COAG push to reform planning laws crucial to cheap groceries

07 November 2009

Grocery shoppers and small businesses alike will win if the Council of Australian Government agrees to reform anti-competitive town planning laws, at its meeting today.

The reform of town planning laws is one of the items on the agenda of the meeting between the Prime Minister and state premiers.


The Taskforces chief executive, Aaron Gadiel, said that town planning laws are restricting competition in the sale of retail groceries, clothing, general merchandise and in the provision of entertainment facilities, such as cinemas.


These laws protect the big shopping centres even when there is no legitimate town planning reason to do so, Mr Gadiel said.


Its understandable, for a development application for a new supermarket to be refused on traffic or urban amenity grounds.


But right now, new retail development is routinely denied on the grounds that it will compete with existing businesses.


Mr Gadiel said that town planning laws currently concentrate mega retail development in select areas, banning or limiting competitors in surrounding suburbs.


Often these decisions to ban nearby competing development defy all logic denying opportunities for new retail precincts in areas with good public transport and urban design possibilities.


Tackling the power of the retail landlords is essential if were to get more competition in grocery, clothing and general merchandise retailing, Mr Gadiel said.


Mr Gadiel said that town planning laws have helped create an undersupply of supermarkets selling affordable groceries.


One shopping centre landlord has even admitted to the Australian Competition and Consumer Commission (ACCC) that they were using an under-supply of supermarkets to ˜drive up the rent.


Mr Gadiel said that planning laws were denying consumers access to these cheaper retail formats by rationing consumers access to anything bigger than corner stores.


A study by the Bureau of Infrastructure and Regional Economics, found that consumers, without ready access to a larger format supermarket, paid 17 per cent more.


The Economist Intelligence Units cost of living survey, found that mid-size stores charged an average of 22-39 per cent more than larger stores, such as supermarkets.


If an existing retail landlord is doing a poor job of servicing consumers, or is charging its tenants excessive rents, then an entrepreneur should be free to establish new competing retail premises.


Even the threat of a new competitor can be effective in ensuring that incumbent retail property owners invest in their assets and keep costs down.


Last year the Productivity Commission found that small retail tenants face an uphill battle in negotiating with oligopolistic shopping centre landlords.


Small businesses are among the first to suffer when shopping centres landlords are handed monopolies by town planning laws, Mr Gadiel said.


They are faced with take-it-or-leave-it tenancy agreements and soaring rents.


They have no choice, but to sign these agreements, if they want access to the foot traffic controlled by the landlords.


The Urban Taskforce is a property development industry group, representing Australias most prominent property developers and equity financiers.


The construction activity made possible by property developers contributes $78 billion to the national economy each year and creates 849,000 direct jobs.



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