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Standing Committee on Infrastructure, Transport and Cities
29/08/2017
Australian government's role in the development of cities

SPILLER, Dr Marcus, Principal and Partner, SGS Economics & Planning Pty Ltd

Committee met at 09:06

CHAIR ( Mr Alexander ): I declare open the public hearing in Melbourne of the Committee on Infrastructure, Transport and Cities for the inquiry into the Australian government's role in the development of cities. In accordance with the committee's resolutions of Tuesday, 11 October 2016, this hearing will be broadcast on the parliament's website and the proof and official transcripts of proceedings will be published on the parliament's website. Those present here today are advised that filming and recording are permitted during the hearing. I remind members of the media who may be present or listening on the web of the need to fairly and accurately report the proceedings of the committee.

I now welcome a representative of SGS Economics and Planning to give evidence here today. Although the committee does not require you to give evidence under oath I should advise you that this hearing is a legal proceeding of the parliament and therefore has the same standing as proceedings of the representative houses. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence today will be recorded by Hansard and attracts parliamentary privilege. I know invite you to make an opening statement before we proceed to discussion.

Dr Spiller : I should, perhaps, explain a little why SGS Economics & Planning would make a submission in the first place. SGS is an employee owned consulting company of approximately 50 equivalent-full-time employees. We have been in operation for more than 25 years. Our business is almost entirely public policy focus; that is to say, 90 per cent of our billings come from public sector clients and our focus is very much on urban policy and urban economics. We have advised governments at the local, state and national level on matters to do with housing, transport, regional development and so on. Our self-appointed mission in the world is to influence policy and investment decisions in favour of sustainable urban development.

It is against that background that we felt it was important for a company like ours to make a submission to an important inquiry like this and perhaps I will take five minutes or so just to highlight the principal points in our submission and then I would be more than happy to discuss any questions you might have.

We have addressed the two terms of reference of the committee in turn, so I will start by talking about the Commonwealth's role in metropolitan areas and then turn my attention to the Commonwealth's role with regional cities. In metropolitan areas our submission asserts, with confidence, that there is no problem in this country with writing good metropolitan strategies. We know what a good metropolitan strategy looks like; in fact, Australian planners, engineers and kindred professionals are sought after the world over for their expertise in this space, so there is no shortage of know-how. Where we have a problem is taking the plans into action. The cities that we see today do not reflect the plans that we have been churning out for the past 25 to 30 years.

Our problem is implementation and our submission suggests that Australia needs a fairly dramatic institutional change in the government space in order to correct this problem. We say that Australia needs metropolitan governments. You might think of the Greater London Authority when I use that expression. We need something like that working alongside Commonwealth, state and local governments if we are going to translate good plans into action.

We say that as things stand the states and the Commonwealth governments cannot do this job of effective implementation. They cannot do this job. They cannot do it because, first and foremost, they do not stand for the metropolitan areas and they do not speak for the metropolitan areas. Their constituencies may well cover the metropolitan areas but they do not have a mandate from the community of interest which is known as the metropolitan areas; therefore, they have no in a sense legitimacy in prosecuting implementation of metropolitan strategies, as perhaps is most evident when we see state governments clashing with local governments over urban consolidation policies. Local communities do not accept that state governments have a mandate to do that. Whether they are right or wrong is immaterial. That is one reason.

The second reason that the states and the Commonwealth cannot do the implementation job of metropolitan strategies is that their primary purpose is to deliver services and entitlements to the citizenry at large and at scale. We are talking about services like health, education, justice and income support, where citizens expect a roughly equal outcome regardless of where you live in a state or in the nation. That kind of role, in a governance sense, requires a delivery method, a production method if you like, which is configured around scale and reliability. It encourages and demands production of public services in what are disparagingly called silos. State governments and the national government work in silos. It is unfair to use it as a disparaging term because I think it is a perfectly efficient way to deliver volume services to a widespread citizenry at a dependable quality level. Nevertheless, they work in silos, which makes it very difficult for them to deal with questions of metropolitan development which requires a connected up way of thinking at the level of place, so we need to connect up transport and land use planning, for example, which state governments have not been able to do. You can point to the odd success here and there but, by and large, there is a structural problem with integrated delivery of services at the level of place.

