Shoppers better off if building red tape is cut

Planning Minister Justin Madden, on the advice of a committee he had established, rejected Woolworths' application to build a new hardware store in north Geelong.

The committee's advice was in line with regulators' policies in all states to concentrate shops in ''activity centres'' which integrate economic, social and environmental goals.  Clustering shops together is said to promote competition.

But some stores obliged to locate in those centres would incur costs that they think their customers don't value -- costs like bus stops and special ramps.  Moreover, forcing unwanted locational decisions on retailers is likely to mean diminished convenience for shoppers.

One outcome of the Australian regulatory approach is that our cities are not as well served with shops as less-regulated US cities.

In the north Geelong case, arguments concerning the merits of the development were heard from a rival hardware business.  Naturally that business opposed more competition.

This was a factor in the ministerial committee's decision, which acknowledged that such considerations ''would partially mute the strong community benefits as articulated by the proponent''.

Planning reviews are important in assessing conflicting rights people have regarding their properties.

But these reviews should not be forums for evaluating the disadvantages that a new competitor would bring for existing businesses.

When government bodies become such forums they start arbitrating what products people should buy and where they should buy them.

At the very least this brings bureaucratic costs as well as expenses to businesses seeking the go-ahead for their proposals.

More importantly, having committees make such decisions promotes the wrong business incentives.

If a company can get a bureaucratic verdict that impedes its competitor it can be far more lucrative than offering consumers better value.

But the lobbying to get that result is detrimental to shoppers' interests.  Choice is overridden and suppliers are encouraged to focus on pleasing regulators rather than customers, thus relegating the importance of cost control and merchandising.

Across Australia, the Federal Government has inadvertently partially undermined state government shopping location plans.

Federal-owned surplus airport land was sold with exemptions from state government planning rules.  This offered openings for new DFO centres to compete with state planners' approved shopping centres but without those centres' unnecessary costs.

The Federal Government recognised that land unconstrained by planning rules was worth a premium.  But this stemmed from avoiding costs that regulations foist on existing shopping centres -- costs that are passed on to the shopper.

The federal land sales infuriated state governments and existing shopping centre owners, who had been forced to endure lengthy approval processes and bureaucratic tinkerings and now faced competition from well-located sites that were cheaper to develop.

But the consumer benefited because costly planning processes and site requirements had been circumvented.

The development of surplus airport land illustrates the community benefits that are obtainable from a stiff dose of planning deregulation.  And far more can be done to better meet the needs of shoppers by reducing government controls.

The Productivity Commission is reviewing planning and zoning rules.  Hopefully this will bring insights on how governments might improve these rules so they better serve consumers' interests.

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