The Causes and Consequences of Melbourne's Central City Property Boom

Abstract

This paper argues that political factors interacting with a changing global economic environment generated the property boom in Melbourne's central area which culminated in 1990. Four main factors were involved: a steadily increasing demand for offfice space and only limited supply, the availabilityofan immense poolof global capital, thereduction in the cost of capital in 1987, and the creation of an encouraging climate for property investment by the State government. None of these factors were outside politics or action by the state. Governmental action at federal level wasimplicated in three of the four factors. The principal cost of the boom is an opportunity cost. Billions of dollars borrowedoverseas, on which the nation now pays a massive bill, was not invested either in industry which would have allowed Australia to trade its way out of the recession, or in social and physical onfrastructure which would have added to the general welfare