Productivity Commission: Action on cities can provide $29 billion boost

The Productivity Commission five yearly review into national productivity is a reminder that Australia cannot forsake the path of slow growth in household income.

“According to the Productivity Commission, better functioning cities can provide a $29 billion increase in GDP,” said Ken Morrison, Chief Executive of the Property Council of Australia.

“Better functioning cities can reduce congestion, increase employment, reduce home moving costs and increase national income.

“The Productivity Commission is right – our cities are a major driver of productivity and we have to see our cities as a key driver of economic growth.

“Our cities provide 80% of Australia’s GDP and our capital cities provide two-thirds of all employment and 80% of employment growth.

“We congratulate the Treasurer for commissioning the report and backing it in with a commitment to not play the ‘rule-in rule-out’ game. The report, not just the cities and infrastructure aspects, represents a framework for the next stage of Australia’s economic reform journey.”

Mr Morrison said the Productivity Commission has raised the vital issues of planning and land use, stamp duties, infrastructure planning and road user charges.

“The report highlights the big gap between our dynamic growing cities and the complex, slow moving regulatory framework that is trying to keep up with it.

“These are issues that affect housing affordability, the ability for people to live close to jobs and the productivity of businesses and individuals.

“While governments continue to work on it, the complexity of land use planning controls, the way new development is taxed and uncertain planning processes remain priority reform targets for the nation.

“We have argued for competition style payments to incentivise the states and territories to reform and it is pleasing to see a similar approach argued by the Productivity Commission.”

Mr Morrison said the Productive Report highlighted the big negative impacts of stamp duty.

“Stamp duty is a monster tax which is trapping people in homes that are too big or small for their families and stage of life – the transaction costs of moving are so high.

“Currently stamp duty in Sydney for the average house is in excess of $51,000 and just under $30,000 for apartments.

“The economic efficiency arguments for a stamp duty/land tax swap are well understood, but the problem is the mountains of stamp duty money that States are sitting on.  Modelling for the Property Council by Deloitte Access Economics shows that such a swap would probably leave land taxes on households unacceptably high and the ACT reform experience has been particularly harmful for commercial property. This reform is not as simple as it sounds.”

Mr Morrison said Australia should have a debate over road user charges.

“It’s true that motorists already pay a swathe of charges including registration, fuel, tolls and taxes on city parking, but it’s fair to say, there is a place for a fairer regime that uses price as a way of alleviating congestion.  The Productivity Commission has argued for trial sites and this is worthy of debate.”

Mr Morrison said the Productivity Commission is one of Australia’s respected institutions and it should be applauded for the body of work it released today.

“We need more thoughtful debate in our country and the Productivity Commission, under the direction of the Treasurer, has stepped up to the plate with the report it released today.”

For more information contact: Paul Ritchie  |  pritchie@propertycouncil.com.au