Shelving of planning reforms highlights the cost of doing business in Victoria

In dropping his planning reforms less than a fortnight after announcing them, Treasurer Tim Pallas has crudely exposed the mindset of the people who run our state as well as the cost of doing business in Victoria.

The Treasurer’s media release on Tuesday which axed the reforms boasted about what the state had stood to gain: $7 billion in economic uplift, tens of thousands of jobs and faster planning approvals that would have shaved up to six months off the permit process.

Victorian Treasurer Tim Pallas.Credit:Joe Armao

And in a startling contrast with the hyperbole that usually makes up political media releases, Pallas was telling the truth.

The proposed reforms, which were the outcome of three years’ work by bureaucrats, industry and the Commissioner for Better Regulation and Red Tape (truly her title), would have delivered real benefits to the Victorian economy.

Sadly, this alone isn’t a good enough reason for them to go ahead.

As Pallas’ media release made plain, because the state’s property developers were refusing to go along with a 1.75 per cent tax on all major residential projects, the regulatory shackles will stay on.

The $800 million a year the tax was expected to raise was to be used to pay for more affordable housing.

Pallas was no doubt correct that making planning more efficient would have made property development more profitable. But making it more profitable would have stimulated the sector, and ultimately increased the state’s tax take through stamp duty and payroll tax. The changes would also have made it quicker and cheaper to build new housing which would have benefited every Victorian struggling to buy a home.

What sort of government bins reforms that would cut red tape adding an unnecessary six months to the planning process?

The answer is one whose Treasurer sneers in a press release about the “super profits” that would flow from the removal of his government’s unnecessary obstruction to an industry.

And because the industry refused to go along with the government’s shakedown: “This package is off the table for good – it will not proceed under a re-elected Andrews Labor government.”

It is impossible to imagine that Steve Bracks or John Brumby would have allowed a good policy – that wouldn’t have cost the state government a cent – to be held ransom like this.

Especially one that would have had a net benefit to the state’s economy.

The question is why the state government thought it had to tie good policy to taxes and rush to announce it without locking in industry support.

It’s hard not to wonder if the real audience for this tax grab was the credit rating agencies that are worried about the state of Victoria’s budget.

Late last year S&P said we had the weakest fiscal position in the country with triple the level of the debt compared to before the pandemic.

Its report made clear Victoria is the underperforming kid in the class, saying: “Victoria continues to display structurally weaker budgetary metrics and a higher debt burden relative to domestic peers.”

The other major international credit rating agency was even harsher last month.

Downgrading the state’s credit rating last month with a negative outlook, Moody’s reflected “a marked erosion in Victoria’s governance of its public finances”.

It’s not difficult to see that the boost of an $800 million tax is exactly the sort of improvement Victoria’s balance sheet needs right now given the intense scrutiny of our financial woes.

But in holding good policy ransom to higher taxes, the Victorian government has crudely shone the spotlight on the price of doing business in this state.

And it’s not an isolated example.

Last month a report commissioned by the Victorian Chamber of Commerce and Industry found that aside from the public sector paradise of Canberra, Victoria is the hardest places in the country to do business, with the most red tape and that we have the highest taxes in the country.

As Paul Guerra of the Victorian Chamber of Commerce and Industry said, the report “shows time is as important as money for doing business, so we need to remove those excessive barriers given the number of approvals and permits is higher than elsewhere”.

Unsurprisingly, given what has since unfolded, only 7 per cent of national businesses polled said the Andrews government was doing a good job reducing the cost of doing business.

This week the Andrews government has made clear there is a price to doing business in this state and if you’re not willing to pay it, they’re not willing to take the foot off your neck.

Roshena Campbell is a Melbourne City councillor and barrister. She is a member of the Liberal Party. The views expressed are her own and not those of Melbourne City Council.

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