Up to half of the cost of a new house and land package is government taxes, fees and charges," stated HIA's Chief Economist, Tim Reardon. Constraints on the industry reflect the large impost governments place on home building in Australia, not the efficiency with which the industry operates, added Mr Reardon. The detached home building in Australia is one, if not, the most efficient in the world. A workforce that is largely engaged as subcontractors and are paid to complete a task, not by the hour, has developed an efficient industry. An inquiry into productivity in the sector is important to highlight the imposts that governments continue to add to home building, which cause delays, add costs and reduce labour productivity.

Governments have recently introduced a range of measures through the National Construction Code that will add around $25,000 to the cost of a new home. These regulations add additional upfront costs, but they also place additional restrictions on house designs that further reduce the supply of homes. These measures were introduced despite their respective cost/benefit analysis recommending that alternate options be pursued. These changes will also see new home buyers paying a higher cost for carbon abatement than any other households in the economy, further reducing the supply of housing. These are just the latest additions to the cost imposts that reduce productivity and constrain housing supply.

Perhaps the worst own goal from governments is the imposition of taxes on foreign owned building companies. State governments impose punitive rates of stamp duty on foreign owned building companies that prevent them from developing new homes. If the goal is to continue to increase the level of pre-fabrication, the industry will require access to overseas finance, and the repeal of planning restrictions that prevent standardisation of materials and building systems.

There are barriers in the design rules, approvals processes and financing arrangements, particularly for housing, that can make the use of prefabrication more difficult, if not impossible. These barriers are clearly impeding the productivity benefits that industry and governments understand and expect to flow from the prefabricated building sector. More information can be found here.

There are some common misconceptions regarding productivity in house building. This includes a misunderstanding of ABS 301 Res Bldg, which measures employment by building businesses. Direct employment by building businesses does not include those typically involved in onsite activities such as carpenters, joiners, electricians, etc. It measures direct employment of accountants, sales staff, lawyers, etc. Direct employment in the industry has increased since the GFC, as the industry has become increasingly vertically integrated, and with the rise in pre-fabrication and to navigate increasingly complex systems. This has occurred with support from overseas investors and results in more labour off-site, and less labour onsite.

Secondly, the rise in the number of trades persons, as measured by ABS 32 Construction Trades is not only a measure of trades in the building industry but across the economy. The rise in the number of trades people likely reflects, at least in part, the growth in trades in mining and public infrastructure sectors, concluded Mr Reardon.