Productivity Report: Property Industry Calls for More Action

Decades of poor performance have dragged down residential construction in Australia and without effective reform the housing crisis can never be solved.

According to the Housing Construction Productivity: Can We Fix It? report by the Productivity Commission, during the past three decades physical productivity dropped by 53 per cent and labour by 12 per cent. 

It found four key issues are affecting the sector nationally: complicated, slow approval processes, little to no innovation, no scaling of projects, and the workforce.

It also made four recommendations. These were:

• Governments make the planning and approval processes easier and faster

• The National Construction Code and how it is implemented with state and local government regulations be examined

• Barriers to innovation in construction are addressed

• Occupational licensing regimes be reformed to reduce barriers to migration, and apprentice support is improved. 

For some in the industry, the report’s recommendations fall short. 

Master Builders Australia, while supporting the recommendations, said it wanted more investigation into the impact of industrial relations reforms relating to independent contractors and enterprise bargaining agreements. 

But, Master Builders chief executive Denita Wawn said, there was no one solution to fixing the situation and that the recommendations should be adhered to.

“Just like the housing crisis, there is no silver bullet to solving woeful productivity in the industry and it requires a co-ordinated and comprehensive approach by all levels of government,” Wawn said. 

Meanwhile, Property Council of Australia chief executive Michael Zorbas welcomed the recommendations. 

“Development co-ordination bodies, better skills recognition, improved innovation pathways and an arm’s length review of building regulation are all worthy recommendations,” Zorbas said. 

He said working on regulations and their interaction with the National Construction Code was important. 

“Australia has a good national construction code,” Zorbas said. “Can it be better? You bet. 

“Better resourcing for the Australian Building Codes Board to do its work and end patchwork adoption by states must be top of the review priorities.”

Zorbas also wanted faster approval and planning processes.

“States are starting to improve project timelines but much more needs to be done to co-ordinate more efficient planning outcomes for residential and commercial projects that benefit our cities,” Zorbas said.

▲ Master Builders chief executive Denita Wawn: No silver bullet.

Urban Taskforce Australia chief executive Tom Forrest said unions had contributed to increased labour costs and the workforce issues outlined in the review.

“The Federal Productivity Commission research paper confirms the massive impact that the unions, burdensome planning and building construction regulation has had on housing supply,” Forrest said.

“The Productivity Commission has called out the Commonwealth for failing to recognise the catastrophic impact of their immigration policy, leaving skilled construction workers off the essential worker list for so long. 

“Clearly, the iron grip that the CFMEU has had has resulted in rising labour costs which have not been matched by improved productivity.

“Labour productivity (gross value added per hour worked) in the construction industry has declined by 12 per cent since 1995 compared with the broader economy’s increase of 49 per cent over the same period.”

Forrest also said that overall productivity in the construction industry had fallen 41 per cent compared with the rest of the economy during the past three decades. 

He also said that the review showed how regulation allowed some groups to impact the planning process.

“The paper correctly points to the sheer volume of regulation that allows three levels of government, NIMBY community groups and well-meaning but productivity-killing bureaucrats to control the speed, cost and the amount of houses delivered,” Forrest said. 

“Every new planning requirement increases the number and cost of consultant reports, the time taken by assessors and risk associated with property development.

“Every new construction code change or regulatory impost also adds to both time and cost.

“These flow-on to the cost of construction and the price paid for new homes.”

Forrest said that environmental regulations reduced the productivity of the construction sector.