Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Standing Committee on Infrastructure, Transport and Cities
02/03/2018
Australian government's role in the development of cities

BUDWORTH, Mr Greg, Group Managing Director, Compass Housing Services Co. Ltd

FRANCIS, Mr Peter, CEO, Dantia, Lake Macquarie's Economic Development Company

HUGO, Mrs Anita, Policy and Public Affairs Manager, Hunter Business Chamber

NOVOSELAC, Mr Jon, Member Liaison and Communications Officer, Hunter Business Chamber

[14:03]

CHAIR: I welcome representatives of the Hunter Business Chamber, Dantia and Compass Housing Services to give evidence. 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 the 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 a brief opening statement before we proceed to discussion.

Mrs Hugo : Thank you. The Hunter Business Chamber is grateful for the opportunity to be engaged in this process. It is our belief that government at all levels has a critical role to play in the development of cities. Federal government needs to ensure that planning processes are seamless and that state and local government plans are complementary. Regional or state plans shouldn't be developed in isolation of federal plans, and this should also be the case, of course, with local government planning. The federal government has a key role to play in funding important development and infrastructure regionally and setting well-informed regional infrastructure priorities. Success is dependent on integrated and informed planning, strong governance and accountability models, and management of resources. The chamber encourages that government at all levels ensures that planning processes are providing certainty and timeliness that incentivises businesses and individuals to grow and commit to their regional centres, but likewise attracts business and individuals to relocate to regional areas such as the Hunter.

While there is no dispute that cities such as Sydney, Melbourne, Perth or Brisbane are leading drivers of growth, it's important to recognise the vital role of secondary cities such as Newcastle and the Hunter. In this regard, it's our belief that there needs to be a strong national focus on secondary cities, with a much higher priority on infrastructure audits and plans. Newcastle and the Hunter have existing competitive advantage with critical infrastructure and key economic assets already in place. The region is home to major global gateways, with the port of Newcastle and Newcastle Airport having significant untapped capacity for growth. It has world-class health, education and research facilities and is home to a growing and diverse range of industries and supply chains, including defence, tourism, manufacturing, innovation and professional services. Liveability in Newcastle and the Hunter is hard to match. It boasts a strong and diversified property market. The promotion of this through government plans will only aid to further growth in the regions.

Mr Budworth : Thank you, honourable members. Compass Housing Services is an NGO that was established in Newcastle but operates in New South Wales, Queensland and New Zealand, as well as on projects in Vanuatu. I'm also the vice-chair of a global group called the General Assembly of Partners, which is a stakeholder advisory platform for the UN-Habitat organisation.

I have a written submission and I will just go through the headings very quickly. Firstly, I'd like to unpack the executive summary a little bit and say that, from broadscale to a regional scale, I believe the Commonwealth needs to be involved in urban development, planning and monitoring of cities for several reasons. The Commonwealth has given undertakings to the international community in various United Nations forums and General Assembly resolutions concerning cities that it needs to have a role in to ensure fulfilment of, for example, the Paris agreement; Agenda 2030, which is also called the Sustainable Development Goals; and, more recently, New Urban Agenda. The Commonwealth has a primary role in trade and the national economy, which is underpinned by the efficiency of cities and infrastructure requirements, including social infrastructure—ergo affordable housing. The Commonwealth has a primary role in immigration policy, which is underpinned by the adequate provision of infrastructure, including social infrastructure and affordable housing, for example, for either emigrating households or those who are displaced from the housing system due to scarcity. The growing international trend towards polycentric cities and transport hub cities connected by enhanced mobility in the mega-city should be logically applied to Australia's east coast and, more specifically and obviously, between Newcastle, the Central Coast and Sydney. Affordable housing is a key economic as well as social infrastructure investment.

I turn to the points of the paper. The first set of paragraphs illustrates the concept of the New Urban Agenda, with the commitment that Australia has made that it will have safe, inclusive, sustainable and liveable cities—cities for all—and also the concept of leaving no-one behind. The economies of agglomeration are factors that bring cities together, but there are also factors that pull cities apart—crime and pollution, for example—but there is also affordable housing. I'd like to quote Dr Joan Clos, the former executive director who, by analogy, likens unaffordability in cities as a cancer in cities. It has the potential—to work the analogy further—of metastasising to regional areas unless it's specifically addressed.