The third reason why state and Commonwealth governments cannot do the job is that vertical fiscal imbalance obfuscates accountability for implementation. If the roads are not going in on time the Commonwealth blames the states for incompetence, the states blame the Commonwealth for lack of funding and the local punter is left confused. Nobody really understands who is responsible for it. The other side of that is that when state governments engage, for the time being at least, as the owners of the metropolitan areas, with the metropolitan community on the sorts of futures they would prefer for their metropolitan areas, these public participation programs are really, in our view, a relatively hollow gesture or process because the people being consulted have no real stake in the outcome; that is to say, their tax outcomes do not change. If they want a more compact, public transport friendly city, and if it involves paying more taxes, that does not come into the equation. That is a matter that is dealt with in other circuits, which means that the consultation process is robbed of relevance.

Finally—and perhaps there are many others but the only one that I want to raise today—another reason why states and Commonwealth governments cannot do the job of implementation is that they cannot realistically undertake the taxation and market reforms necessary. For example, we have immense speculation in our planning and urban development systems around the generation and allocation of development rights, chasing rezonings and uplifts in land value. The clear planning and economic solution to that is to have a market in development rights such as exists in Canberra, for example, where if you want a planning permit to build a block of flats your application is dealt with on the planning merits; that is to say, will it fit in the street, will it fit in with the infrastructure and does it obey overlooking, overshadowing and other rules? So, it is the technical design based assessment. Then, once you get your approval, you have to trot across to the lease office and say, 'Please change my lease from a single family house to a block of flats', and you pay the difference in the underlying land value. So, it is a value capture mechanism. Now, elsewhere in the Commonwealth that uplift in land value is privately captured, highly sought after and is the route of a lot of inefficiency and in some cases corruption in our system.

Another area where state governments have patently failed to undertake the market reforms necessary is in the area of road pricing. Road travel must be one of the last protected markets in our country. We do not have congestion pricing and it is unlikely, because of the lack of mandate and acceptance at the metropolitan area, that a state government could successfully prosecute the case for that.

Now, local governments cannot do the job either, whether they are working individually or collectively, because they stand for local communities. It is a fanciful aspiration to think that they can somehow lift their sights to the interests of the metropolitan area when they are undertaking their business.

So, metropolitan governments are necessary but we need not think of them as being a competitor to state governments. In our view they would have a relatively narrow scope of responsibilities around regional integrated planning; that is, preparing the likes of a metropolitan strategy for Sydney, or SEQ or Melbourne, regional economic development planning at that level; transport system investment and management, so that would run the public transport system and the arterial road system; regional water sustainability and maybe regional power grids; regional resource recovery; and, regional institutions and facilities like arts, culture, sporting and so on.

Now, a common response that we have found to this proposition is that it would be, as I mentioned before, a competitor against the states that would do the states out of the job. This is not so. The states would still be responsible for those high volume services that I spoke of earlier—education, health, policing and kindred services—which currently account for more than a third of their outlay, so they will remain a senior and important sphere of governance.

Metropolitan governments would need to be fiscally autonomous and have a credible democratic mandate. Now, this is a momentous institutional reform. We realise that but we are speaking from the perspective of an independent consulting firm so we can think big, and somebody has got to do that. We realise the momentous nature of it but it would correct a major deficiency in Australia's governance fabrics which is now demonstrably holding back the nation's performance on social, economic and environmental parameters, given the numbers of people that live in our cities.

Now, whilst it is ambitious, this reform agenda is not unrealistic. Australia has had, in the past, quasi metropolitan governments. I was just chatting to a colleague a moment ago about this. We did have—and, in fact, I worked in one—the Melbourne and Metropolitan Board of Works which had a scope of functions similar to the one that I described. It was in charge of metropolitan strategic planning. It was in charge of the metropolitan roads. It was in charge of metropolitan water. It was in charge of the metropolitan open space system. It was fiscally autonomous in the sense that it had an independent rate base. It issued infrastructure bonds. It had a democratic mandate insofar as the board of the Board of Works comprised elected members from constituent councils sent to the board via electoral colleges and the state government appointed other members, so the state government had a controlling interest but it was, nevertheless, an institution owned and accountable to the metropolitan constituency. If we look across the ditch we can find that regional councils in that country have worked well over the years, albeit that they have had a narrow focus on environmental issues.

