The Economic Reform Roundtable is ostensibly all about productivity. Treasurer Jim Chalmers has argued that cutting red tape and speeding up approvals is the key to unlocking growth. It’s the old trickle-down idea made new again by Ezra Klein’s book Abundance: make it easier to build, and prosperity will follow.
It’s an appealing story. But on its own, deregulation and growth won’t deliver abundance for everyone. Without tax reform, the gains will flow not to workers, innovators and communities, but to those who already own land.
We’ve seen this pattern before. At Fishermans Bend in Melbourne, rezoning delivered a $4.43 billion windfall to landowners before a single brick was laid. The same thing is happening in Sydney today, where upzoned sites are fetching inflated prices as neighbours band together to sell to developers. The public makes the planning decisions, but the private owners pocket the profits, while governments struggle to fund the new schools, transport and services that higher density demands.
Victoria has at least tried to fix this with a windfall gains tax. The idea is simple: landowners should keep the profits from what they build, but not from government decisions that hand them unearned windfalls. Apart from the ACT, no other state has followed suit.
Even when housing is approved and built, affordability doesn’t automatically improve. Developers often drip-feed new homes to the market in staged releases designed to maximise prices. There are 120,000 dwellings already approved in Victoria, but construction hasn’t started. That means supply is being deliberately throttled, and the promise that “more approvals will make housing cheaper” falls flat.
Monopoly is the blind spot in the abundance agenda that Jim Chalmers and this government are embracing. Competition policy, in simple terms, is about making sure no one business gets so much power that it can rip people off. Otherwise, monopolies or duopolies rig the market to engineer massive profits. Yet we ignore the biggest monopoly of all: the fixed supply of well-located land. As long as the land monopoly goes unchallenged, productivity reforms and public investment end up getting soaked up into higher land prices, widening inequality instead of narrowing it.
Throw in generous tax breaks for property investors, and you have an inequality time bomb ticking away under our housing system.
If the problem this roundtable is trying to solve is reducing inequality and promoting growth, then the f ix is clear. Stop taxing work and enterprise so heavily, and start capturing unearned gains from land and natural resources. Replace stamp duty with a broad land tax. Share rezoning windfalls with the community that creates them. Fund growth fairly, instead of gifting private fortunes from public decisions.
Chalmers is right: abundance means building more. But if the benefits of growth only flow to landowners, it’s just inequality in new clothes. Like Norway and Singapore, we can capture unearned wealth from land and resources to fund public services, invest in infrastructure, and future-proof our economy for all Australians.
—–
Read our submission to the Economic Reform Roundtable.
Learn more about shifting taxes off productivity and onto monopoly.