In the paper we go on to talk about the concept of the multiplier effect of investing in construction and also investing in affordable housing. We note in the first chart the nine cities that were the most unaffordable cities in the world around the Pacific rim. We note too that Sydney is the second most unaffordable city in the world, next to Hong Kong. We note that Melbourne is about sixth, followed by others. Newcastle is 6.6 years in terms of the median multiplier—in other words, how many median incomes it takes to buy a median-priced house. Anything over five years is called 'severely unaffordable'. Most of our Australian cities are severely unaffordable, including Newcastle, and Sydney is out on its own in terms of that. And there are not a lot models in terms of predictors about what will happen if we get to 20, if we get to 25. It's just simply that we are ahead of the pack, except for Hong Kong, which has its own peculiarities of mainland Chinese wanting to live there. But outside of that, Australia, in terms of being a mixed economy, is the most unaffordable city in the world in that sense.

The paper goes on to show how capital city housing prices have grown compared with income. It notes the consequences of that. We note that some of the consequences are that household debt has risen, and we're one of the most indebted households on average in the OECD. And home ownership rates amongst all the cohorts are decreasing. The problem with that, obviously, is when we are talking about 'build to rent' and 'generation rent'—things that I've never heard of in my lifetime—and we're accepting that as a norm, which I don't think we need to.

The increase in the number of people who are renting and are in stress: there is another graph that shows the steady increase of that. Social housing has not kept up with the rate of population and the waiting lists et cetera for that social infrastructure. Need is growing and is not being met. Hence the point of this is that there are a lot of things going on that the Commonwealth really needs to be more involved in.

The paper goes on to talk about a greater case for housing, and I won't go into that in any great detail except to say that the Commonwealth was the initiator of the former housing commission which at the time was an affordable housing product, what we call affordable housing. My parents lived in a housing commission as a young policeman and a young nurse and went on to own their own home. So, that was what the housing commission did from 1945 to 1965: it created 670,000 dwellings, with states' contribution, and sold down to about half of those. Since then we've added, under nation building, an economic stimulus package, another 20,000. So, we have roughly the same number that we did in 1965, give or take 20,000-odd, and that has not kept up with population growth.

So, the concept of affordable housing has grown as a new product for key workers, and that needs to be addressed. And the call from our sector is that we need to have a lot more Commonwealth involvement in what might be termed a new affordable housing commission and see housing and affordable housing for key workers, or workers generally, being a social infrastructure. We talk about immigration, and it's not a paper to decry that or push that back. We don't make any particular comment about that except to say that infrastructure and social infrastructure have to keep pace with the level of immigration. Otherwise, Australians particularly are displaced from the housing system.

The paper goes on to talk about infrastructure spending. Just as a citizen of this great city and area, I think it's quite logical, and from cities around the world that I've been associated with, with the vice-president role, the General Assembly of Partners working on the nation's habitat, that the logic of polycentricity over monocentricity is increasing. In other words, we need lots of different CBDs and those need to be connected by things like high-speed rail and greater mobility infrastructure. That's the logic that is being pursued in some of the megacities now, and the cities that we see in South-East Asia, and I think that logic needs to be applied equally to Australia and particularly in Newcastle, Sydney and the east coast of this great nation.

To quote A metropolis of three cities, produced by the Greater Sydney Commission, and also the logic of a PricewaterhouseCoopers report, the commute of workers to their workplace should be no more than 30 minutes. And I know there is a proposal between high-speed rail between Newcastle and Sydney that says it's going to be 35 minutes. A metropolis of three cities, from the Greater Sydney Commission, which spans from the east to the west of Sydney, I think needs to also include the north and the south, which is Newcastle, the Central Coast and Wollongong. I can see that over many, many years this whole area will be urban, between Newcastle and Wollongong, and they need to interact with each other to create a greater market, a greater economy, and those economies of agglomeration can underpin our trade, our investment, our tourism and so on. Thank you.

Mr Francis : Thank you for the opportunity. I am representing a unique business within the economic development landscape based on a UK and a New Zealand model where local government sets up a board to have a private company drive economic development within their local area. Dantia was established three years ago, and our activity is around helping existing and new businesses to grow with a focus on investment and jobs and the main drivers for economic development for our business—new and existing businesses' investment in jobs—and the infrastructure that supports that. And that infrastructure is either soft or hard infrastructure, the soft infrastructure being the policies and procedures that will incentivise and encourage investment and the hard infrastructure being things like internet, roads and transport systems that are conducive to encouraging that investment.

