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

RIMMER, Mr Ben, Chief Executive Officer, City of Melbourne


CHAIR: I now welcome the representative of the City of Melbourne to give evidence 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 respective houses. The giving of false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. The evidence given today will be recorded by Hansard and attracts parliamentary privilege. I now invite you to make an opening statement before we proceed to discussion.

Mr Rimmer : Thank you. By way of context, the broader metropolis of Melbourne contributed roughly a third of all GDP growth in Australia in the year 2015-16 and Melbourne, as a broad metropolis, is now one of the 10 fastest-growing large cities in the developed world, growing quicker than Vancouver, London or New York. Within that broad metropolis the City of Melbourne is actually a very small area. It is roughly 37 square kilometres, but within the City of Melbourne the economic activity is about 27 per cent of the whole of Victoria's state product, and that equates to about six per cent of Australia's gross domestic product.

Mr WALLACE: Did you say 20 per cent of the national GDP a moment ago?

Mr Rimmer : No. I am sorry; maybe I misspoke. The broad metropolis of Melbourne contributed a third of all growth in GDP.

Mr WALLACE: That is the metropolis of Melbourne as opposed to the CBD?

Mr Rimmer : Yes. Apologies if I misspoke.

CHAIR: You will have a chance to correct your errors in the transcript, if you wish.

Mr Rimmer : I have heard. The context that I bring to this is that what happens in the very centre of this city is, in current terms, about six per cent of our national economic output and the economic output within the centre of the city is growing faster than the economy as a whole. We can see that in terms of job creation; we can see that in terms of the shift towards the knowledge economy and high-tech. So what happens in the centre of this city is incredibly important in terms of Australia's national productivity story and also incredibly important in terms of employment growth.

Right now, today, there are about 400,000 people employed within the city of Melbourne. We forecast another 250,000 people will be working within the city of Melbourne over the coming decades, and over the last decade there has been about 90,000 additional jobs created within the City of Melbourne. So, in terms of the land mass of this wonderful country, the City of Melbourne is just a fragment, but in terms of the economic output of the country, the City of Melbourne is a very significant component.

If you take the centre of Sydney and the centre of Melbourne together, with no disrespect to Brisbane, you are getting up to 12 or 13 per cent of the national economy within a very small nonconcentrated couple of areas. So, to put that in real numbers, the economy of the City of Melbourne is now close to $100 billion on an annual basis, which has grown by 42 per cent over the last 10 years. There is no surprise in that because as the economy shifts from a heavy focus on manufacturing and mining towards a focus on knowledge, high-tech, biotech service economy what happens is that companies that are investing in those areas want to invest in areas where there are other companies also doing business of a similar kind.

You can see this. I know you were at Docklands the other day. You saw, within a couple of hundred metres of each other, the head offices of ANZ and National Australia Bank and there are some other very large banking institutions right next to each other. That is no accident. That is companies choosing to do their business close to each other. You can see another version of that in the Parkville biotechnology precinct where you have this incredible research output happening within really what is a few hundred metres of each other.

So, in that context what happens in the centre of cities is very important to the prosperity of the country and the economic growth of the country as a whole and is really the source of the next significant shift in productivity reform in Australia and, through productivity reform, employment growth and other issues that are important to social wellbeing. So, therefore, if you take that factual background, that context, you very quickly form a view that the Commonwealth government must have a central role in thinking about the future of these issues and in thinking about the future of productivity reform in the centre of our cities. If the Commonwealth government used the levers that it has to even greater effect our cities could become even more of a source of real and enduring competitive advantage for Australia. There is a number of different aspects of that. There is a role in planning, funding and governance but, in particular, there is a role in aligning the interests of different levels of government, different stakeholders, using incentives and advocacy and the bully pulpit, effectively, to produce a shift in the national debate on some of these issues.

These ideas are not new. There have been many different versions of them over decades. One that happened somewhat recently was in 2009 when COAG agreed to a national initiative to improve the strategic planning of Australia's largest cities. That initiative was a great example of the Commonwealth using its authority to encourage state governments and, frankly, local governments to improve their performance on strategic planning for the benefit of the national productivity story. I should, by the way, say that I was involved in that as a Commonwealth public servant so I have a little bit of a vested interest, but there was some significant progress that was made through that initiative in getting our larger cities to plan for growth more effectively and in a more integrated fashion.