So what is the Commonwealth's role in all of this? We say that the Commonwealth's role is to nudge the states into this major institutional reform. It could do this via a ramped up version of City Deals in which the states are rewarded with additional Commonwealth tax transfers based on the productivity given and from better cities. So, if we somehow resolve this governance impasse and we are able to build more productive and sustainable cities the evidence shows that there will be a more productive economy and greater tax inflows. The Commonwealth collects 80 per cent of taxes in the first instance. That means a bigger cake to share. Some of that cake should be shared with the states to induce them to undertake these important reforms. We have done all of this before with national competition policy when the Commonwealth induced the states to undertake all manner of reforms outside of the jurisdiction of the Commonwealth but highly efficiently.

Just turning briefly to the question of regional cities. The main message from our submission is that it is unhelpful and distracting to construct a picture of Australia in which the cities are in competition with rural and regional areas for resources, for capital and for talent. We say that because of technological change and globalisation the value chain in any business has unbundled to an unprecedented extent so that those parts of value creation that are to do with analysis, science, design, creativity, problem solving and so on have become uncoupled from those processes of value production which are to do with the physical manufacture or growing of things and the distribution of things.

Now, the creative and knowledge intensive services require big city agglomeration economies to be world competitive. They need that. An example is that SGS work around the corner from here. We have about 30 people employed there. If we were forced by some dictum to move to an outer suburban area, let alone a rural area, our bottom line would shrink by the order of 15 per cent, which means that our shared profits would reduce by 15 per cent and we would pay our workers 15 per cent, and that is not going to happen. We would need an enormous subsidy to move there and we probably would not move anyway because we get a competitive advantage by being in a agglomerated situation.

Meanwhile, regional producers need these city based, knowledge intensive services to be well competitive. Whether you are a farmer, a grazier, a horticulturalist or a tourism operator you need to have these marketing, design, IT and problem-solving services in order to sustain your business so there is a symbiotic relationship between country and city. They are not in competition and policy needs to be framed around this and understand this. Forced decentralisation of knowledge based services is likely to damage productivity in both city and country were it to be achieved at scale, which I very much doubt that it would be anyway.

In our submission we point out that there are probably four broad categories of non-metro regions in Australia. Firstly, those which are closely linked to the nearest metropolis, those which are not within convenient reach of the metropolis but offer lifestyle and tourism opportunities and those that are also beyond the immediate reach of the metropolitan areas but are agricultural based, so we can think of those, and then there are the remote and mineral resource regions. When you look at where the population is growing it is very much in the big cities and those areas that are linked to the big cities and regional development strategies should understand this typology and be customised towards it. For the first category, those that have good links with the metropolitan areas, improving that integration should be a priority through road and rail links so that those regions in effect become part of the metropolitan labour market. Outside of those areas conservation of the resource base is vital.

The role for the Commonwealth, again, is not to pick individual infrastructure winners but to nudge the states into developing productivity boosting programs for the regions based on a systematic sharing of the productivity or tax dividend from such programs. As I mentioned in terms of City Deals, you can have regional deals that do a similar thing. Those are the main points in our submission and I would be pleased to take any questions.

Ms BIRD: I can start.

CHAIR: Certainly.

Ms BIRD: Thank you. I just want to explore a bit further with you where you talked about the Building Better Cities program and the subsequent City Deals program. Just for our information, could you outline what you think were the positives of each and where they might have been significantly improved, if I can diplomatically put it that way?