There is no doubt that all levels of government have a role in economic development, but there are many studies, particularly by the UTS, that highlight the lack of coordination between all three—everyone really making the same effort to encourage and welcome new businesses to the country, the state or the local area but all being rather ineffective. In many cases one of the real barriers is around the fear that an engagement with a business somehow compromises a government employee. That's one of the reasons our business was set up—to ensure that that sort of barrier wasn't there and we could have quite open discussions with anyone from a business to a developer without apparently compromising a government official. But I think we need a greater openness among our government employees to be able to engage with businesses in a collaborative and cooperative way, and I'll talk a little bit about that when we come to master planning.

It's really important that we do understand the drivers of economic development and city development. If we look at the key multipliers and propulsive sectors, they're very similar to some of the material Greg has just presented to you. No. 1 is population growth. That's no surprise: if you have population growth you have your economy developing. But the second one is unencumbered debt and unencumbered population in terms of debt. Lowering the amount of debt that sits within our population is really critical to growing our economies.

Mr WALLACE: Could you expand on that?

Mr Francis : If we look at economists who write economic development plans for councils and government all round, they look at the propulsive sectors or the multiplier effect and often ignore—probably because industries take over the agenda the construction industry will say. For example, that for every job they create or dollar they invest there's a four-times multiplier effect. But when we actually look to the left of any graph about the propulsion or the multiplier effect, the biggest multiplier is a low-debt ratio, or a low loan-to-value ratio within the population. There's more money to spend in the local economy; there's a greater potential to explore dreams and creativity because you're not tied to your job and you're not tied to your home loan. It's a pretty logical sort of approach, but not one that's often discussed. Maybe it's because it's too far out of reach or maybe it's because often the economic discussion is an industry-led discussion, well-meaning by many industry groups but each vying to prove that they have the greatest multiplier effect. For example, mining will talk about a 10-times multiplier effect but, in reality, that multiplier effect only occurs during the construction of the mining operation, as we have seen in the Hunter where the construction of mines slowed down and the economy took a downturn. The mining has continued in fact, the volume of the coal coming out of the mines was going up by 10 per cent every year, but the win for the community was no longer there because the construction had slowed down.

Mr WALLACE: Is it a chicken-and-egg argument or a circuitous argument, though, to look at whether people should have a lower debt ratio? If they have lower debts, obviously, the less houses are built; the less houses that are built, the less jobs are created.

Mr Francis : No, not at all. In fact, I think, to get the lower debt, we need a greater housing supply. This goes really to Greg's point, and I don't want to double down on what Greg said too much, but we do need a significantly increased housing supply, and we're well aware that that's being discussed at the moment within the parliament. So if we then look at other—

Mr WALLACE: Sorry, I'd like you to just keep on that point because it's an interesting point. Do you have any papers you can direct us to that support that philosophy?

Mr Francis : No, not really.

Mr WALLACE: Whose philosophy is it?

Mr Francis : On the multiplier? I can refer you definitely to some economists who work in the area of local economic development all the time.

Mr WALLACE: No, I'm talking about the low debt. I'm not saying I agree or disagree with you; it's just something that you very rarely hear about.

Mr Francis : Absolutely.

Mr WALLACE: As someone who bought my first house when I was 18 and have been saddled up to a mortgage since then, I can certainly relate to what you're saying.

Mr Francis : Sure.

CHAIR: We had a discussion with a Martin North from Digital Finance Analytics. His point was, when there are people who are highly encumbered in debt and they get to a point of mortgage stress, they stop spending because they don't have any money, so they're killing the economy. You're saying that the other side of the coin is when you are not encumbered, you have a far greater—

Mr Francis : You've got free-flowing cash. I've worked for major ASX property listed companies and the measure of whether they're going to invest in an area is whether the disposable income of the local area is high or low, so it absolutely is to your point. If the disposable income is there, that is a driver of investment.

CHAIR: Greg, going back to your concerns about housing affordability, one of the drivers of some of these inquiries is the opening up of regions, whether it's through high-speed rail or whatever other means you might find. Would it not be the case that we will be able to produce affordable housing for decades and decades and decades because of the low cost of the land from these regions and replay the Australian dream of the fifties?

Mr Budworth : Yes, I absolutely agree. We do need land supply and—

CHAIR: I've got somebody who agrees with me!

Mr Budworth : we do need housing supply. I know some of the value capture end and I know some of the proposals that are in the very fast rail tender that's currently on foot. They're all using value capture. The two that I've read, at least, have talked about adding affordable housing in those areas. We support that wholeheartedly—anything that would tend to increase supply. We've got immigration coming in at 200,000 a year. It's a no-brainer to see most of the immigrants—thankfully they're coming—can afford to buy into a house but, ultimately, in a constrained market, we're not building enough to actually settle the displacement of those who can't buy in. Anything that adds supply, particularly in this decade, I would imagine, would be of benefit—and if it can actually add jobs, because it's not just about housing: it's about housing and jobs. If you can have jobs and you can have housing and you've got immigration coming in at 200,000 a year, you've got to do something with that growing population.

