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Infrastructure funding needs more thought

By Graham Young - posted Tuesday, 7 July 2015


There may be an increase in the value of the GoPrint site, but this will be in the millions of dollars, not billions.

A developer levy applied to all projects in an area, or a betterment levy applied to all landowners, is more likely to raise significant funds, but has issues (which the government appears to have quickly realised).

Levying developers within a particular radius of the infrastructure would impair the value of sites at best, unless the developers were able to add the costs on to the price they charged the buyer, in which case the product becomes less affordable.

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In fact, with a properly constructed taxation system there is little justification for a developer levy of this sort as well-designed infrastructure will lift the value of the real estate because it will become more productive, meaning that the state will experience an enhanced tax take through land tax and stamp duty.

One of the problems with housing affordability in Australia is that governments have actually been at this lurk for a while.

In 2011 it was calculated that all taxes added 36 percent to the cost of a house in Brisbane which amounted to $191,000 at the time.

Governments have gotten used to sticking the cost of all sorts of hard infrastructure, like roads, and even soft infrastructure, things like libraries, to new developments.

This is a tempting honey pot. Large sums are changing hands, and banks are prepared to lend most of it. The government can levy a large tax, and the tax payer will be happy to spend the next 20 years of their life paying it off because it puts a roof over their head.

And it is inequitable. While the new home owner pays the tax, all residents get the benefit. Most are free-riders.

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What looks like a magic pudding will come around to give us indigestion, because most of these schemes give the baby boomers yet another free ride, and blight the standard of living of Gens X, Y, Z, AA and beyond.

They’re smart, we gave them a good education, and they won’t stand for it. Woe to the government that is in power, and their aged parents in the nursing homes, when they wake up.

No, a better and more equitable solution needs to be found. There’ll be more kites before too long, and just as well.

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An edited version of this was published in The Courier Mail.



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About the Author

Graham Young is chief editor and the publisher of On Line Opinion. He is executive director of the Australian Institute for Progress, an Australian think tank based in Brisbane, and the publisher of On Line Opinion.

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