How the humble Aussie pie can help solve our housing crisis
From small family business to world's largest pie manufacturer, the extraordinary transformation of the company behind Australia's iconic Four'N Twenty pie carries lessons beyond the bakery. Solving the housing crisis will require the same kind of thinking that turned a regional bakery into a global enterprise: a relentless focus on producing more for less, a willingness to innovate, and the courage to make disruptive changes when the status quo is clearly failing. By John Dahlsen.
The Pie at the Centre of the Debate
The current discussion about Australia’s housing crisis keeps circling back to the same fundamental question: how do we grow the pie? The argument, put simply, is that if we focus on expanding the economic pie through genuine growth, productivity and good industrial relationships, many of the problems we face today will begin to resolve themselves. More output, more revenue, more tax receipts, and ultimately more capacity to fund the services and entitlements that Australians rightly expect.
But the concept of “growing the pie” can feel abstract. To make it concrete, there is no better example than the story of one of Australia’s most iconic products: the humble Aussie meat pie. And not just any pie, but the Four’N Twenty pie, a product so deeply woven into the fabric of Australian life that it is virtually inseparable from the culture itself.
From Lakes Entrance to the World: The Patties Story
The story of Four’N Twenty begins with the Rijs family, immigrants from the Netherlands who arrived in Australia and set up a modest bakery in the small coastal town of Lakes Entrance in Victoria’s Gippsland region in 1966. They were not economists, accountants, lawyers or engineers and had no university education. They were newcomers to the country, starting from scratch in a quiet regional town with little more than a willingness to work as a family and an instinct for how to run a business, with no prior knowledge of the product.
The bakery was successful enough that the family expanded into nearby Bairnsdale, where they built a larger operation. From that second bakery, they began manufacturing pies at scale. What started as a small family enterprise, known as Patties Pies, grew with extraordinary speed. In a remarkably short period, the Rijs family built Patties Foods into the biggest pie manufacturer in the world.
This is not an exaggeration. Patties is a global leader in its category. To put the scale in perspective, the company sells tens of thousands of pies at the AFL Grand Final alone, an event that draws over 100,000 fans to the MCG each year. No single sporting event anywhere in the world matches that volume of pie consumption. The Four’N Twenty pie and the AFL Grand Final are so intertwined that one is almost unthinkable without the other. It is a uniquely Australian achievement, and it began with a migrant family in a small town with a population of a few thousand.
The Patties story is a powerful example of what immigrants can do for this country when they are given the opportunity and the conditions to succeed. It is a story of enterprise, hard work and the kind of practical ingenuity that built modern Australia. And it carries lessons that extend far beyond the bakery.
The Economics of the Pie
The Rijs family understood something that many policymakers seem to have forgotten: the key to business success is driving efficiency. Their approach was straightforward. Either you make more pies at the same cost per pie, or you produce the same number of pies at a reduced cost. There is no mystery to it. It is the basic engine of productivity.
With that principle as their guide, the family went about fine-tuning every element of their operation. They refined their pastry. They improved the source of their Australian-only meat. They optimised their manufacturing processes. Step by step, they were able to produce more and more pies at a lower and lower unit cost.
In economic terms, they satisfied the fundamental criteria for productive success: more output for less input, or the same output for lower. This is what growing the pie actually looks like in practice, and it is a lesson that scales from a single bakery to an entire national economy. When a business can produce more at less cost, everyone benefits: the business thrives, workers are employed, consumers get a better product at a better price, and the government collects more tax from a larger base of economic activity.
The Obstacles to Growing the Pie
If the path to prosperity is so straightforward in principle, why is Australia struggling? The answer lies in a series of policy decisions that are making it harder, not easier, for businesses to grow.
The government does not appear to accept that productivity-led growth is the best path forward. Instead, it is layering on more and more costs. Taxes are increasing. Wages are being pushed up without corresponding productivity gains. The cost of capital is rising. Energy prices continue to climb. Rents are under pressure. Each of these represents an additional cost that the pie maker, whether literal or metaphorical, must absorb.
The government does not understand the difference between taxing a larger share of a shrinking pie, or taking a smaller percentage of a growing pie, generating a greater amount of tax. If you lower the tax rate but create the conditions for businesses to produce more, the total tax revenue can remain the same or even increase. Countries that have deliberately reduced tax rates, including Ireland, Singapore and the Baltic states, have typically experienced a significant increase in economic activity. The resulting expansion in the tax base generates higher total tax revenue even at lower rates. This is not a theoretical proposition. It is an empirically demonstrated outcome across multiple jurisdictions. The key insight is that tax rates and tax revenue are not the same thing.