Mr WALLACE: I just want to pick you up on that, because that's a common rounding error. It's not 200,000; it's 180,000—10 per cent.

Mr Francis : It's interesting when we talk about supply because, in putting together our strategy for how we're going to drive the economy, Lake Macquarie is very much seeing itself as release valve for the pressure that sits within the Sydney housing supply. We're quite actively going to be going after this stressed Sydney market to attract them to this area.

To pick up on the point you made about whether people will spend more, real estate agents and accountants tell me that people will stop eating before they stop paying their mortgage and lose the roof over their head. That's quite an extraordinary comment that has been made to me a number of times as I've been putting together our strategy for our organisation. It's quite scary.

When we talk about housing supply, we have a planning issue right across the nation. Planning is predominantly the domain of the state and the local government, and this is potentially where the federal government needs to have a significant role in incentivising and working with states and local governments to change the planning arrangements. We have local environmental plans, development control plans and inflexible zonings that are based on an antiquated economy. For example, if you've got a shopping centre, it's zoned 'retail'. Sixty per cent of retail in the next 10 years will be online—that's the American experience and it will be the experience in Australia. We're seeing the major shopping centres and those property owners being under significant pressure with vacancy rates increasing and, yet, if someone wanted to come in and build a hospital, university or new school, it could be done in a shopping centre—the built form's already there. To build a new school costs $40 million, but, if you already had the built form there, your cost for kicking off a new school has gone down by, probably, 75 per cent. But we can't do that, because it's not zoned with a general zoning. Councils and state governments hold onto those zonings seeing that they're setting up the city in the way they want it to be set up. Someone in the local government area that I come from once said, 'We'll determine the nature in which the businesses come to this area and the location they have'—he really took a leaf from John there! It is like we have taken this way too far. We're not creating a free-flowing economy and we're wasting money in building costs that we don't need to. There are some real opportunities to leverage things and, if we did, we'd be getting the REIT sector getting more involved in public infrastructure of the kind that often federal and state governments—particularly with hospitals, universities and educational institutions—are being called upon to fund. Invariably with these development control plans, it's very hard for developers to meet the commercial hurdles to facilitate the development.

What's worse, particularly in regional areas—being part of the focus of this discussion—is, wherever a tree needs to be cut down outside of the Sydney Basin, you have to replace it four times at a minimum and up to 10 times. The biodiversity offsets are absolutely crippling housing prices. Greg alluded to the cost of Newcastle housing and the region's housing. Whenever someone buys a block of land in the area, if that development had trees on it, the developer has to go and buy the equivalent of four times that block of land, up to 10 times that block of land. That means that, when a young couple are going to buy a house block, they are not buying one house block; they're buying seven. Sure, the developer goes and tries to find equivalent land somewhere else. If he can't find the land, he goes and pays the state government some money to put into national parks. That is all well and good—it's still got to be recovered. That's why the average price of housing in this area, for a first time start-up outside of Maitland, is somewhere in the order of $650,000, up to $800,000 for a block of dirt with a house on it. That's not first home buyer territory—$350,000 to $450,000, maybe, is first home buyer territory.

The biodiversity offsets and the environmental argument have gone too far and it's absolutely crippling. The UDIA and the Property Council, in their various submissions to the state government and Planning on biodiversity offsets, have argued this case and they have not won it. It absolutely needs the federal government to get involved and unpack what is a very onerous and expensive encumbrance on our community. We need to get clever about it. Our environment is important. But we need to challenge particularly our local and state governments to get much more sophisticated in their planning for tree cover. Let's put tree cover in our verges and in our parks and those sorts of things, but, when it comes to residential areas, let's free it up. There is no doubt that incentivising infill and densification in our cities will go a long way to address getting older people to move out of their residences and free up the larger properties that sit within the housing stock, but we need to do a lot more of that.

Mr WALLACE: Can I stop you there, Mr Francis. Specifically what role does the federal government have to play in changing that culture amongst the state and local governments when it has no jurisdictional power to do so?

Mr Francis : I think it comes to the social issue, affordability within our society and the fundamentals of the economy. The Australian government has oversight of the economy. Unless the federal government starts to create these linkages and sees the unintended consequences of these behaviours—if the federal government can't put some pressure to bear on the states and local government, then we have an issue. That pressure can come to bear through things like the Smart Cities funding or infrastructure funding and those sorts of things. I probably don't have the answer completely to that at all. I think that's a challenge for others, hopefully coming out of your reports, that may take that up.

