Contact Brian Haratsis, Executive Chairman today to discuss your property research requirements.
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