Dr Spiller : Yes. I am personally acquainted with Building Better Cities. I worked on that program back in the early nineties. City Deals is still an idea that is being rolled out, so the jury is still out. I will speak first about Building Better Cities. Building Better Cities was very well received in most quarters. There are a couple of reasons for that. One is it was an outcomes-focused and respectful program of the states in the sense that it was based on the states proposing an area strategy with certain outcomes to be achieved that could be measured and then the Commonwealth came across in a similar way to a productivity dividend saying, 'We'll tip in a certain amount of money', but in an untied fashion. I think this was very well received by the states because they were accountable for the outcomes but were not being told directly by the Commonwealth what things to build, what things to put where and what infrastructure was needed. So, in the subsidiarity sense, it respected a very important principle that the Commonwealth is entitled to use its resources, as I have mentioned, to nudge other jurisdictions towards achieving national objectives but it has recognised that the states in that case—and I would now say a metropolitan government would have done the job better—could be put in a better position to identify how to get best value out of those resources and make things happen on the ground. It was flexible and respectful in that sense. They were the pros of it.

The cons of it were that it was not really part of that government's base load agenda. That government's base load agenda was microeconomic reform, deregulation and freeing up markets. The Building Better Cities program was, in a sense, a little hobby program on the side. It is perhaps a bit harsh to say that but it was not big enough, which I suppose is what I am saying. It was not embraced as a base load program to transform the nation like those other microeconomic reform programs were, which changed the nation as well. So, if there is a criticism to be made, it should have been bigger and could have been bigger.

We mentioned in our submission that the National Growth Areas Alliance, which is a lobby group that is lobbying for growth areas around our major metropolitan areas and elsewhere, put up a project or a proposition about five or six years ago to take the Building Better Cities model and elevate it to a much larger scale that could transform the nation.

City Deals is very much of the same philosophy. It is very much, in a sense, inspired by the UK City Deals which is premised on this idea of, 'You guys hold the lead at the microeconomic productivity end of the spectrum. We hold the fiscal power. We'll share the productivity dividend, the tax dividend, from you deploying those levers in a more efficient way', so it makes a hell of a lot of sense. I would have a few criticisms. One of them is that the City Deals, with the way that it is being rolled out today, it seems to have been focused even more narrowly than the Building Better Cities program so it becomes very focused on individual projects in places like Townsville or something like that which I think is getting perilously close to the Commonwealth picking individual project winners rather than facilitating structural change.

Ms BIRD: I do not know if this is putting you on the spot. Is there an example from the Building Better Cities program that you could point to where the outcomes they wanted have happened, that that is what we got in a particular place as a result of that?

Dr Spiller : Yes. One example is the inner north-east urban renewal corridor in Brisbane, which, if you are familiar with that part of the world, was primarily industrial with lots of woolstores and things like that. Now, with the benefit of hindsight, you would say, 'That would have all been gentrified anyway', but in fact for generations before then that was a very underutilised area, problematic in many respects in terms of land use and so on. The state government there put up a regeneration project where a number of objectives were established and the deployment of Commonwealth funds accelerated the regeneration process. That is one example.

Another example that I like to quote in other forums on a different issue is Ultimo-Pyrmont in Sydney, which again was a monte for regeneration but could have been regenerated in a less desirable way than it has been. One of the great achievements of Ultimo-Pyrmont is that affordable housing is hardwired into the regeneration process, so when the Building Better Cities program for that area was negotiated the Commonwealth insisted on having a certain percentage of affordable housing embedded in it and negotiated—

Ms BIRD: Is that affordable housing in terms of on-the-market affordable housing, or public housing?

Dr Spiller : No, it is social.

Ms BIRD: Public and social housing?

Dr Spiller : Yes, public and social housing, so it is permanently affordable rental housing available to the bottom two quintiles of the income distribution. It is not public housing in the sense that the dwellings are owned by an outfit called City West Housing, which is an independent not-for-profit business in which the state government is a stakeholder. So, we now have a pepper and salt social housing provision situation in Ultimo-Pyrmont. The social mix was retained in an area that would otherwise have been, as my little brother calls it, a victim or urban bleaching.

Ms BIRD: I can well picture what that term means. I have one more question. One of the points that you make around this concept of the metropolitan government, but it could be structured in various ways—and I am just thinking of something like the Greater Sydney Commission at the moment—how do you think those sorts of structures would work and do you think that there is capacity, perhaps, for more of that sort of thing, or not?