CHAIR: We've been playing with a value capture model where the federal government would capture the uplift as a result of infrastructure and land use, quarantine it and hypothecate it back to the states when the states have made arrangements with the local council for the land use and the infrastructure, and if they meet the criteria the federal government just hands over the money. So the criteria could include what you've just been presenting.

Mr Francis : Absolutely. My observation is that the federal government gets played—people say they're doing things, but is it really happening? If it were really happening we wouldn't be seeing the ridiculous situation we've got at the moment. The Sydney Morning Herald did an excellent expose on the weekend about the migration out of Sydney because of the housing prices.

Mr WALLACE: What numbers was it putting it at?

Mr Francis : One hundred and fifty a week, I think. It was quite extraordinary.

CHAIR: That is 150 people a week? I would have thought it was a lot more than that.

Mr WALLACE: Where are they going?

Mr Francis : They're going to Wollongong and into the Hunter. One of the urban researchers at UTS—I can send you the paperwork on this—did a study to find out where a registered nurse on a starting salary of I think about $57,000 could rent a place and live. It drew an arc, and the closest place they could get a rental property, working in Sydney, was Cessnock.

Now I'll put that with some anecdotal information. In our local government area, which is south of Cessnock, are a train station called Morisset and an industrial estate. That industrial estate is parked out every single morning by people driving down from Maitland and Cessnock, parking their cars, jumping on a train and going to work in Sydney.

CHAIR: How long is the train ride from Cessnock?

Mr Francis : There's no direct train, so that's why they go to Morisset. I don't know. What is it? That'd be a three-hour round trip, but it's about 52 minutes to an hour and 12 minutes to Sydney, or something like that.

Mrs Hugo : From Morisset?

Mr Francis : From Morisset.

Mrs Hugo : It's closer to two hours.

CHAIR: Sorry, Jon. We haven't let you make an opening statement.

Mr Novoselac : Anita has made the opening statement on behalf of the Hunter Business Chamber.

Mr Francis : We talk about infrastructure, and often the federal government is tied to infrastructure, but there are also many more clever ways that we can skin this cat. I'm sure that Jim Bentley talked about his strategy around not just building new infrastructure but looking at the new, innovative infrastructure that's coming so that we're not binding ourselves to fixed costs in perpetuity. I'm assuming Jim talked about his company's strategy in that regard. Similarly, if we can't have a very fast train tomorrow—which we can't, as the cost is extraordinary: a kilometre of track for that sort of service costs circa $3 million, $3½ million or $4 million, so it's expensive—why can't we have dedicated bus lanes and bus routes with wi-fi buses and get that dormitory suburb stuff working now in the interim, and have that funded by the federal government to start to take some pressure off the Sydney area? These are all things that, at a local government level, we're actually looking at, but we know that our ability to change some of that in a local government jurisdiction is severely limited. So we certainly welcome the opportunity of having this discussion today.

CHAIR: Thank you very much. Mr Wallace, do you have a question to follow on from your previous question?

Mr WALLACE: I have so many questions. I've got that article, Mr Chair—129 people a day.

CHAIR: One of the interesting things, if I'm understanding you all correctly, is really what has driven this inquiry out of a concern about an imbalance of settlement, where Sydney and Melbourne have gotten bigger and bigger and more expensive and overly congested, and we need to have a plan to rebalance the settlement and rebalance the economy, because those two cities, as you said, are amongst the most expensive in the world. So the opportunity of developing new cities and expanding these cities, as in this region, and making sure they are holistically planned, with infrastructure and an attached land use, can address a lot of things. If you move more and more people into Sydney, you're going to get more and more congestion and higher and higher prices, making us less competitive and less productive. So we've driven ourselves into a corner where this is what we need to do, and this is what the bipartisan nature of these inquiries has agreed to do: to look at the role of the federal government. How do we affect overall planning to empower states and local councils to divine their future? So we do the big infrastructure, but you've got a nuance, so this region remains this region and it's grown as you would have it grow.

Mr Francis : One of the really interesting things is the targets that are set. At the state level, within the state department of planning, they look at the population of this region. Back in 2006, there were some studies done, and they looked at capacity of the land for new dwellings. That was on about a fifty-fifty split—50 per cent infilling, so pulling down large blocks and with densification and apartments, plus new spots.

