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Section 2: Planning and Infrastructure [Part 1 of 2]

Planning in Australia is a critical value driver for property.  The process of zoning, development approval, private project construction, public infrastructure construction and urban renewal is generally poorly executed by the public sector and difficult to understand within the private sector.  Poor land use planning (including regulation, value capture and infrastructure coordination) emerged in the early 2000s as Australia battled its way out of the recession ‘we had to have’ (1989–94), hosted the Olympics (2000) and confronted yet another resources boom cycle.  

Land use planning in the 1990s was all about a low growth future[1], and this prospect promoted anti-growth/green policy settings.  These policy settings were grafted onto metropolitan land use strategies and plans.  Simplistically, the growth area boundary, urban footprint or growth boundaries would be drawn on a plan (except for Perth and Darwin) with no supporting policies to facilitate feasible, medium-density development or urban renewal.

By 2006 major pressure ensued , as the resources super cycle[2] started to emerge.  Population growth hit 2.4% per annum (up from 1.5%), household wealth skyrocketed and international investment boomed.  House and land prices increased dramatically, such as Perth increasing by 100% in four years.  The state and federal governments were caught out, because infrastructure expenditure reduced dramatically from the early 1990s, by around 50% as a proportion of GDP.

Voters in Australia had a new sense of wealth and bravado, so despite the Howard–Costello Government paying off the national debt in 2006, Labor’s Kevin Rudd was installed as the new Prime Minister, essentially to translate the new-found wealth and optimism into an infrastructure rich, traffic congestion free Big Australia.  However, the GFC and Gillard’s consecutive Labor Government combined to end this dream, with 30% reduction in permanent migration, introduction of a carbon tax and low level funding for regional Australia. This coincided with a lack of appetite in the AREIT sector for regional investment.

Land use planning, transport planning and infrastructure planning agencies in the states and local areas went in to shock over the extent of resource driven growth.  The state driven population forecasts had been wrong.  In Sydney, land prices on the urban fringe quadrupled. In Melbourne, the Bracks Victorian Government produced the Melbourne at Five Million Strategy (2008), but still land shortages drove up prices.  The CBD/Suburban Growth limitation Model failed, and savvy developers profited from poor planning.

However, smart local government authorities like Cardinia in Melbourne’s east used the boom to create urban places (such as activity centres, recreational facilities, parks etc.), new business parks and new council facilities.  Anti-growth councils like Cairns Regional Council began planning new growth corridors in 2006 and were still planning in 2012, by which time many of the developers were bankrupt.

However, some councils, like Wanneroo (WA) and Logan (QLD) got on with the job admirably.

Sizing up future populations and cities will, however, remain a mystery.  No federal government will commit to population targets, and as a result, no state, regional or local authority can therefore effectively plan.  Despite this reality, the federal government – through COAG – is seeking to impose new urban planning frameworks for capital cities.

When fast economic growth cycles emerge, this means property development opportunities are created and more planning and environmental regulations emerge (to prevent growth).  Development and planning in Australia has always followed the money[3] – that is, it has always been and will continue to be reactive.

Red, green and black tape is bad for Australia, but in reality is good for planners and developers.  Regulation creates monopoly, and in Australia shopping centre developers are great examples of investors paying too much for land but securing high rental yields.  The ridiculous amount of red, green and black tape creates an outrageous amount of opportunity, desire and persistence to get around it, because it creates staggering value in the limited amount of land in Australia deemed by the regulators to be developable.

Current land use planning and tax policy settings by Australian regulators are still based on the CBD/Suburban Growth limitation Model.  This includes metropolitan strategies, stamp duty, no capital gains tax on the primary place of residence, and tax deductibility of property rental losses (negative gearing)[4].


[1] Driven by the CSIRO and B. Jones’ ‘Inquiry into Australia’s population carrying capacity’ (1994).

[2] A “supercycle” is an economic cycle affecting one or several industries that exists outside or above the economic cycle of the economy as a whole. In Australia, this usually refers to the boom the resources sector experienced while the rest of the country was in recession.

[3] For a detailed discussion, see ‘Follow the Money’ in Made in Australia (2012), B.Haratsis and D.Haratsis.

[4] For a detailed discussion of the current policy settings, which support fringe expansion and high property prices, see Australia’s Unintended Cities (2012), R. Tomlinson (ed.).

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Over the next few months, Brian Haratsis will share excerpts from his book, Beyond the Fringe on the MacroPlan website.  If you have any questions regarding the excerpts or you would like to order a copy of the book, please contact Dorothy Patrick, Executive Assistant to the Chairman on 03 9600 0500 or via email patrick@macroplan.com.au

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About the author:

Brian HaratsisBrian Haratsis
Executive Chairman
E: haratsis@macroplan.com.au
P: 03 9600 0500
Brian 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.
ORDER YOUR COPY OF ‘BEYOND THE FRINGE’ HERE.
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