This article is from the Australian Property Journal archive
BUSINESSES and property industry representative bodies have broadly welcomed the Albanese government’s announcement of a new $900 million productivity fund which will encourage states and territories to embrace more construction methods and cut planning red tape in a bid to boost national housing supply.
The announcement comes as analysts continue to voice concerns about the construction industry’s capacity to handle the huge demand amid a national housing crisis, with early estimates suggesting that national cabinet’s National Housing Accord target of delivering 1.2 million “well-located” homes over five years will be missed by as many as 260,000 homes.
Australia recently recorded its worst 12 months for new home builds in a decade, according to official data. The construction industry has in recent times been hampered by labour shortages and high materials costs.
The National Productivity Fund was heavily informed by the Productivity Commission’s five-yearly review of the nation’s productivity performance, which showed that growth in the last full decade was the slowest in 60 years. Productivity growth in the 10 years to 2020 averaged 1.1% a year – worse than the decade before and barely half the rate achieved during the 1990s.
In 2022, Treasury downgraded its long-term annual productivity growth assumption from 1.5% to 1.2%.
In an address to Australia Business Economists yesterday, Treasurer Jim Chalmers said the fund will “incentivise states to achieve productivity gains through pro‑competitive policies, choosing from a menu of options”.
“Areas of focus could include streamlining commercial planning and zoning, and removing barriers to the uptake of modern construction methods.”
The Property Council of Australia welcomed the announcement.
“This housing crisis demands we pull every lever, and making our planning systems fit for purpose is the golden lever,” said Property Council CEO Mike Zorbas.
He cited analysis by former Reserve Bank of Australia economist Tony Richards that found Australia would have 1.3 million extra homes today if planning systems had retained the efficiency they had in the 20 years before 2001.
“Rewarding state and local government housing supply innovations should be top of mind alongside boosting last-mile infrastructure and addressing taxes that hinder investment and reduce affordability,” Zorbas said.
“With welcome and much-needed federal funding for social housing, planning reform and housing infrastructure, this new fund will help to cut through housing red tape and boost home construction.
The Property Council also welcomed additional focus on prefabricated and modular homes in the fund. States including NSW and Queensland have already started incorporating modular homes into the housing policies, providing an avenue to faster delivery that traditional builds.
Master Builders last week released analysis of build times which found that 15 years ago, it took on average nine months to build a standalone house from approval to completion, whereas today it now takes 12.7 months – an increase of over 40%.
“A focus on planning and incentives to support modern methods of construction or modular housing are some of the areas that could improve the outlook for housing,” Master Builders CEO Denita Wawn said yesterday following the announcement of the fund.
Master Builders said it “strongly supports” the fund.
“Productivity in building and construction has been in decline for too long, with labour productivity down 18% over the last decade,” Wawn said.
“Productivity is more than a buzzword. When productivity is down, prices go up and our ability to build the homes and surrounding infrastructure communities need is slowed down.”
The Business Council of Australia (BCA) also voiced support for the fund.
BCA chief executive Bran Black said a fund incentivising states to implement productivity enhancing reforms is “needed to help reverse the trend of lagging productivity that is impacting our ability to increase real wages”.
Chalmers will meet with his state and territory counterparts on November 29th to thrash out the details of productivity reforms for eligibility for payments from the fund.
In yesterday’s speech, Chalmers said the “next generation of productivity growth” would be built on five pillars, led by creating a more “dynamic, competitive and resilient” economy; building a skilled and adaptable workforce; harnessing data and the digital economy; investing in the net zero transformation; and delivering “quality care more efficiently”.