It is a principle that the Rijs family grasped instinctively: lower input costs drive greater output, which drives greater overall returns.
The Rijs family did not learn this in a business school. They did not study economic theory. They learned it on the floor of their bakery, through trial and error and the relentless pursuit of efficiency. That practical understanding of how business actually works is precisely what is missing from the current policy conversation.
A Government Without Business Experience
Patties, like so many Australian businesses, is frustrated by the disconnect between government policy and business reality. That frustration is not surprising when you consider the composition of the current federal cabinet. At the time of writing, there is only one member of cabinet with any meaningful business experience: the Minister for International Trade, Don Farrell, whose exposure to the private sector was limited and part-time winemaking.
The rest of the cabinet is drawn overwhelmingly from backgrounds in unions, ministerial staffing, teaching, and the public sector. These are not dishonourable careers, but they provide virtually no exposure to the pressures, dynamics, and realities of running a business. When the people making economic policy have never had to meet a payroll, manage a supply chain, or absorb a cost increase without passing it on, the resulting policies tend to reflect that gap. It is the difference between understanding business as a concept and understanding it as a daily reality where every cost matters, where margins are thin, and where survival depends on producing more for less.
At the end of the day, it is business activity, the trading in goods and services, that produces taxable income. It is businesses that employ people, pay wages, collect GST, remit payroll tax and generate the corporate tax receipts that fund government expenditure. When you look at the revenue the government receives from the most prominent corporations alone, the numbers are staggering. The four largest mining companies, the four major banks and the leading retailers between them contribute an enormous share of all corporate tax paid by Australia’s 2,700 largest companies. That revenue depends entirely on those businesses being viable and growing. Squeeze them and the tax take falls. Help them grow the pie, and the tax take grows with it.
The Hawke-Keating Contrast
It was not always this way. In the era of Hawke and Keating, Labor understood the relationship between business and workers intimately and had close relationships with many senior businesspeople who would have spoken to them honestly. The Accord was built on a simple but powerful idea: that increased pay should be funded by increased productivity. Business and the union movement were brought together, not set against each other. Agreements were struck where workers benefited from growth, and growth was made possible by cooperation. This approach was continued by the Howard-Costello government.
Bob Hawke’s unusual background gave him an acute interest in and understanding of what was in the national interest, and an empathy for what employers needed that is entirely absent today. His leadership in driving enterprise agreements, trading productivity gains for wage increases under the Accord, was good for the whole economy. It curtailed the power of the more aggressive unions by channelling bargaining into productive, enterprise-level deals. The framework delivered some of the most significant economic reforms in Australia’s history. It opened the economy, lowered tariffs, floated the dollar, and set the foundation for decades of prosperity.
It worked because it was grounded in a recognition that business and workers are not adversaries in a zero-sum game. They are partners in growing the pie. Adam Smith’s distinction between self-interest and selfishness is relevant here. Self-interest, properly understood, leads to exchanges that benefit both parties: the worker and the employer both gain from a productivity-linked wage increase. Selfishness, by contrast, seeks maximum gain without regard to the viability of the enterprise, ultimately destroying the value it purports to capture and harming the workers it claims to represent.
For the current government, productivity appears to be a closed book. The focus has shifted almost entirely to the welfare of workers, with concessions and benefits being granted without adequate consideration of the pressure these place on the business sector. There is little evidence of empathy for, or understanding of, how businesses operate, what they need to grow, and what happens when their margins are squeezed to breaking point. The private sector is shrinking relative to the public sector. Public-sector employment and wages are rising. Each time activity shifts from the private sector to the public sector, growth weakens, because it is the private sector, not government, that generates the activity and revenue an economy grows on, and that ultimately funds the rising bill for entitlements.
The Cost of Lost Competitiveness
The consequences of this approach extend well beyond Australia’s borders. Australia is a young nation that has historically funded much of its growth through overseas capital. At least fifty-five percent of our investment funds come from international sources. That dependence on foreign capital means that our international competitiveness is not just a matter of national pride. It is a matter of economic reality.
If Australia is not competitive, our ability to attract and service foreign investment is compromised. Capital flows to where it can earn the best risk-adjusted return, and if our costs are too high, our regulations too burdensome, and our productivity too low, that capital will go elsewhere. When foreign capital is making an allocation decision between Australia, Canada, Singapore, the UK and the United States, the relevant comparison is not just tax rates but the overall investment climate, including regulatory certainty, labour market flexibility, approval timeframes and the ease of repatriating returns. Australia is deteriorating on most of these metrics.
