Are planning regulations making retailing uncompetitive?

City of Darebin's draft Vision for Northland

I agree with Australia’s retailers and the Productivity Commission that imported internet purchases valued at less than $1,000 should be subject to GST. But I only agree in-principle.

The trouble is, as the Productivity Commission’s report on retailing released last week shows, the administrative effort required to levy the GST would cost more than the tax would raise in revenue.

But the GST is really just a distraction – the underlying malaise of Australia’s retail sector runs far deeper. The Commission says retailers operate under several regulatory regimes that reduce their competitiveness. It nominates three major restrictions which require improvement:

Planning and zoning regulations which are complex, excessively prescriptive and often exclusionary

Trading hours regulations (in some States) which interfere with the industry’s ability to adapt and compete in a more globalised market

Constraints on workplace flexibility such as obstacles to the greater use of enterprise bargaining and the adoption of best practice productivity measures

Retail hasn’t historically been trade-exposed, so it hasn’t had to work hard at being competitive. Up until now, international suppliers have even been able to practice blatant price discrimination. But the internet has changed the game. Consumers can now compare what they’re paying for many products locally with what it costs to import them from overseas markets.

The impact of planning regulations on the viability of domestic retailing is of course of particular interest to The Melbourne Urbanist. The Commission notes that the ability to maintain a competitive and healthy retail sector is vitally dependent on the ability of new retail formats to gain entry to Activity Centres. A number of studies have shown that preventing the development of new retail formats lowers productivity, reduces employment and raises prices to consumers.

The Commission finds a number of barriers to entry, including limits on the size and scope of centres, prescriptive planning requirements and excessive scope for firms to establish local monopolies and maintain them by excluding new entrants, either with the implicit cooperation of planning agencies or through the courts. The Commission recommends that:

Activity Centres should be large enough in terms of total retail floor space and broad enough in terms of allowable uses to facilitate new retail formats locating in existing business zones

Prescriptive planning requirements should be significantly reduced to ensure competition is not needlessly restricted

The impact of new entrants on the viability of existing retail businesses should not be considered at any stage in the rezoning or development assessment process. This issue should only be considered at the strategic planning stage

The focus should shift to “as-of-right” development processes to reduce uncertainty and minimise the scope for gaming of the system by commercial rivals

Courts should be able to award costs against parties who are found to be appealing for non planning reasons

It’s interesting and illuminating to read the Commission’s report and at the same time look at what the City of Darebin is proposing in this report for the future development of Northland, a “hard-top” shopping centre (mall) with nearby “big-box” retail facilities at Preston, about 11 km north of Melbourne’s CBD. The exhibit above shows Council’s proposed vision for the centre and surrounding uses. Read the rest of this entry »


Why is transit’s share low at Latrobe Uni?

Mode shares (%), 2006 Census

Workers who commute to Melbourne University at Parkville are much more inclined to use public transport than their colleagues who work at suburban Monash or Latrobe universities. The chart shows that at the 2006 Census, 41% of Melbourne University workers reported they drove to work compared to 83% at Monash and 84% at Latrobe universities. Many more staff at Melbourne also walked and cycled – 24% compared to 6-7% at the other two institutions.

Melbourne University’s lower car use is explained by a few key factors. The main one is that it is located on the edge of the CBD where car use is limited by high levels of traffic congestion and expensive all-day parking charges. For many staff, driving would take too long, generate too much angst and be too expensive. If the value of driving is marginal, the decision to choose an alternative will be tipped by the high quality of public transport service available to Parkville workers. Although it’s not served directly by rail (none of these universities are), Melbourne University has easy access by multiple tram lines to the CBD and thence to the many radial train and tram lines linking to the larger metropolitan area. For many Melbourne University workers public transport would be a no-brainer.

Melbourne University’s high level of walking can largely be attributed to the relatively high residential densities in the nearby CBD and inner city environs. If transport is expensive in outlays and time, it makes sense for workers to live close to the university. In this case, living close to the university also means living close to the many activities and opportunities offered by the inner city.

The suburban setting of Monash and Latrobe provides a very different environment. Although these universities are not without their challenges, they generally experience less traffic congestion and enjoy cheaper parking than Melbourne University. Low suburban residential densities and large open space and industrial uses mean fewer staff can live within walking distance. The level of public transport service is actually pretty reasonable by prevailing standards (for example, see here) but obviously not as good as Melbourne University, which benefits greatly from its proximity to the CBD. Read the rest of this entry »