Back in 2006, the demographers of New South Wales had much higher expectations for dwellings because they looked at the carrying capability of the land and the town and city centres. I'll give you some real numbers: in 2006, the expectation was that Lake Macquarie, which sits at about 195,000 people and is the third-largest regional local government area in Australia—and the largest within the Hunter—would deliver 36,000 dwellings over the next 20 years. That's about 1,400 a year. It's not that many but, subsequently, that was dropped by 300 per cent. Now it sits at 11,000 dwellings per year, but we know that the carrying capacity of the land is 36,000 dwellings over 20 years. So, a really great thing that the federal government could do is to say that funding is tied to delivering on the capacity of the land.

There is no doubt that it needs to be done in a staggered, structured way so that not all the construction happens at once and we don't get beyond our supply chain and all those sorts of things. It does need to be done in a planned way.

Mr WALLACE: We don't do that well, traditionally, do we?

Mr Francis : We don't at all. But, interestingly, we have. After that target was set in 2006, for a period of time—for the first five years of its rollout—Lake Macquarie delivered 1,400 dwellings a year. When the target was dropped and it went from where it was to 700 dwellings per year, guess what? That's what they approved: 704, 732. We work to the targets that we're given. We get more efficient, we have better planning and we do compliant developments when we know the pressure is on because we have to meet the target. The targets aren't high enough.

Land is a fixed commodity; they aren't making more of it. If we're going to hive off a whole bunch of it for biodiversity the problem is that we're creating a real issue because we are only increasing the cost and we're not getting that full capability of development. So, certainly, targets are something that the federal government could really lever and push to create a wedge.

CHAIR: So, we should be the master planner—

Mr Francis : Absolutely.

CHAIR: and then leave it to local regions to—

Mr Francis : Find the solution to deliver it.

CHAIR: deliver, and they only get the funding from us that's gathered through value capture and what other methods we have if they meet those? It's conditional on performance?

Mr Budworth : The federal government made those commitments to do that in the New Urban Agenda. If you think of the external affairs power, you've signed documents and made commitments to all the other nations that you're going to do just that.

Mr WALLACE: I think that's an overreach!

Mr Budworth : Well, you're going to work with subnational and local governments to produce cities that are safe, inclusive et cetera. They'll have affordable housing, leave no-one behind et cetera. I can send you the document; I'm quite happy to do that. It has 175 clauses of aspirations—that's one area.

I think that part of it is that it's 100 years since Federation. Maybe it's an anachronism that we have six colonies still struggling to find their way in a world where the countries that we compete and trade with have much more efficient governance. I guess that what we're going to do about that has to be a process. But can I give you one example? Affordable housing in Canada. They have the same system: federated provinces and limited powers of the national government. They had no power and colleagues like us would say that we're in the same boat: the federal government says it doesn't have the power and there is no minister of housing et cetera. Justin Trudeau got elected and was swept into power on a popular vote. He started a national conversation about affordable housing and the housing system. Six or nine months later that national conversation has turned into a housing minister, a housing department and a national plan for housing. I think that's political will and political leadership.

Mr WALLACE: I'm not meaning to be a contrarian, but Vancouver is always held up as a city that's worse than Sydney as far as its affordability levels go. I think Vancouver sits at the top of the table.

Mr Budworth : Not according to Demographica. Vancouver is now under Sydney. Sydney is second and Vancouver is third. So Vancouver was the second. Now, after Hong Kong, Sydney is the second. So that was true but it is no longer true.

CHAIR: They are really being impacted by Chinese homebuyers and are putting in the same sorts of things as the Victorian government has in taxing unoccupied housing.

Mr Francis : What Vancouver's planning system has encouraged over time is that very flexible zoning and a freeing-up of the controls around development and infill. So what they do have is a very strong commercial economy and that is part of the reason it has been such an attractive place for people to visit. Certainly they have a very interesting planning regime in Vancouver that is worth some investigation. One other thing that is relevant for regional areas—and this is an aside related to a previous job—is we have the states doing asset sales and recapitalisation of assets, which makes enormous sense. I was involved in a record-breaking sale of a port at 29 times its earnings. But one of the key issues the federal government really does potentially need to engage in is making sure that there is strict oversight on the competitive controls that go with those sales.

Often not known is that the state is immune from prosecution under competition law because it is the Crown and that is a very tidy thing to hide behind. But what that does is reduce competition within our economies and between our various geographies. The catchment of the Port of Newcastle that sits behind you has got 10.6 million tonnes of cargo coming out of the richest agricultural lands in Australia in the Liverpool Plains, all the way from Dubbo through to Moree. Most of that cargo gets containerised or trucked to Sydney for export. In fact, it is 6.3 million and one and a bit goes through the port of Brisbane. That cargo goes out at an additional cost to the economy, to those farmers, of somewhere between $500 and $1,000 per box, more than they should be paying and that is because there is a competition clause which precludes a container terminal being built in the Port of Newcastle.

