While this week’s meeting of COAG on security issues dominated the national press, the Conference of Australian Economists staged in Melbourne produced two pearls for Local Government. Both papers are worth a read.
The first, by Sydney academic, Professor Peter Abelson, looked at the impact of taxes and subsidies on new home prices. You may recall that Local Government was vigorously attacked last year by a housing industry group for allegedly adding thousands of dollars to the cost of a new home.
His study challenges this claim, finding instead that nearly all taxes are passed backwards to housing suppliers and original land owners, rather than forwards to consumers.
Professor Abelson said suggestions that taxes, such as stamp duties, GST and infrastructure charges, were all passed to consumers by way of higher prices was wrong. As new homes and existing homes were almost interchangeable for buyers, developers who tried to push up prices to cover the cost of taxes would fail to sell their properties as buyers chased existing homes.
“Nearly all taxes are passed backwards to housing suppliers, or more specifically to original land owners, rather than forwards to consumers,” Professor Abelson said.
The second study, by Brian Dollery and Lin Crase, focused on Local Government’s use of user charges. These now form a significant part of Council revenue. This, Dollery and Crase say, has been largely driven by fiscal stress imposed on Local Government by our State and Federal counterparts.
They argue that growing demand for increased welfare services should be funded through decent State and Federal grants or better access to taxation measures. Importantly, they highlight cost shifting, inadequate grants and barriers to taxation revenue as significant drivers of fiscal stress.
Both these are useful papers. And while we’re on the subject of economists, as I write ALGA representatives are attending a two day roundtable on financing Local Government, convened by the University of Technology in Sydney.
I am sure that this, too, will yield more ammunition for our struggle to achieve fair funding, fair treatment and fair recognition for Local Government in this country.
