National urban policy: an inter-governmental deal on better cities

Posted September 08, 2022

  • Local government
  • State government
  • Federal Government
SGS Economics and Planning Marcus Spiller Metropolitan Imperative

With a change of national government, particularly one of a progressive inclination, we see an outpouring of expectation in the urban policy community for positive Commonwealth action on cities.

For some, thoughts might reach all the way back to the glory days of national urban policy — those of the Whitlam Government 1972-1975. This is what Whitlam had to say in his campaign launch on November 13, 1972, in Blacktown — then in the Sydney boom suburbs.

“We will involve the national government in a massive effort to rebuild our existing cities and to build new ones. A deep and direct national involvement in Australia’s cities will be the great thrust of our government. It’s not just because 85% of our people live in cities and towns, but because in modern Australia social inequality is fixed upon families by the place in which they are forced to live even more than by what they are able to earn”.

Inspiring stuff! But from a 2022 perspective, do we want a contemporary version of the Whitlam approach?

Things have changed — a lot — over 50 years

SGS Economics and Planning intergovernment deals article landscape flowchart4

Whitlam was disdainful of the states. He did not hide his view that the states were an anachronism, a relic of the colonial age. In his vision, the states would be replaced by regional governments which would deal directly with Canberra.

At breakneck speed, Whitlam and his cities Minister — Tom Uren, the storied mentor of our current PM — set about building the institutional and programmatic infrastructure to implement this top-down model of urban policy. This included:

  • Regional commissions
  • Commonwealth sponsored development corporations to build new cities in places like Orange and Monarto, and
  • Direct funding to metro and non-metro regional communities.

This was all done with scant regard for the circumscribed constitutional mandate of the Commonwealth and the principles of subsidiarity in government.

Except for Queensland, which stubbornly asserted its constitutional pre-eminence over matters of planning and urban development, most state governments were happy to wave the Whitlam program through. They were, no doubt, grateful for the flood of federal money into their jurisdictions and, perhaps, secretly inspired by the momentum which Whitlam had generated in visionary urban policy.

Today, in some contrast, we see in the Australian polity newfound respect for the states and territories. The pandemic laid bare the limits of Commonwealth competence and capability. It demonstrated that the states and territories do have a better grasp of, and capacity to attend to, the nuances of community need over different geographies.

Perhaps for the first time in a long time, we better understand what the states are for and see the need for their jurisdictional independence within the federation.

How to proceed on national urban policy?

So, in this context, how should a progressive Commonwealth Government proceed on national urban policy?

Notwithstanding the Commonwealth’s limited constitutional mandate on cities and urban development, the federal government continues to have a legitimate interest in the shape of our settlement patterns for much the same reasons as outlined by Whitlam in his 1972 campaign launch. A nation cannot hope to fulfil its potential as a national community if the Commonwealth takes a passive or absent stance on cities.

This is because the shape of our cities and settlement patterns generally inevitably has a substantial bearing on the Commonwealth’s clear constitutional mandate to:

  • Create and manage a productive national economy,
  • Build a social contract in which all Australians feel included, valued and protected, and
  • Enter into international treaties, including to do with emissions reductions targets.

The challenge remains, however, in that the Commonwealth has some, but limited, jurisdiction over planning and urban development. The states and territories continue to be primarily responsible for, and indeed, increasingly protective of, powers to manage and shape settlement patterns.

In prosecuting national urban policy in this context, the Commonwealth must, for a start, get its own house in order. This means two things;

Firstly, the Commonwealth needs to be clear about what aspects of urban and regional development impinge on national aspirations for productivity, emissions reduction and equity, and set some goals and targets around these. This doesn’t mean drawing up strategies and plans, but rather defining outcomes around reductions in congestion costs, improved access to affordable housing to help the labour market work better and to achieve greater equity, and reduced greenhouse gas emissions from city building and transport etc.

Secondly, it needs to have the internal disciplines in place to ensure that its own policy levers around interstate transport links, housing subsidies, energy regulation, etcetera, are aligned to these targets.

Aligning policy instruments won’t be enough

But while the Commonwealth should align its own policy instruments, this will not be enough.

In seeking to get the states and territories on board with national goals, the Commonwealth can push for a ‘hands on’ approach where it sees itself directly engaged in planning and development initiatives. Examples of this include Whitlam’s urban programs. But there are less heroic, crash-through versions of this approach in the history of national urban policy, including Keating’s Better Cities program and Turnbull’s City Deals.

