A Productivity Commission (PC) report, Housing Construction Productivity: Can We Fix It?, warns that inefficiencies in the construction sector have severely restricted housing supply, driving up prices and making it harder for Australians – especially younger buyers – to enter the market.
PC Chair Danielle Wood said that while planning reforms are an important focus, governments must also tackle construction delays and rising costs.
“Too many Australians, particularly younger Australians, are struggling to afford a home in which to live,” Ms Wood said. “Lifting the productivity of homebuilding will deliver more homes, regardless of what is happening with the workforce, interest rates or costs.”
The report shows that while labour productivity across the broader economy has increased by 49% since 1995, productivity in home construction has dropped by 12%.
If the entire economy had followed the same sluggish trajectory as housing construction, the average Australian income today would be 41% lower
PC Commissioner Julie Abramson said the sector has been stuck in a cycle of inefficiency and outdated practices.
“There is no single thing to blame for this poor productivity performance. But there are steps that governments could take to remove or ease regulatory bottlenecks and encourage innovation in an industry where the way we build homes has barely changed,” she said.
The Productivity Commission has outlined seven major reform areas, with four key priorities for government action:
- Faster approvals – Establish coordination bodies to speed up development and construction processes.
- Regulatory overhaul – Conduct an independent review of building regulations to cut red tape.
- Encouraging innovation – Address barriers to new building techniques, such as modular and prefabricated housing.
- Workforce mobility – Implement a national occupational licensing system to allow builders and tradies to work across states without restrictions.
Ms Wood urged governments to rethink the volume of regulation slowing down homebuilding.
“The sheer volume of regulation has a deadening effect on productivity. If governments are serious about getting more homes built, then they need to think harder about how their decisions unnecessarily restrict housing development and slow down the rate of new home building.”
