In the bad old days state governments' purchasing policies advantaged local suppliers by granting them preferential treatment.
Such measures were always of dubious validity (after all, the Australian Constitution was supposed to be about freedom of interstate trade). But it took the competition reforms over the past decade for these practices to be abolished.
This was not before time. State purchasing preferences tended to fragment supply and add to costs.
But not all competition between states is bad.
Competitive federalism in the European Union has been an important growth propellant. Nations that have reduced taxes and regulations have risen above the rather ordinary economic performance of the area as a whole.
This policy has been the fairy godmother that has transformed Ireland, Europe's Cinderella, from rags to riches. Ireland has seen its average income levels grow to be a quarter above those of the United Kingdom.
Some of the newer EU members are following similar paths. Slovakia, the location for a new Porsche vehicle plant, has adopted the Irish approach and has benefited from economic growth at 8 per cent a year.
These same elements are seen within other federal systems. In California, regulatory excesses are undermining the state's advantages in spite of it being the centre of the world's hi-tech industry.
The state is now experiencing low average growth and a migration of jobs and people to neighbouring states where less regulation is bringing cheaper house prices.
Housing policies under Australian state systems offer similar opportunities.
In New South Wales, planning restrictions have so limited the availability of land for housing that the average new home in Sydney now sells for $480,000. That price is even more excessive than the average of $330,000 in Melbourne and Brisbane.
Land development restrictions in South Australia also have had a severe effect in Adelaide where house prices are now above those of Brisbane. The SA Housing Minister has required that 15 per cent of all new housing developments must be "affordable". This can only further boost prices. It means subsidies to the very poor paid for by the relatively poor new house buyer.
In Queensland, Treasurer Anna Bligh has introduced some modest measures to reduce taxation on houses. She is reviewing other proposals for a statement to be issued next month. But the state has experienced land price inflation similar to the rest of Australia.
This has caused house prices to rise relative to incomes: 20 years ago an average new house would have cost about three times the average level of family incomes while today it is more than six times greater.
The impending federal election has ignited policy discussion on housing. Some Liberals are calling for a doubling of the First Home Owners grant. Federal Labor is calling for increased regulatory oversight of existing funding. Both these proposals entail increased government intervention in housing and they overlook the bonus available from deregulating land supply.
Taxation and government charges are partly to blame for this cost inflation, but the real culprit is planning restraints on land availability.
A block of land fully serviced for housing on the fringe of all Australian cities should be no more than $50,000. This includes the costs of the raw land itself which should be only a few thousand dollars.
At Redlands, planning restraints have created a scarcity which boosts the cost of a block of raw land for housing to $80,000. Land preparation costs increase this by a further $30,000.
Queensland, like other states, has ample opportunity to expand housing land supply and drive down excessive house prices. Less than 0.1 per cent of the state's land is urbanised and, with less restrictive planning constraints, we could easily see new homes on the Brisbane edge at $70,000 less than present prices.
Australia's federal system opens opportunities for the states to offer different approaches to regulation and taxation. Victorian Treasurer John Brumby was stung to respond to the tax reductions on housing that Bligh announced, claiming his measures were more effective.
This is the sort of competition between states that is healthy.
Many younger families are priced out of house ownership by regulatory measures on land use and by development contributions and other taxation impositions.
It would be a wonderful bonus for them to see state governments competing to reduce regulations and charges on new home building.
Bligh is scheduled to bring out a major new initiative on the state's housing policy next month. Hopefully she will take this opportunity to slash the cost impositions caused by planning restraints.
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