2002_05_may_land rent gorton

Much has been written about the erratic style of former Prime Minister John Gorton in the past week. One of his more erratic decisions is still being felt in Canberra today.

Gorton who died last week has been accorded a state funeral – the same honour Gorton as Prime Minister accorded Jim Fraser the Federal Labor Member for the ACT who died in 1970. Fraser won 67.7 per cent of the vote at the 1969 election and was an enormously popular local member. Gorton, naively thought the Liberals could gain the seat at the ensuing by-election.

The Liberals put up Clarrie Hermes, a well-liked Canberra magistrate. Labor put up Kep Enderby.

At the time, there was a lot of trouble over land in Canberra. In the lead up to federation, there was fear speculators would get the profits from the increased in land value created by the establishment of the capital. To counter this, the Constitution said the land of the federal capital shall be “”vested in the Commonwealth”. The Seat of Government Act in 1910 forbad the Commonwealth from granting freehold in the territory. So a system of leasehold was set up. Residential leases ran for 99 years and commercial ones for 50 years. Leases contain two components – a premium for the lease itself and rent. Most leases, though contain only one or the other.

When the first 99-year residential leases were offered in 1924, the land rent was set at 5 per cent of unimproved value which was to be reassessed every 20 years. Rates were very low, so the combined rates and rent amounted to less than rates alone in other parts of Australia.

As time wore on, those who bought early were paying much less land rent than those who bought more recently. Someone who came to Canberra might be paying $40 a year whereas someone coming in 1969 would be paying $240. Moreover, the rent was cheaper in the higher value inner areas, because there was no reassessment for 20 years. But when the reassessment came it was often horrific. A car dealer’s yard in Braddon got reassessed in the late 1960s from $3100 to $400,000 and the rent (5 per cent) went from $155 a year to $20,000. Some residents (as they approached retirement) were copping quadrupled land rent.

The theory was the increased in value of the land would go to the general public through rent, rather than to the land holder. The rent was to help build the city. Rates were very low.

But as these wildly jumping land rents occurred, resentment built up. It made commerce unequal. It made for jealousy between newer and older residents about their contribution to the upkeep of the city.

Rates were frozen to apply at 1962 values. It caused a large deficit in the city’s notional accounts. The bureaucracy and advisory council had many reviews and inquiries. Water rates were introduced, then a sewerage rate with extra charges for the third flushing unit which caused great mirth at the time.

The freezing of the rates did little to lessen public puzzlement and anger over land rent. But the Department of the Interior, which had carriage of the matter, and its minister, the National Party’s Peter Nixon were opposed to significant change.

Gorton seized his opportunity. In typical disregard for the bureaucracy and process Gorton convened a hasty Cabinet meeting at 5pm on May 13, 1970 – just three hours before Hermes was to open his by-election campaign at the community hall in Hughes. Nixon presented a paper on land-rent reform, leaving details to be worked out for later consideration.

Gorton then unexpectedly arrived at the Hughes meeting. He saw a vote-winner. He stood before an audience of several hundred (including the press) and stated, “”I want to announce here and now . . . ” the abolition of land rent in Canberra.

There were no details. People clamoured for them. Nixon admitted it was a half-cocked thing. Gorton had inadvertently included commercial rent.

It did Hermes no good. Enderby won on preferences – most of the lost Labor vote going to the Australia Party and independents.

The land auctions in 1970 were the last in which land went cheap in Canberra. Thereafter, land values has gone up and up and profits have gone to landholders. I was fortunate enough to bid successfully for a block on land in 1970 for $500 with the balance of $700 to be paid a 4.25 per cent over 44 years. I may thank you, John Gorton, but people seeking their first home now will not.