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Tuesday, 28 August 1973
Page: 484


Mr INNES (Melbourne) - At the outset I congratulate the Treasurer (Mr Crean) for the way he presented the Budget. It was a very fine Budget and it was in sharp contrast to the irresponsible reply we heard from the Leader of the Opposition (Mr Sneddon) this evening. Much has been said by the calamity howlers on the other side of the House about inflation being primarily due to excessive wage increases. This is simply not an established economic fact. One of the foremost economists of the Western World, Professor Harry Johnson, a professor of economics at both the London School of Economics and the University of Chicago, has strongly challenged the concept of wage-push inflation. In a paper published in the 'International Currency Review' of August 1971 he makes the point that inflation is a world problem, that the increase in the rate of world inflation in the second half of the 1960s is primarily the responsibility of the United States, which financed the Vietnam war by inflation rather than taxation, and that due to the United States' predominant position in the world economy its inflation was transported to the rest of the world. His thesis is summed up in the following quotation from page 7 of his paper:

The world inflation then can be attributed largely to a change towards inflationary behaviour on the part of the United States. The details of events in other countries can be used to tell a tale of domestic causation of inflation and in particular to blame inflation on the irresponsibility of the trade unions -

I have heard that before - but I would instead regard them merely as details in the process of transmission of world inflation, sparked by the United Stales, to the individual countries concerned.

Thus it can be seen that the wage-push notion of inflation is not an unchallengeable economic verity. The Johnson theory of inflation can be shown to" apply directly to Australia and was so shown in the union's submission during the national wage case of 1972. (Quorum formed). Any responsible government concerned to prevent inflation must make a real and genuine attempt to limit the freedom of entrepreneurs to fix prices as they please, to prevent land prices being forced up by land speculators and to take positive steps to stop the spiralling cost of housing - and that is exactly what this Government intends to do. Once again these aims are in sharp contrast to the appalling record of the previous Government. The following examination of inflation of property prices in the central business districts of Melbourne will illustrate clearly what some of the real causes of inflation are and who has been responsible, and the grave imbalance in the use of resources which have been produced as a byproduct. In 1971 it was announced that the land values in the central business district had increased by 800 per cent in 3 years. Blocks were selling at $100 a square foot. In the previous. 12 months 26 permits had been issued for multi-storey office and shop complexes. In June 1973 the Melbourne City Council released a report which revealed that land prices throughout the city had doubled since 1968. The report said:

The great economic expansion in the city has forced out activities that are not capable of meeting rising land values and rents.

Earlier in the year Melbourne's strategy plan consultants, the American firm of Interplan, had issued a draft report which included figures forecasting a $33m over-supply of office space by 1975. In other words, what is happening in Melbourne at the present time is not a straightforward question of supply and demand. Instead we are dealing with a complex series of speculative investments between large corporations. These activities have been encouraged by the Melbourne City Council - the friends of honourable members opposite - because the result of each new building is more revenue for the Council which charges rates of between $2 and $7 a square foot for each new building. So a building such as the 26 storey Australian Mutual Provident Society block pays rates to the Council of approximately 3165,000 a year, whereas the old buildings formerly on this site returned only one-ninth of this amount. Who can afford these soaring prices?

An acre of land abutting the city square was up for sale in December 1972 and was expected to fetch between S8m and $12m, that is, between $175 and $250 a square foot. Among the companies which were expected to bid were a big British development company, the Lend Lease Corporation Ltd, Mainline Construction (Vic.) Pty Ltd, the Australian Mutual Provident Society, T & G Mutual Life Society and the Oominion Insurance Co. Pty Ltd. Even if the Melbourne City Council wanted to buy the land and convert it to open space or to some other use of a more human scale which would benefit the majority of city users, it could not afford to do so. As one journalist observed: 'To walk along Collins Street today is to say goodbye to an old friend'. Estate agents proudly relate the average 40 per cent increase in Collins Street land values over the past two or three years. A real estate report of June 1972 said that the underground loop has lifted city values, including Collins Street, by about 300 per cent.

The major property holders in Collins Street are the life insurance companies. They have been involved in many of the recent transactions, together with the banks. The Melbourne City Council's building surveyors department reports that there are 6 projects currently under construction. Of these the smallest building will be 17 floors while the tallest will be two 55 storey towers. The council department reports also that it has been informed verbally of another dozen proposed buildings for the street. To get some perspective of what is happening I shall give a brief run down of the bigger projects so that honourable members will have some idea of what is shaping the new city.

Between Spring Street and Exhibition Street on the southern side of Collins Street most of the block is being taken up by the $87m Collins Place project which is based around two 600 feet towers for the Australian and New Zealand Banking Group Ltd and the AMP Society. Almost all the rest of the block, with the exception of a 22 floor building for professional suites and residential accommodation, is understood to have been bought by another life company which plans eventually to redevelop the whole area. Between Exhibition and Russell Streets on the southern side of Collins Street, Conzinc Riotinto of Australia is expected to erect a 650 feet office complex in 1975. A second stage of the complex would include four 10 and 12 storey buildings. Sixty per cent of the rest of the block is being purchased by an English company and major redevelopment is expected there also. I could go on all the way up and down the streets but shall refer only to a couple more such projects.

Between Queen and William Streets on the southern side of Collins Street, half the block to Market Street is expected to be gone by 1975. The rest of the block is taken up by National Mutual Life Association of Australasia Ltd. Between Queen and William Streets on the northern side of Collins Street there has already been much major redevelopment, mostly by insurance companies. Between King and Spencer Streets on the southern side a 23-storey office building is replacing the old Federal Hotel. There is regrettably little discussion in the community about this coming land of giants, but there have been some appropriate references to this fearful development that are worth noting. John Larkin in the 'Age' of 3 January remarked:

How much pollution, how much down-draught, how much over-crowding, how much noise, how much waste of resources, how many shadows, how much anonymity, how much confrontation for citizens caught between walls and traffic, how much subjection of the office workers themselves?

A previous warning came in 1972 from the architect John Andrews, a former professor of architecture at the Toronto University, who said that Melbourne's centre was becoming a city of buildings and not of people. Victoria's architect of the year, Kevin Borland, described it as an incredible indictment of our society that these buildings are costing $3,000 a square and are used only from 9 o'clock to 5 o'clock. Collins Street could become the city's space age dead heart. If it does it would be a fitting tribute to those who let it happen, a group of traders otherwise known as the city council. Because of its interest in the ratable values of these new buildings, the Melbourne City Council is a most unlikely opponent of the direction the city skyscape is taking. The Melbourne City Council, like honourable members opposite, operates in the interests of a small but wealthy section of the community in the inner business district centre of Melbourne, those profiteering from the large scale property ownership and speculation on land values. It is the members of the Civic Group in the Melbourne City Council, the counterpart of the Opposition in this Parliament, who are among the chief contributors to and beneficiaries of inflation in the central business district. The Melbourne City Council has done little to ensure that the city is developed in an egalitarian manner. The reason can be found partly in the fact - (Quorum formed). The Melbourne City Council, in following the policies that I have outlined, has had the same sort of gerrymandered situation that we have in the Victorian State Parliament. There are 6 wards in the central business district which elect 18 of the 33 councillors. So, it is impossible for Labor to gain a majority while 29 per cent of the voters elect half the councillors. Labor is further disadvantaged because the Council and its committees sit during the day and most prospective Labor candidates cannot get time off to attend. In the 3 months ended 31 March 1973 over $34m worth of office space was approved for construction in the inner suburban areas of Melbourne and most of this was in the central business district. I seek leave to incorporate a table in Hansard.







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