“It's the economy, Stupid” is a phrase that was coined by campaign strategist James Carville during Bill Clinton's 1992 presidential campaign, but it is true today as it ever was.
Economics has been referred to as the dismal science since the days of Malthus and the news coming from economists is certainly dismal today.
Commonwealth Treasury Secretary, Steven Kennedy, appeared at a Senate inquiry last week and said that despite the unprecedented levels of economic stimulus, the long-term impact on the economy would be profound.
Very few alive today experienced the Great Depression of the late 1920s and early 1930s. The COVID-19 induced shutdown of the Australian economy will likely see unemployment fall short of Great Depression levels, but a great many people would have lost their jobs in a very short period of time. Economists are certain we are heading for a recession. Some are even saying it will be closer to a depression.
This has massive consequences for the lives of Australians. It is not just an economic problem – it flows onto what services governments can afford to provide, the affordability of homes, the quality of amenity provided by government infrastructure and developer contributions, the social wellbeing of our society and the quality of our lives.
Quoted in the SMH by Shane Wright, Steven Kennedy said “We have never seen an economic shock of this speed, magnitude and shape, reflecting that this is both a significant supply and demand shock.”
Recessions change people’s lives. They change priorities of governments. Without a strong economy, there is no development. Without development, there are no new homes, shopping centres, employment zones, commercial centres. Without this development, there will be no contributions to improved public open space, bike paths, local swimming pools or Council libraries.
As Tim Sneesby, a Strategic Planner from Waverly Council notes, planners get left out of the conversation when the economy turns because there is a glaring lack of attention given to economics in a planning degree.
It is little wonder therefore, that planners plan while assuming that there will always be money available to realise their noble aspirations. The reality is to the contrary. Economics simply does not work that way. A strong economy must come first or there will be no quality outcomes. With a strong economy, we can afford improved amenity, improved design, improved outcomes.
Just for the record, no-one is suggesting throwing out the planning system, its checks and balances, the need for community input, quality design and outcomes. But ensuring that projects proceed and are feasible must be the first priority.
When the economy tanks, there is a need for re-assessment. There is no doubt that some of the housing growth will continue to come from greenfield development – but governments also need to re-consider leveraging the investments they have already made and increasing densities where infrastructure already exists. This is particularly the case where governments are investing in new infrastructure.
The prohibition on development of dis-used industrial land, even for mixed-use developments which would significantly increase employment, must be re-visited.
An economic recession leaves governments with a vexed and wicked conundrum. No-one likes change in their own community. Sydney’s north shore has made that very clear. The NIMBY phenomenon is real. But no-one really wants the economy to collapse either. Stimulating the economy and moving through and beyond COVID-19 will require every opportunity for private sector investment to be encouraged.
Economic growth depends on population growth and this in turn depends upon immigration. If new homes are not built in sufficient quantity to meet demand, this will force housing prices further upward – perhaps not in the short term where you will simply see increasing average household occupancy rates, but eventually this will happen.
Red tape, duplication in process and delay discourages investment. It increases costs and it increases risk. The key is to maintain or improve the quality of outcomes while encouraging private sector investment – particularly those which create jobs.
The property development and construction sector represents about 10% of the economy. In NSW that is over 400,000 jobs. Facilitating investment in the property sector has a strong multiplier effect for the economy, making this sector a stand-out when stimulus measures are considered. Jobs are directly created in planning, architecture, engineering, construction, sales, marketing and maintenance. The investment stimulates activity in banks, insurance companies, and the money paid circulates through the economy resulting in retail and hospitality sales.
This economic activity results in a massive contribution to government revenues through taxes generated by property transactions and construction activity. These include land tax, stamp duty, GST, local infrastructure changes, State infrastructure charges, company tax, payroll tax, Voluntary Planning Agreements. Not only does the construction sector generate housing for our growing population, but it also constitutes a significant component of economic activity and thus a significant component of government revenue used to fund roads, hospitals, schools, public transport, social housing etc.
The property industry also provides valuable apprenticeships and programs for young people to develop their abilities and up-skill, which will be particularly critical during these times of economic uncertainty.
Governments are very aware of this. Treasurers are particularly aware of this. That is why Treasuries come to the fore in times of economic crises. Planners in NSW, by contrast, are proud of their plans and produce them over a long period of consultation with communities. But they don’t respond well to an economic crisis.
The Victorian Government has led the stimulus charge with the establishment of the Building Victoria’s Recovery Taskforce and the simultaneous announcement of four major new projects including Australia’s tallest tower, the Southbank by Beulah Development (2 x 365m towers); a mixed use 26 storey tower at 52 Collins Street Melbourne; a 34 storey mixed use tower at 555 Collins Street and a 300 apartment development at the edge of Flemington racecourse. All private sector projects with an aggregate construction value of over $1.5 Billion.
All these projects have significant height and residential apartments. No one is suggesting the planning outcomes are poor. The architects used are first class.
In contrast, the NSW planning system is slow and insular – but it is improving.
High-rise is considered a scary concept in NSW and density is largely shunned, particularly where the local character of an area might be altered (and despite the merit of this in many cases). A decade of under-investment in public transport infrastructure by successive Labor Premiers exacerbated this concern.
That said, this government has focussed and delivered public transport infrastructure. The Urban Taskforce warmly welcomes the NSW Government’s Planning Acceleration Program and the early signs are promising. Projects with general community support have been targeted and fast tracked in the program’s early stages.
Urban Taskforce submitted almost 80 projects for fast-track consideration. None of these will by-pass planning assessment. Instead, where projects are approved under the program, a focussed effort will be applied to ensure the process delivers a timely result. Councils will be assisted. Referral authorities will be co-ordinated. Communities will be consulted.
The inevitable outcome from an economic downturn/recession/depression is an adjustment to the relative importance given when determining “public benefit”. The importance of the economy when assessing public benefit is commensurate with the significance of the economic decline.
The best way for planners to achieve the outcomes they desire for improved amenity, design and quality is to ensure the economy is strong. Planners need to be partners in the process. Rather than killing the goose, they need to feed it!