Greater push needed on housing and productivity

“New home building and transport infrastructure are set to drive construction activity higher over the next few years with commercial building likely to retreat from record highs,” Master Builders Australia’s Chief Economist Shane Garrett said.

The February 2020 edition of Master Builders Australia’s Industry Forecast reports have just been published and contain projections of building and construction activity out to the 2024/25 financial year across the residential building, commercial building and civil construction sectors. Individual reports are available for each of the eight states and territories.

“Having been in reverse over recent years, we predict that new home building starts will bottom out during 2020/21 at around 159,000. We then expect that residential building will expand and take dwelling commencements back above the 200,000 mark in 2024/25,” Shane Garrett said.

“Australia needs around 200,000 new homes to be built each year to meet future population growth. Our latest forecasts indicate that we are set to fall considerably short of this requirement for a few years yet,” he said.

“Master Builders’ Federal Budget 2020/21 submission calls for an expansion in NHFIC’s mandate and for targeting the First Home Buyer Deposit Scheme at new homes going forward. Such actions would increase the annual volume of new home building and enhance the likelihood of matching housing demand,” Shane Garrett said.

“Accelerating the roll out of previously committed infrastructure projects will also help unlock new housing supply in affected areas and enhance the viability of potential new home building initiatives,” he said.

“We predict that commercial building activity will smash another record high this financial year before moving into reverse gear,” Shane Garrett said.

“Bolstering productivity growth is one of the biggest challenges facing our economy at the moment and this is best achieved by encouraging investment by firms in new plant, machinery, technology and buildings,” he said.

“From this perspective, the emerging downturn in commercial building is worrying and government should look at expanding investment in social infrastructure like schools, health and community facilities,” Shane Garrett said.

“As our Federal Budget submission outlines, productivity advances would also be helped by immediately dropping the company tax rate to 25% for small and medium businesses, as well as extending the $30,000 instant asset write off,” he said.

“Our economy is still growing well below trend. Carefully targeted initiatives aimed at stimulating building and construction can give it a big push in the right direction,” Shane Garrett said.