A reduction in foreign direct investment has compounding effects. Less FDI means fewer jobs, less technology transfer, reduced export income and lower tax revenues in the medium term, creating a negative feedback loop that the government’s domestic spending plans are not designed to address. The consequences ripple outward through our capacity to borrow, to invest, and to sustain the standard of living that Australians have come to expect.
Industrial Relations and the Building Sector
Among the most consequential policy changes has been the overhaul of industrial relations. Minister Burke pushed through sweeping IR reforms, bypassing a Senate inquiry in the process, that fundamentally altered the relationship between workers and businesses. Union powers were significantly enhanced. More recently, the government mandated that government contracts can only be awarded to companies that are, in effect, unionised. This is a profound shift in the balance of power, and its effects are being felt across the economy.
Nowhere is this more acute than in the building and construction sector, where the CFMEU remains a dominant force. As an integral part of the union movement that funds the Labor government, the CFMEU wields enormous influence. The result is stark: the CFMEU is estimated to be responsible for at least a thirty percent increase in building costs. That is not a marginal increase. It is a cost that fundamentally changes the economics of construction. Australia now has one of the highest construction costs in the world and is regarded by international contractors as one of the most difficult markets to deal with.
This cost does not stay contained within the unionised segment of the industry. It flows on to the rest of the sector, where there is already immense pressure on the availability of workers, on wages, on subcontractor rates, and on the price of building materials. Everything is inflating simultaneously. The consequence is that builders will not build and developers will not develop, because there is simply no profit in it. The numbers do not work. There is no margin left. A development only proceeds when the expected revenue exceeds the full stack of costs: land, construction, holding and finance costs, and a margin large enough to compensate for the risk being taken. When construction and finance costs rise faster than achievable sale prices, projects no longer stack up, and rational developers shelve them.
The deeper tragedy is that the conduct of the CFMEU and a small number of other militant unions damages the many good unions and unionists who are reasonable in their demands and genuinely concerned in balancing the interests of their members and their employers. The current government’s refusal to confront the CFMEU is not just a failure of economic policy. It is a betrayal of the moderate union tradition that made the Accord possible and that delivered genuine benefits for Australian workers and businesses alike.
In effect, the government’s own policies, including its unwillingness to confront the CFMEU, have become a primary driver of inflation in the construction sector and, by extension, a primary driver of the housing crisis itself.
The Banking System and the Housing Imbalance
The problems in the housing sector are compounded by a structural distortion in the banking system that has been building for decades. Australia’s four major banks control roughly eighty percent of the market, and APRA’s capital allocation rules have driven an extraordinary shift in the composition of their lending. As the former CEO of the National Australia Bank, Don Argus, has argued, the banks have effectively become building societies.
APRA treats residential mortgages as less risky than commercial and development lending, so banks are required to hold less capital against a mortgage than against a development loan. Competing on return on equity, banks drive mortgage lending hard because it consumes less capital. The result is a damaging asymmetry. The same framework that makes mortgages cheap to fund and therefore plentiful also makes development and construction lending relatively expensive in capital terms, so banks ration it. In other words, the financial system simultaneously inflates demand through abundant, competitive mortgage credit while constraining the supply of new homes through tight, conservative development finance.
This matters enormously for the housing crisis. Builders and developers depend on bankers, and banks want to see satisfactory margins, presales and cash flow before they will lend. They have become very difficult about providing construction loans, which means that, at the very point where we need supply, the banks are making it harder to deliver. So we begin from an economic structure carrying too much household debt, with banks that have lent too heavily into mortgages and too cautiously into the construction that would relieve the shortage.
Investment Issues
It is fortunate for the Rijs family that they have sold their business prior to the changes in the tax laws now taking place. But the proceeds of the sale which now have been invested will be subject to more rigorous tax rules. On selling any share or asset, irrespective of how long held, a minimum of 30% tax will apply or the marginal rate, whichever is the higher, so they will be unable to pool the profit and losses for a net taxable outcome.
It is only the large investment funds, many of which are controlled by the unions through industry superannuation, that will retain the ability to pool profits and losses and pay tax on the net. This creates a two-tier system that penalises the individual investor and the family that has built wealth through enterprise, while protecting the institutional structures aligned with the union movement.
The Rijs family story illustrates the perversity of this perfectly. A migrant family arrives with nothing, builds a global business through decades of hard work and efficiency, creates thousands of jobs, and eventually realises the value of what they have built. Under the new settings, the government takes an ever-larger share of that success, while the institutional funds aligned with its political base enjoy more favourable treatment. The signal this sends to every aspiring entrepreneur and investor is deeply discouraging.
