Borrow to invest in infrastructure
In stark contrast to the former Napthine Government’s refusal to enter into any discussion around the option of borrowing to invest in infrastructure, new Premier Dan Andrews has hinted that his government may be prepared to embrace this debate. Speaking to ABC News, CEO Kate Roffey welcomed this change in approach and noted that borrowing against a strong AAA rating at all time low interest rates (below 3 per cent) is something we should seriously consider if we are going to move forward with infrastructure investment. We need to be clear about ‘good debt’ and ‘bad debt’. We are talking about borrowing to invest in long-term productivity enhancing infrastructure projects that provide enduring benefits, not borrowing to service ongoing operational costs. According to Reserve Bank Assistant Governor Guy Debelle, contrary to fears of blowouts, Australian governments generally appear to have plenty of scope to borrow more before AAA ratings are placed at risk. In the absence of big surpluses, borrowing is one mechanism we have to build our pool of investment funds. We cannot afford to go about this recklessly, but neither can we afford to not have this discussion.
Time to set some minimum apartment standards?
Former Cain government planning law expert John Mant – now a Sydney City Councillor – has stated Melbourne’s wave of apartment towers is leaving us with an appalling legacy of sub-standard housing, reigniting the debate that we need more stringent planning rules and minimum standards. Speaking at a BIS Shrapnel business lunch Kate Roffey noted that while top end apartment sales are performing strongly, there are concerns of over-supply of poor quality and poorly designed apartments being built. More stringent planning rules in Sydney requiring minimum floor spaces, ceiling heights and balcony depths – versus Melbourne’s rule free developments – means many apartments here are smaller in size, have lower ceiling heights and smaller balconies. This raises the question of where our housing stock sits in terms of value for money. In the end you buy what you can afford, and if setting minimum standards simply results in a higher priced apartment, that will not help the problem of affordability. We do need to ensure some reasonable standards are set, but we also need to keep prices affordable, and that is the conundrum we need to resolve.
We all need to contribute to infrastructure
In speaking with Jon Faine this week, Kate Roffey noted that we need to be having a much broader and intelligent conversation about alternative mechanisms to help fund infrastructure build, including a range of direct and indirect user pays contributions. There is a strong tendency to shy away from conversations around benefitted area levies, developer contribution charges or business rates supplements, because these ideas can be controversial. But these are discussions we need to have. In cases where there are indirect benefits realised from an uplift in value due to infrastructure improvements, then we should be considering how both direct and indirect beneficiaries can sensibly make a contribution. Mechanisms like these have been used to great effect in both Australia and overseas. The London Crossrail project is being partly funded by a Business Rates Supplement, and public use areas in Sydney’s Barangaroo development are being funded by the commercial developments on the site. While these can be difficult conversations, we must have them. The reality is that while no-one wants to pay more, the cost of ‘doing nothing’ will impact us all in the end.
Just build a new capital city
What do you do when the problems of over-crowding, decaying infrastructure, congestion and poor environmental sustainability start to seriously impact on the liveability and appeal of a country’s capital city? You build a new one. That is what Egypt proposes with its plan to create a new capital city. A new city offers the opportunity to learn from the mistakes of the past and create the best yet. Commenting in the Herald Sun, former Premier Jeff Kennett imagined being able to build a city that had provision for recycled water, a clean environment, an efficient public transport system, exciting architecture and modern community services. Can I draw your attention to Fishermans Bend? More than 200 hectares of inner-city land ready to be developed. On our doorstep is an opportunity to create a world-leading city suburb. Why not make this the most innovative city development in the world - one that includes recycled water, underground waste disposal, effective public transport, renewable energy provision, IT connectivity, green public open spaces and well-linked residential and commercial environ? Because it’s not the way we usually do things? Maybe it’s time to look to Egypt for a vision for the future.
From the horse’s mouth - 100 days in Government
Last week the media provided insights into business leaders’ perceptions of the Andrews Government’s first 100 days. This week the Premier released Labour’s self assessment. According to the Premier, leading highlights were the release of the $45.5 million Ice Action Plan; ending the ambulance dispute, the first step taken to legalising medical cannabis; the establishment of the Family Violence Royal Commission; fast track of $40 million to start work on the Melbourne Metro Rail project; 30 new carriages on order for Melbourne’s train network; funding Infrastructure Victoria to take the ‘politics out of projects and give independent advice’; release of the EOI for the Westgate Distributor project; starting the $320 million saving TAFE Rescue Fund flowing; and introducing a cap on council rates. 100 days isn’t a long time, particularly when you consider what it actually takes to change the machinations of an entire government. And while some sound progress has been made in the early days, it will really be the next 1,360 days of office that will determine how successful we feel the government has been in delivering against the needs of Victoria and Victorians.