Dr Spiller : With these initiatives time will tell. I do not think that administrative reform is a substitute for governance reform. This is an exercise of the states actually having to give up a degree of power, which is an awfully hard thing to do. I am not talking specifically about the Sydney situation, but I have dealt with ministers around the country who have, in a sense, seen the merit of this kind of reform and have wanted to go in that direction but have met with a lot of resistance, even from their own colleagues, because it means giving up power or sharing power, and the Commonwealth faces exactly the same problem. There is probably a lot more to be gained politically by picking winners and backing certain projects, not others and so on, rather than saying, 'We'll nudge you to do the right thing and we'll sit back and hope that you do that.'

Sometimes in my less optimistic moments I think that those kinds of reforms, those administrative reforms, just put off the crunch day when we really have to do something serious about this, but let us not think of it as being some great disruptive change. As I mentioned, we have had institutions that have worked in this fashion successfully in the past. The Greater Sydney Commission, for example, would be greatly improved in my opinion if, instead of having government appointed representatives of the different districts, if those districts elected one of their number, one of their elected members, via an electoral college to sit on the commission and then the politics and the dynamics of that institution would change enormously. When there is a contest between the metropolitan interest and the local interest, when that debate is held in the commission, if you have that kind of democratic mandate the way in which that debate is conducted will be a different kind of debate than one in which you have an institution that when push comes to shove is owned by the state government. The local constituency will hold fast and tend to fight. It is about giving up power or sharing power.

Ms BIRD: Since we are talking realpolitik, part of the other side of that is that it is also about being seen to walk away from responsibility.

Dr Spiller : Yes.

Ms BIRD: Sometimes people can be quite suspect of such organisations thinking, 'I elected you to be my local member so why aren't you intervening and doing something about this when I want to complain?' Have you seen ways in which that has been managed effectively?

Dr Spiller : Yes. I was a young fellow at the time but I remember when the freshly elected Cain Labor government decided to disband the Board of Works, which had successfully done metropolitan planning and infrastructure provision in this city for decades and, in fact, that model had been copied in other parts of the world, including Vancouver. The Cain Labor government came in and disbanded that organisation very much along those lines. They said, 'We need to make planning more accountable.' What that did was it turned planning into the greatest political football so that now it becomes a point of differentiation between the contending parties. Each party wants to see a different metropolitan strategy; therefore, once we had one or maybe two metropolitan strategies in the three decades leading up to the Cain government, we have had maybe six or seven metropolitan strategies since. Now, intuitively you know that if you are managing a mega entity like a metropolitan area you need long-term vision and consistency, so making things more politically accountable is counterproductive. You are still politically accountable in a quasi-democratic institution like the Board of Works. It is still partly owned by the state government. It is still partly owned by local people and there are mechanisms to transact that accountability, but I think the way that we have swung, by centralising power into the states over the cities, as time has told us, has been counterproductive.

Ms BIRD: Thank you.

CHAIR: So much to cover and so little time. Thank you for your contribution at this point. Interestingly, yesterday we had a group who in their presentation informed us that the Ultimo stock that had come on the market in this time of redevelopment was 98 per cent dominated by investors. It is an interesting mix.

Dr Spiller : Yes.

CHAIR: I hope that is not the future.

Dr Spiller : We need investors.

CHAIR: We do not need them to take away the opportunity of the homebuyer, though. Now, our previous hearing recommended that we should have master planning of infrastructure and that all infrastructure should be attached to a master planning of land use, that the two should not be silent but integrated, synchronised and harmonised. This, in our mind, formed the right precondition to implement an overarching federal value capture system and that this had the potential of aligning the three levels of government; if the three levels of government could align and understand that if you put together this system of alignment of infrastructure land use you would maximise the uplift; you would maximise your rightful claim on that uplift or capitalise on the investment in infrastructure and all the federal government would do would be to collect this money, quarantine it and then hypothecate it to what has been agreed between the states and the local councils, what are their needs for a master plan, whether it is urban densification with infrastructure designed to have the capacity of what you are now planning on land use; some very simple rules. Have you looked at value capture as a way of aligning the interests not just of the three levels of government but also of the landowner and the developer?

Dr Spiller : Yes. That is a big topic.

CHAIR: You are into big stuff.