The investment climate for shares, property and businesses has changed dramatically, and it is inevitable that it will affect investment decisions. Risk appetite will fall. When the tax system punishes success but does not compensate for failure, the rational response is to reduce exposure, hold cash, pay down debt or invest conservatively rather than backing new ventures or growth companies. But the government is more concerned with the worker and cannot see the benefit of working with business to grow the pie. Instead they have retreated to their union culture, the dominant influence on Labor policy making.
A Universal Frustration
This frustration is not confined to any single industry. It is being felt at every level of business in Australia: by the small tradesman working on residential jobs, by the farmer battling rising input costs, by mid-sized businesses trying to compete and grow, and by the large corporates whose margins are being eroded quarter by quarter.
The pattern is the same everywhere. Revenue is flat or under pressure. Costs are rising. And there is no policy framework in place to address the underlying dynamic. The building sector is in deep crisis, with the rate of builder failure high and rising. But the malaise extends well beyond construction. Every sector that depends on affordable inputs, a flexible labour market and a supportive regulatory environment is feeling the squeeze.
The Spectre of Stagflation
There is a word for what happens when revenue stagnates while costs continue to climb: stagflation. It is one of the most dangerous conditions an economy can face, because it is extraordinarily difficult to break out of. The usual policy levers, stimulating demand to boost growth, or tightening to control inflation, work against each other. You cannot easily do both at once.
Housing is the clearest example. We have the makings of stagflation in the sector: builder and developer revenues are falling while their costs are rising. The result is fewer builders, fewer developers, and fewer employees and subcontractors available to do the work. In the context of the housing crisis, the situation is so severe and so multifaceted that it will only be solved through significant disruptive action. Incremental adjustments will not be enough. What is needed are bold, structural reforms to planning, to industrial relations, to tax policy, to the banking and capital framework, and to the regulatory burden on construction. Whether the current government has the stomach for that level of disruption remains very much in doubt.
The Human Cost
In the meantime, the building sector, like many other sectors of the economy, is suffering. But the real cost is borne by ordinary Australians. Our standard of living is falling. GDP per capita is declining. At the same time, the rate of business failure is escalating. The tax burden on income is increasing. And in due course, if these trends continue, rising unemployment will follow and the recession will deepen.
Young Australians face a particularly difficult outlook. The combination of rising rents, limited housing affordability, HECS/HELP debt and limited career advancement in a stagnant economy creates a compounding disadvantage for those entering the workforce. They are locked out of housing, burdened by public debt and carrying the fiscal weight of an ageing population. This is not just an economic problem. It is a social crisis that threatens the cohesion and optimism that have traditionally defined the Australian character.
The government, at this point, appears unwilling to face up to this reality. The public discourse is dominated by justification of current policy settings, with no meaningful effort being made to reach agreement with the business sector on how to grow the pie. The government spends its time defending what it has done rather than confronting what needs to be done.
Conclusion: Lessons from the Humble Pie
So the story comes full circle, back to the humble Australian meat pie. One of the best of its kind in the world. Produced at a scale unmatched anywhere on earth by Patties Foods, a company born from a migrant family’s bakery in Lakes Entrance.
The lessons of the pie are simple but profound. Efficiency drives growth. Lower input costs enable greater output. A larger pie generates more for everyone, including the government and the workers it seeks to protect. These are not theoretical propositions. They are demonstrated facts, proven on the factory floor by people who understood business not from textbooks but from doing it.
Patties is an extraordinary example of what a migrant-led business can achieve in Australia. But it is also a cautionary tale. Even the most successful, most efficient, most innovative businesses are now suffering under the weight of poor government policy. If we cannot get the settings right for companies like Patties, what hope is there for the thousands of smaller businesses that lack the scale to absorb the blows?
The housing crisis will not be solved by tinkering. It requires the same kind of thinking that turned a small-town bakery into a global enterprise: a relentless focus on producing more for less, a willingness to innovate, and the courage to make disruptive changes when the status quo is clearly failing. The solution is to make building economic again, and because construction is so large a part of the economy, restoring developer feasibility would lift both housing output and the profitable growth of the economy as a whole.
Australia has done it before. The Hawke-Keating reforms proved that a Labor government, working honestly with business and unions together, could transform the economy and deliver prosperity for all Australians. The question is whether Labor has the willingness, capability and authority to act in a disruptive way.
This paper draws on insights from business leaders with direct experience in Australian manufacturing, construction, and economic policy.