Alternatively, and I would say preferably, the Commonwealth can take a hands-off approach where it ‘nudges’ the states and territories to align policies and programs. National Competition Policy — prosecuted by the Hawke-Keating Government and carried forward by Howard — is an example of this approach.

National Competition Policy is now recognisable as the pivotal move ushering in the ascendency of ‘neo-liberalism’ in our approach to government.

We can debate the merits and demerits of this shift. But in terms of intergovernmental relations and the promotion of national objectives in a federated system, National Competition Policy can be seen as exemplary public policy.

The Commonwealth devised an agenda for micro-economic reform — deregulation, privatisation, commercialisation of public service delivery and market design to fix environmental problems (think water trading to save the Murray Darling). This was premised on a conviction — rightly or wrongly — that without this reform, Australia would struggle to maintain the continuous improvement in living standards that had distinguished the long post-war boom.

As in the case of urban policy, the Commonwealth had control of some policy levers to effect a program of micro-economic reform — notably taxation and national infrastructure, including interstate highways, telecoms, aviation etc. But it recognised that a lot of the required market liberalisation would have to occur via the states.

These jurisdictions were, and are, responsible for all sorts of regulations and market interventions which could impede the smooth transition of resources to their most productive use, guided by price signals. These included protected markets in agriculture, transport and other goods and services, barriers to entry into registered professions and, of course, planning controls.

The Commonwealth’s approach in the face of this reality was to, firstly, establish national principles and targets for market reform. It then measured the prospective productivity uplift from these reforms and offered to share the tax dividend with states willing to engage in the required legislative and institutional changes, recognising that these would be tough and politically unpalatable.

The states were offered a down payment to sign up to the reform process, and were subsequently rewarded with milestone payments once mutually agreed targets were met.

The process was mediated and overseen by an independent institution specifically set up for this purpose. This became the COAG reform council which has since disappeared.

The lesson from National Competition Policy is that national goals were met but in ways devised by the states, which reflected local priorities, circumstances and possibilities.

The Hawke/Keating approach was dramatically different from that of Whitlam, but no less exciting. It certainly harnessed the federation to transform the nation.

The hands-off approach in national urban policy

So, how would the ‘hands off’ approach work in national urban policy?

I propose four elements and three principles to guide the overarching design of national urban policy.

Element 1: The Commonwealth would co-invest in urban policy initiatives put forward by the states and territories if these initiatives can be shown to advance national objectives around:

  • Productivity
  • Carbon emission reductions
  • Spatial equality and social cohesion

Element 2: The Commonwealth’s co-investment would be proportionate with the anticipated value of the benefits generated by the initiatives across some or all three of these parameters.

Element 3: Urban policy initiatives may include but would not be limited to:

  • Governance reforms affecting the way plans are made and implemented in conjunction with transport and other infrastructure investments
  • Pricing and market reforms relating to urban infrastructure, transport, emissions etc
  • Regulatory reforms which improve the efficiency and effectiveness of the development approval process
  • Development facilitation involving use of public corporations and public land
  • Investments in threshold infrastructure enabling more efficient and sustainable development

In general, these initiatives would not be plans and strategies for confined places, but systemic or regional scale projects which can deliver on national goals. This said, it may be appropriate to include exemplar development projects at the precinct or district scale, or projects and plans for geographies of acknowledged national strategic significance – such as Western Sydney Airport.

Element 4: Upon independent certification of merit, the Commonwealth would provide an initial co-investment payment to kick start implementation of the initiative. Subsequent co-investment payments would be linked to independent certification that mutually agreed milestones and outcome measures have been achieved.

The operation of national urban policy along these lines should be guided by three principles:

  1. Additionality; the urban policy initiative must be shown to deliver productivity, emissions, equity and social cohesion benefits over and above those that would be expected under the ordinary policy and fiscal settings of the states and territories in question.
  2. Subsidiarity; formulation of urban policy initiatives will be devolved as far as competency and democratic responsibility will allow.
  3. Accountability and transparency; certification of the merits of an urban policy initiative, as well as progress against milestones and agreed outcomes, should rest with an independent institution which is open to public scrutiny.
  • Local government
  • State government
  • Federal Government
SGS Economics Planning Marcus Spiller
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Marcus Spiller

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