Dr Spiller : Yes, we are into big stuff. We have done a lot of thinking about value capture. Just a quick point about that, we tend to think of it in terms of infrastructure investment, like we are going to make this infrastructure investment, there is going to be an uplift in value and we should claw some of that back to help pay for the infrastructure. That is fine. That is good and we should do those things, but it is a rather narrow perspective on value capture. I think we need a bigger understanding of value capture which is more about—if you are thinking about it as an economist—creating a market in development rights so that you explicitly assert that it is the community rather than the landowner that owns the development rights. It is a bit like you might own a chunk of land but you do not own the minerals underneath and you do not own the water that falls from the sky. If you are a landowner you have the right to use that land for those purposes sanctioned by the planning scheme and by the community so if you are sitting there on your single family house, your lot, you are perfectly entitled to do that but you do not have the ownership of the development rights that might be awarded to that site going forward. So, it is your property. This is your land; a single lot. The value of your lot may well go up if a rail station is put here but it might also go up independent of whether you put a railway station in there if you change the zoning rules for this site. In both cases a value capture situation is warranted.

The interesting thing about creating a market in development rights is that the value of those rights rises as you improve amenity around it, so a block of land that can take 10 apartments in at this point in time Sunshine will have a certain residual land value, whereas the same lot in let us say Footscray or some other more mature area will be greater. So, as you insert more infrastructure, as you improve amenity, the value of those rights goes up. If you wanted to have a systematic way of capturing land value and then using that as a means of aligning the interests of the different spheres of government, then I would be trying to think not just in terms of value capture in relation to individual transport projects but value capture more generally. If that is what you are saying, I totally agree with the proposition. In fact, we have written about this and we can make a paper available to you if you wish.

CHAIR: We would appreciate that.

Dr Spiller : Yes—this idea of the community reserving the development rights and then selling them to people rather than just being privately captured. And, by the way, we are not totally opposed to some private capture of the uplift in land value, because the landowner needs to get a bit of a premium in order to be induced or incentivised to release the land. But in Canberra the value capture rate is 75 per cent; in the voluntary planning agreements that are typically negotiated in Sydney, as you do a little bit they have an informal 50 per cent of value capture rate. If you were able to systematically capture value and then share part of that uplift, that revenue, with local councils, you would change their whole attitude to densification. All of a sudden they would come from pulling up the drawbridge to, in a sense, competing for development.

CHAIR: They could be masters of their own destiny by working with the state government to say, 'We will approve this zoning around this train station that is coming in', and by approving a greater level of density it will be value captured by federal government and repatriated straight back to them so they are then in alignment.

Dr Spiller : It makes a lot of sense.

CHAIR: It includes in that other things that add value. It is not just the railway line; it is the parklands or whatever else. So they get a way of master planning their community, with engagement with their community, but as we heard from the Melbourne City Council yesterday, if this happens along transport corridors the great majority of the suburban area can remain untouched.

Dr Spiller : Yes. This is why I think that we need four levels of government because local government knows better than anybody else.

CHAIR: Can I negotiate you down to three and a half?

Dr Spiller : Yes, you can.

CHAIR: Here is the idea. We had an interesting situation some time ago where a Chinese company wanted to come and put LED lighting in Sydney. There was a very significant saving but you had to have a critical mass so it needed a number of councils to combine to put this in. They were willing to give a five or 10 per cent discount on their current costs over a number of years. They would put the lighting in for free and then after that the local council would have the benefit of about 20 per cent of the current cost. It was a fantastic deal but you could not get two people to agree. We looked at then having the Sydney councils—that are divided into North Rocks, South Rocks, West Rocks and probably East Rocks too—but the thought at the time and with the amalgamations that have now stopped, could you amalgamate certain services as you did with representatives from each council?

Dr Spiller : Yes.

CHAIR: So, therefore, I would say 3½ levels.

Dr Spiller : Yes.

CHAIR: Where that half level is more of a—

Dr Spiller : A coordination?