So there are a few examples of where the Commonwealth's role can work really well. One is in relation to more efficient urban form. There is very good evidence about the importance of infill development as opposed to fringe development. Some research by Curtin showed that the cost of edge development was roughly $350 million more per thousand dwellings than the cost of infill development. So, if you take it at a macro scale and say if Melbourne were going to add a million people over the next X period the saving from doing that entirely through infill would be about $110 billion. Of course, it is probably not realistic to do it entirely through infill but it gives an indication of the importance of intensification of density of building around development.

There was a very effective research paper put together by the City of Melbourne and the Victorian state government in 2009-10 called Transforming Australian cities which has more detail on that matter.

Mr WALLACE: Can I just check those figures with you again? Is the cost of edge development $200 million more per 1,000 homes than infill?

Mr Rimmer : It is $344 million.

Mr WALLACE: $344 million per 1,000?

Mr Rimmer : Yes. That is the first example of the Commonwealth's role: the structure of the urban area and the urban form. There is also a role, obviously, in relation to priority infrastructure. If getting people to and from the centre of Australian cities is so crucial to the productivity story and the employment story, then high capacity public transport into and out of the centre of our urban areas is incredibly important to our national economic story and, therefore, is an important part of the Commonwealth's story.

As an aside, Sydney and Melbourne are really very different cities on this issue because Sydney is really a number of cities in close proximity, with Parramatta, Macquarie Park and everything else. Melbourne is still really very much a monocentric city. It is really a place which is growing in the centre and that growth is supported by land release in the centre in new areas, such as Fishermans Bend and Arden Macaulay and potentially one day in E-Gate, so the story of Sydney and Melbourne on this issue is really quite different.

There is a third role for the Commonwealth in terms of funding solutions. We have borrowed the language from the UK about City Deals but unfortunately we have not borrowed the funding mechanism. The funding mechanism in the UK involved other partners in growth and development sharing some of the economic upside of that growth and development so that they had an incentive to invest, an incentive to align together and an incentive to work together to produce nationally significant outcomes.

Mr WALLACE: I do not understand what you mean by that.

Mr Rimmer : In the UK version of City Deals some of the economic growth that is potentially created by a city deal, for example in the city of Bristol, the UK Treasury allowed—in inverted commas—to be given back to the participants in that growth, as a means of encouraging them, incentivising them to participate, to work together, to grow in ways that are nationally significant.

Mr WALLACE: If you did not why would they do it?

Mr Rimmer : That is really the question. At the moment the Australian version of City Deals does not really involve new money and has not really involved Commonwealth Treasury countenancing the idea that some of the upside in terms of tax receipts and economic growth could be shared with people who are generating that growth. To take an example, if there are things that can be done by way of better partnership between the state government, the local government, the university and the research institutions to make the Melbourne biotechnology precinct even more productive and even more economically effective, then one way of encouraging those things to be done is to share some of that benefit. That is not a policy position that we have seen in Australia at this time.

A fourth area of the Commonwealth role is around inclusive growth. You have been talking previously around housing affordability and even around homelessness. It is frequently forgotten that the Commonwealth government's role in acute homelessness is incredibly significant through the operation of welfare policies, Centrelink's operation and other related matters and, of course, in the city of Melbourne and the city of Sydney, famously in recent times, we see this in very practical terms because we end up with rough sleepers on our streets and a whole range of community perspectives and real challenges for the people involved. We see that there is obviously a role for local government in managing that; there is obviously a role for the state government in homelessness programs, but there are also very important interactions with the Commonwealth through Centrelink, welfare policies and housing affordability policy that need to be part of the debate about the Commonwealth's role in cities.

Also, part of the terms of reference talks about sustainability transitions. Clearly one of the things that the city of Melbourne has been working on for many years is a whole range of sustainability measures including climate adaptation, mitigation, energy efficiency and so on. A Commonwealth leadership role in those issues is important.

Finally, and without forgetting it, even in areas where there is joint Commonwealth-state regulatory power, the Commonwealth can play an incredibly important galvanising role. Take, for example, the Building Code of Australia, which is a cooperative regulatory scheme between the Commonwealth and the states. The Commonwealth's role in that can be incredibly important in leading a position through the states that can then be adopted. We are seeing, with the kind of growth in our cities now, and particularly the growth in high-rise development, very new challenges around building regulation, as you have seen.