CHAIR: Why is that? Is that a state government thing?

Mr Francis : Yes.

Mr WALLACE: Sorry, what is the rationale behind that?

Mr Francis : It protects the sale of other ports, doesn't it?

Mr WALLACE: I don't know; that's why I'm asking.

Mr Francis : It does. So that restricts a regional economy's ability to develop. This is not pie-in-the-sky stuff. There have been three legal deals done for the building of a container terminal in the Port of Newcastle: first one, $860 million—quashed; second one, $500 million—quashed. So it is not like the market doesn't want to build it but they can't with the competitive restrictions put on them. The ACCC won't look at this until someone brings up a bid post the sale. That is sort of a little counterintuitive because no-one is really going to look at the opportunity seriously with the restriction in place.

So if the federal government wants to delve into some of these sales and really look at some of the restrictions that are maybe being put in behind them in order to boost the price, then we may be able to unlock real potential within regional areas by creating new economies and competition between our cities. And competition between cities and towns across our country is something we should be doing because competition breeds efficiency; it breeds innovation. We don't have competition in the New South Wales trade market; everything goes through the port of Sydney and it is locked in that way now, and those farming communities are losing from their economies circa $200 million a year because of the freight that they are having to send to Sydney which they otherwise would not. So this is important stuff.

CHAIR: It is.

Ms McBRIDE: I wanted to take this in a slightly different direction. There has been some very successful redevelopment, which is attracting and retaining local shoppers on Hunter Street. What role can chambers of commerce play in working with local communities to achieve that type of result?

Mrs Hugo : Are you referring to the recent program of works that has been going on?

Ms McBRIDE: Yes.

Mrs Hugo : The Hunter Business Chamber has around 2,000 member organisations, and around 90 or 95 per cent of those are SMEs. We also have a proportion which are up to the size of large multinationals. We've been looking at how to work with those small businesses to alleviate some of the stress they're feeling around issues that come from accessibility to the centre in which they are operating, especially with the revitalisation work that has been occurring in Newcastle. The chamber completely endorses and supports the program of work that's going on as vital to the ongoing growth of this region. You only have to have lived here over the last two years to see the transformation that has been occurring. Opening up the city to the harbour has been critical in our view and is really stimulating a lot of activity.

There's going to have to be work on transport issues. These are probably state but local planning matters. We are remaining engaged with local and state governments at every opportunity and trying to have an input into those processes. We are a little constrained about the sort of assistance we can provide to those small businesses which are immediately affected, though we have been working through the Small Business Commissioner and through the state government to provide advice. It has been said that there won't be any monetary compensation for those businesses but we can provide advice on how to create or promote more effectively what's going on in the city, to encourage people to visit the city and to encourage this buy-local concept, rather than going for online competition. We are trying to make people aware of things they don't know. There are so many people who live in Newcastle and the surrounding areas who believe you can't park anywhere in Newcastle at the moment. That's not true. I believe there is a strong culture in Newcastle that—really it's been around my whole life—you drive into the city and you park and go about your business, whether it's leisure or work. We need to change that culture around public transport use, and the chamber is trying to engage in that process to change the perceptions that people have about how your access things you want to do in the city. There is a piece around marketing; there is a piece around engaging with the local businesses so they feel heard; there is a piece around helping them to connect with places like the Small Business Commissioner, as well as helping them to connect with each other and to collaborate. We also work closely with state government.

Mr Francis : Many of these strategies involve people talking to each other, and there is a lot of talking that goes on. At the end of the day, when they are in these challenging situations where there is disruption going on around them as we build new cities, the thing that impacts on small businesses is their cash flow and their P&L. At the end of the day, if they don't have the cash in the door, they're going to have to close. There is only so long they can take the losses. When major shopping centres do a redevelopment and they disturb their tenancies, they are obliged under the Retail Leases Act to abate to the extent of the impact. There are some creative ways that the cash flow can be reduced. Obviously, landowners could be given a reduction in their land tax while these works are underway or they could be given a local government rates holidays. The federal government could assist with these kinds of projects. Obviously that's going to have an impact on state and local coffers during that construction period, but maybe the federal government could provide some compensation for that on the way through as well.

CHAIR: Could that be done in the form of quarantining some GST revenues?

Mr Francis : I would have thought so; absolutely.