CHAIR: Yes. You have directors but you would have—

Dr Spiller : I get what you are saying. It isn't inconsistent with what we are saying. One way of thinking about this issue is to sit down and ask what are the genuinely metropolitan issues, things that really the state cannot handle because, for the reasons I described, they work in silos and they do not have a mandate? What are the genuine infrastructure or service issues that tie the destinies of metropolitan citizens together, whether they are in the far north of the metropolitan area or the far south?

The bulk rail system, and when I say that, the public transport system is one of those things because a Sydneysider will know that an efficiently functioning Sydney metropolitan labour market is vital to them and to their kids. That is something that they own, in a figurative sense, with all the other metropolitan citizens. That is an item of infrastructure that needs to be planned, managed and delivered via a metropolitan forum that is mandated to do that. Now, there are not too many other things. As I mentioned, there is probably metropolitan strategic spatial planning, some aspects of economic development planning and the kinds of things that the GLA does. The GLA does not have a big remit but it has been enormously successful in repositioning London as a global city over the past four years.

CHAIR: Mr Wallace was very keen to ask you a question earlier and we are getting close to running out of time.

Mr WALLACE: We are—and I could probably spend an hour with you, but unfortunately we do not have that time. I appreciate that you are coming at this from a totally non-political perspective. You do not have to worry about the intricacies of how this is going to work from a political perspective. It is extremely brave to suggest that we should have four levels of government in Australia rather than our already existing overly governed country with three levels of government and with 25 million people but, I suppose, the only dumb idea is one that does not get raised. How do you see this from an economic perspective? Have you looked at this from an economic perspective as to how this is going to play out because we are talking about a whole new tier of government and a whole new tier of bureaucrats.

Dr Spiller : Yes.

Mr WALLACE: Personally, I would have thought that is the last thing that the Australian people would want or need.

Dr Spiller : Yes. It is interesting. You could work out the effectiveness of governance by looking at the number of elected members that you have and say that the minimum number would be best. I could throw the question back at you and say: would that mean that we could be really efficient, in terms of governance, if everything was run out of Canberra? So, what coloured rubbish bins will I have? What will be the quality of my local child care? The fact is different spheres of government have different competencies and the point of our submission is that the state governments—and I have the greatest respect for state governments as I do a lot of work for state governments—are full of highly motivated and talented people but in a governance sense they are not competent to deal with the metropolitan area because they work in silos and because they do not have a mandate from the metropolitan community to make decisions. When they try to do these things around urban consolidation every single project is extremely hard fought, principally because it is contested whether the state government has a right to do that. You can pick up The Age today. There is a story every day about why the state government should not do something or why the state government is imposing its will.

Mr WALLACE: Is that not also the case with the lowest of the tier of governments—and I do not mean that in a disparaging way—but I open up my Sunshine Coast Daily newspaper and read on a daily basis that people constantly complain that the Sunshine Coast council do not consult widely enough and that they are off on a frolic doing their own thing. They are the closest tier of government to people.

Dr Spiller : Yes, but nevertheless they are mandated to resolve those things. Of course you are going to have a vibrant debate and the tussle of local politics but eventually you land somewhere. The problem that we have had with metropolitan areas for the last 30 years is we have not really landed anywhere. If you look at South-East Queensland, I went and worked up there in the early nineties as part of the resuscitation of regional planning in South-East Queensland. If you compare the pattern of settlement in South-East Queensland today—a good 25 years on—with the original plans that were developed then, the state has not been able to deliver the kind of sustainable pattern of development that was aspired to.

Mr WALLACE: I am getting the wind up. I really just put the point to you that all of the failings that you speak about seem to speak of failings of state government. Are we ignoring the elephant in the room by talking about introducing another sphere of government?

Dr Spiller : If we can get better decisions faster in the appropriate forums it is not an inefficient thing to do. It is redistributing power from the state to this level. It is not meaning an extra layer of additional bureaucrats. As you say, that is probably a matter that will require a longer conversation.

Mr WALLACE: Yes, and I would like to have that with you.

Dr Spiller : I am always available.

CHAIR: Thank you for your attendance here today. If you have been asked to provide any additional information you can forward it to the secretary by Tuesday, 12 September 2017. You will be sent a copy of the transcript of your evidence and you will have the opportunity to request corrections to transcription errors. Thank you again.