Mr WALLACE: Are we seeing that now through the National Construction Code?

Mr Rimmer : Yes, but the committee's terms of reference are to look at the Commonwealth's role. I am merely saying that there is an incredibly important role in that area and other areas in relation to energy markets where there are things that the national regulatory arrangement needs to do to accommodate small-scale generation potential and in many cases the way our federation works it requires a strong position from the Commonwealth to get all nine jurisdiction across the line. That is another area. Sometimes, in the Commonwealth, that aspect of things is forgotten; it is seen as a shared responsibility, that it is not really a Commonwealth responsibility.

So that is six areas where we think there is a potential for a very positive and productive Commonwealth role and all to this important objective of improving Australia's economic productivity, employment outcomes and social outcomes through what happens in the centre of our cities. That is all I wanted to say by way of an opening statement.

Ms BIRD: I apologise for this. We have taken up so much time chatting to people that we have pushed you back a bit towards the end, but that was a really comprehensive coverage and I particularly appreciate you pointing us to where you think, out of your long years of experience, the Commonwealth could effectively operate. I think that is really useful for us.

You have touched on some things that we have had evidence around, for example the way the regulatory system impacts on small-scale energy production and, indeed, waste management and some of those things. That was in Sydney so, clearly, it is a common story around that.

I would like to ask you—given the point you made about the difference between the two cities in terms of the structural nature of the CBDs versus satellite type cities or polycities in Sydney and that not being the case here—it strikes me that the urban sprawl issue is a real challenge for Melbourne. Have you done any demographic studies on where people are living, what sort of job they are doing and what sort of income level they might be at, some of that sort of data that tells us who is travelling into the city and why they are travelling into the city, beyond the just physical following data that we get like traffic movements and so forth?

Mr Rimmer : I am not aware of studies that are exactly to the point that you mentioned, although I am sure they exist. I am sure that data exists. What we find is that there is a large and growing number of people whose journey to work is effectively a commute in and out of the centre of the city. Perhaps they work in a biotech lab; perhaps they work in a bank; perhaps they work for the government, but that crosses all demographics.

Ms BIRD: One of the things that has been raised with us is the equity issue about people who are at the higher income levels who have choices about living in a more sustainable way, as in close to the city. In fact, public transport links actually push house prices up so that they become unaffordable. There was evidence about the growth centre suburbs growing on the outskirts of cities, that it is the lower income so then you have not only the cost of living for them but also the implications for sustainability because they tend to be driving older cars, they are driving further distances and all of those sorts of things. I am wondering whether there is something you could point me to about Melbourne's experience of that.

Mr Rimmer : Not obviously, other than to say that the gradient in house prices between the centre and further out of the city is obviously something that matters to us and that council is concerned about because we need to have affordable options in all parts of the city; even just from a key worker perspective, let alone a social equity perspective.

Ms BIRD: That is what I was heading towards. The university just gave us some evidence around programs that can target affordable housing, separate from social or public housing. We visited Nightingale in your city. I wondered if you wanted to point to any others that we should have a look at that are targeting that part of the market.

Mr Rimmer : There is a range of other similar initiatives. Perhaps we can provide that to the secretariat later.

Ms BIRD: That would be great.

Mr Rimmer : There is a whole range of people concerned about the same issue. I know from council's perspective whenever we happen to have a piece of land that we are developing for whatever purpose it is incredibly important for council to make sure that there is an affordable housing component in that.

Ms BIRD: Do you use your planning, zonings and powers that you have to extract that or do you rely on the developers coming to you with that proposition?

Mr Rimmer : On council land we effectively require that of ourselves. It is different in different parts of the city. In the centre of the city developers can get an uplift through the planning scheme if they provide affordable housing and there are different planning requirements in other areas.

Ms BIRD: I am conscious that my colleagues might want to ask a question. Can you provide other examples and perhaps a bit of an outline of what those instruments are that your council is already using?

Mr Rimmer : Yes.

Ms BIRD: We are heading back to Melbourne sometime in the future so it would interesting to follow up with that.

Mr Rimmer : Sure.

Ms BIRD: Thank you.