CHAIR: I know you can't do that, but it's such an obvious thing that should be explored.

Mr Francis : Absolutely. If we're going to say that we're going to make step changes in our major cities and we're going to try and build to the new macro trends that are coming, we're going to need to do things that are destructive, like building a light-rail system to change the culture of transport in and around the city. It would need to be monitored. We'd need to make sure that the landlord or the building owner passes those through to their tenants, and, if they don't, the money doesn't flow. But that's all very trackable. At the end of the day, well-meaning engagement can end up appearing to be supportive theatre or innovation theatre. What we really need to do is do something disruptive and different.

Ms McBRIDE: I have a separate question for Mr Budworth. At the start, you talked about your parents, a nurse and a policeman, being able to buy their first home in that tier between public affordable housing and the private market. What other models has Compass used or are good models that you're aware of in terms of where there's a different equity model? Is there something you might be able to share?

Mr Budworth : Compass is traditionally a product of government policy, delivering government services, and it's been targeted to a rental product. We're exploring now the various rent-to-buy models. NRAS, the National Rental Affordability Scheme, was a pretty good scheme that was attracting institutional investment. It got into a bit of trouble with foreign students here and there a few years ago when Mr Abbott was Prime Minister, and then it was cancelled three-quarters of the way through its program delivery, but something like that. There's a yield gap between what affordable tenants can pay, which is usually a 20 per cent to 25 per cent discount to market—there's a yield gap there that has to be met somehow. And it has to be incentivised, either in the built-form costs or the land costs or as an ongoing supplement or subsidy. That's Compass's particular role. Socially regenerative tenancy management is our key. We do social housing, which has traditionally been the government's role, but it has outsourced at least up to 35 per cent of social housing stock in various states. It has moved to our sector to create a little bit of competition in terms of generating outcomes for tenants and trying to help them through what is called the housing continuum, which is social housing, and somehow they get into private rental or affordable housing, and then there's private rental and home ownership. That continuum is conceptual more than practical. Someone in a social-housing household is paying about 50 per cent of market rent, and then they're asked, because they've got a job, to go down the road and get a similar house where they're going to be paying perhaps an affordable 75 per cent to 80 per cent of market rent or full market rent. They can't do that by getting a part-time job. Obviously, it has to be a complete game changer in their household lifestyle.

My point is that the housing commission in its 1945 to 1965 role was addressing those most in need, sure, but it was predominantly aimed at returning soldiers, the pent-up demand from the war that wasn't met because material needs went to the war, and immigration. They're the same sorts of circumstances we have now—not that we have a war, but we have immigration driven demand. We have a displacement of those within our cities towards, in the worst case, homelessness, and also people are living in substandard conditions, with overcrowding or couch surfing et cetera—all of those things—or they just can't afford it. We're losing the Australian dream, home ownership is plummeting and there is housing stress. All these things you would expect from massive housing price increases, rental price increases and wage increases not keeping anywhere near that for decades. We have the natural consequence of that.

The point is that we need to have a plan about that because we're drifting along with a couple of policy tweaks at the moment, which is not necessarily a plan. Associating with other countries around the world through the General Assembly of Partners, there are lots of nations with plans, and so encouragement is towards having a plan. Out of that plan there'd be lots of innovative ideas about how to get people into shared equity and home ownership. That's not just an Australian dream. I think it's very important for retirees to ultimately own their own home, have security and also have equity at the end of their life rather than being renters and insecure all their life. There's a flow-on consequence if we don't address it now. We're in the middle of severe consequences, like I said, with the most unaffordable cities in the world in our country. So how bad are we going to let it get before we have a plan? That is the point.

Mr Francis : Do you want to talk about the statistic on women over 60 and lack of ownership?

Mr Budworth : One of the peculiar and sad elements is that one of the demographics of rising homelessness is older single women. That's one of the things exacerbating homelessness. They haven't got super; they've had a partner who, obviously, was a bread winner, and they find themselves in the winter of life without security, without a partner and homeless. For a First World country it's appalling.

CHAIR: Thank you very much for your attendance here today and your contribution. It has been really worthwhile. If you've been asked to provide any additional information—and I think some of you have agreed to assist us there—could you please forward it to the secretary by Monday 19 March? You'll be sent a copy of the transcript of your evidence and will have the opportunity to request corrections to transcription errors. Thank you again for your scholarship and your generosity. I should ask a member to move that the document presented by Compass Housing Services be accepted as submission No. 161 to the inquiry and authorised for publication.

Mr WALLACE: So moved.

Committee adjourned at 15 : 03