Mr WALLACE: We have been around Melbourne now for two days and seen a lot of development that is going on. A lot of the property naysayers talk about a glut of units being built and developed in Melbourne now, also in Sydney, and that the world is going to come crashing down around our ankles. Would you like to proffer a view?

Mr Rimmer : I will not try to read the tea leaves about the property market. All I can say is that all of the evidence that we see is that there is a very strong continuing pipeline of apartment development. We have not seen any substantive lessening in the activity around the housing market in general or the apartment market specifically.

Mr WALLACE: When you say that, do you mean demand or construction?

Mr Rimmer : I mean construction. By its nature and the way the bank financing works for construction, the two are very closely linked. We see projects, particularly high quality projects, selling very fast and moving rapidly from planning into construction.

CHAIR: Two areas of our inquiry have dealt with the retrofitting of infrastructure and the need to attach a land use around that so we will have sustainable growth. We are concerned with—while we know we have had a history of booms and busts—trying to reduce the amplitude of such by having probably more engagement with what is happening because we have this rather alarming situation where, between Sydney and Melbourne, we have more cranes operating than in all of the United States combined. It does not seem right to me. Sydney is the number one, by the way. I would like to report that. It is the No. 1 city in the world, as far as cranes operating. In any area of Sydney it would seem like there was a dam about to burst over the place and they are building to stop that but there has been an increase in price; in my electorate it is a 74 per cent increase in three years. These things seem to conspire not to be sustainable and that is of concern, so we are trying to find ways to moderate that to have the infrastructure and land use attached to planning both for the retrofitting of infrastructure into our cities and the pressure release valve that could be found through regional development.

It was interesting that you said that, because we asked the previous witness if there were any inquiries or research done on having certain areas of cities or cities within the cities being dedicated to certain areas and what we experienced yesterday was that the banking industry forms in that part of the city. In the United States it forms in Charlotte to cover a city of five million people, and in other areas of Melbourne there is something else. In Sydney we have Macquarie Park, which has a certain character, and North Sydney has a certain character. Is there any consideration for Melbourne to create more cities within the cities rather than having it as a sort of New York design?

Mr Rimmer : Certainly from the City of Melbourne's perspective we see incredibly important growth and development in specific areas of the economy around specific parts of the inner city. For example, biotechnology around Parkville, or fintech and cybersecurity around Docklands and, potentially, engineering and high-tech manufacturing in Fishermans Bend which would be incredibly valuable. So, yes, there is lots of work and lots of activity going on including partnerships between us and the universities around the innovation districts that we believe will add value to the city, because what Melbourne does best is the liveability of the city. It is the feeling that people experience when they walk around the streets and interact with each other. We believe that is a source of real competitive advantage if you are a medical researcher that could choose between living in San Diego, Melbourne or Singapore, for example.

I cannot talk beyond that about cities within cities because it is not my area of responsibility. All I can say is that in Melbourne for many years people have tried to encourage activity centres or significant developments—for example, in the Dandenongs or in Craigieburn Broad Meadows or around Werribee—and it has been less successful in Melbourne than it has been in Sydney, really because of the different economic geography. So, in Melbourne what we see is that the growth in jobs and growth in investment is happening more right in the centre.

CHAIR: Do you think that would be because—and I hate to say this—in Melbourne there is much better transport, both in terms of rail and roads, with two forms of rail and roads into the city, whereas for a long time Sydney had the problem of just the Harbour Bridge and then a tunnel that only did two lanes? There is a lot of constriction to actually getting to the centre of the city so, therefore, that congestion and loss of productivity and the super high cost of being right in the city actually drove us to decentralise?

Mr Rimmer : I think that is part of it. The physical geography of the place is different. The incredible advantage that Melbourne has, not necessarily in respect to Sydney but in respect to other cities, is that there is land so close to the centre that is available for development. But it will only work for development if there is investment and the right kind of strategic planning in getting that to happen in a way that enhances our productivity and that does not cause congestion. That is the tension for Melbourne. There is a lot more upside in growth potential in the city over the next period of time, but we need to plan for it more effectively. We need to have the right investment ahead of the growth and do that very well.

CHAIR: We have hit our time limit. Thank you so much for attending here today. If you have been asked to provide any additional information would you please 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 very much again for your time yesterday and today. That was absolutely brilliant. We will declare the public hearing closed. Thank you.

Committee adjourned at 15:17