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Event: Interview with Michael McLaren, 2GB Afternoons
Date: 17 February 2025, 2:40pm AEDT
Speakers: Denita Wawn, CEO Master Builders Australia
Topics: Federal Election; Productivity Commission Report; Housing Crisis
E&OE
Michael McLaren, host 2GB Afternoons: Well, what do we do with the eternal questions? What’s driving up housing prices and driving down completions? Because that’s what we seem to be facing at the moment. The answer, as I said earlier, I think, to both of those questions, appears to be government. I think government is driving up housing prices and they’re driving down the rate of completion, or, put another way, the productivity of the construction sector. That certainly seems to be, in part, born out by this latest Productivity Commission report. It’s titled housing construction productivity: Can we fix it? Daniel Wood is the chief of the Productivity Commission. She’s been speaking about this. I mean, some of the numbers are staggering, like this, as the Fin Review reports, half as many houses are being built per hour worked today compared with 30 years ago, and that’s despite, you know, people now all having nail guns and all sorts of other things that should drive productivity in the construction sector but it’s going backwards. Not that the entire economy is going backwards, but construction seems to be going backwards – 12 per cent when factors such as higher quality and larger homes are factored in, compared with an increase in productivity of 49 per cent in the broader economy, something’s not right. Well, at the coalface, of course, is the Master Builders Association. Denita Wawn is the CEO, and she’s with me. Nice to speak again, Denita, thank you for your time.
Denita Wawn CEO Master Builders Australia: Absolute pleasure.
Michael: Okay. I mean, look, let’s just try to distill this in simple terms. There’s a productivity problem, it seems, at the coalface for construction. What’s causing it?
Denita: Well, unfortunately, there’s a lot of reasons why we can’t have affordable homes in this country, and they are, unfortunately, a whole range of supply issues. It starts from the very beginning of development, where the red tape and green tape is just astronomically expensive and time consuming, which of course, adds to the cost. It then takes us forever to get utilities and civil infrastructure into our new developments and our new suburbs, and then it continues on. We have industrial relations constraints. We have not enough people to work and of course, time is always money in our sector. If you’re not getting all of those 40-50 odd trades working in sync with each other, then it’s going to cost more. And of course, if there’s not enough skilled people, the rates are going to be high. So just along that entire building chain, we have increased costs. And on the flip side, we haven’t really introduced major innovations in the industry. So you want to add that all together, 40 per cent increase in costs in the last five years alone and a significant decline in productivity, and it is great, but sobering reading that the Productivity Commission has highlighted this today, given this is what we’ve been saying for years.
Michael: Yeah, okay, but I think what you’re really saying is governments have caused this. Government I mean, government control immigration. That’s what’s driving demand. Government control rezoning or zoning rules, okay, that’s what’s restricting supply. Government are the ones that reel out all the different colored tape that strangle your workers. It’s government, government, government, right?
Denita: Spot on, and it is all three levels of government. But interestingly, Master Builders Australia has just done research, and it says that 70 per cent of the Australian community say that the federal government need to be leading change in this area. They are the ones responsible for resolving the housing crisis. So, while it’s all three levels of government, the Australian community wants to hold federal parliament in charge of resolving housing. And we say that is critical in this next coming federal election. It is saying to both major political parties, what are you going to do about the supply of homes? What are you going to do about responding to this report that is absolutely spot on?
Michael: Okay, just on that though. One thing we learned during COVID was that the state governments actually still have a lot of power and clout. We forgot that, and then they were exercising those powers legally, maybe not responsibly, but legally nonetheless during COVID, under the constitutional arrangements, they still have some pulley. Now, I understand the federal government have a role to play, certainly on the demand side, because they pull the trigger of migration. But really, this is a state government and local council issue at its core, is it not? It’s the state governments that hold back the land releases, local councils to a degree. It’s the local councils that are the worst, I think my experience anyway, when it comes to all of these compliance certificates. I mean, half of them are just ridiculous. But of course, you don’t get the certificate, you don’t pay the $5,000 for this, and the $5,000 for that, you don’t get your right to occupy the premises. So, I mean, I understand, because people don’t understand how the constitution works, why they say federal government, but really, that’s not where the problem fully lies, is it?
Denita: No, it’s everyone’s. It’s all governments are responsible for the housing crisis we have. It’s simple as that, and you’re spot on. Every single government in this country is contributing to the housing crisis we now face. It is a situation that has occurred for years. People have been blind to it. They have ignored it. We acknowledge that there has been a National Cabinet decision between state and territory Premiers and the Prime Minister that they need to resolve these supply issues, but that was now, nearly 15 months ago, we’re still not seeing any action on the ground, and the longer this takes, the harder it is in terms of resolving our housing crisis. And we can’t just rely on the RBA to cut rates to fix the cost implications on the industry. This requires microeconomic reform at all levels of government to understand the implications they have on enabling us to build for all Australians. It’s as simple as that.
Michael: Mind you a rate cut will do nothing to help builders. A rate cut will only probably make the situation worse, because there’ll be more demand, right? People will start wanting to buy homes, build homes, get back into investing in real estate. So I’m not sure that’ll help us. But can you explain this? The Productivity Commission says over the last 10 years, so we’re not going back decades and decades. Just the last 10 years, the average build time for a detached house has increased from 6.4 months to 10.4 months. That’s nearly a 50 per cent increase, right? So, 40 per cent, so why? What’s going on there?
Denita: A range of issues. It includes the fact we have significant skill shortages. So where a builder would just schedule all the trades to come in, one after the other really quickly. That can’t occur anymore, because we simply do not have enough trades. We have an escalation, therefore, in the increase of those prices, we see just as bad with high rise apartments. That in part, again, is because of the shortage of trades, but also because of the inflexibility of the industrial relations system. CFMEU EBAs are highly ineffective from a productivity point of view. They are productivity sapping, and as a consequence, that is also blown out the time frames that cost to build, and therefore inflated costs. So, we need to look at this holistically. This is not an issue that you can just choose, pick and choose which issues you want to address. You’ve got to address all of them at all levels of government.
Michael: Just finally, again, to the state government level in New South Wales, obviously, they’re sort of, you know, realising with this mass migration, people are going to have to live somewhere, mostly going to want to live near the cities, well positioned places. And so now we’ve got all these sort of concentric circles being drawn on maps within 800 meters of metro stations and what not, that you can go higher than you could prior to the Metro being built. Now, I guess there’s some logic to that. But equally, when you have a development that has been approved, and then all of a sudden the rules change, the developer will want more out of that site than they could have got previously. So they go back to the drawing board, and the whole process begins again. That sort of churn without actually a brick being laid, does not help in the delivery of new homes, does it?
Denita: It doesn’t at all. It adds cost significantly. And what we also find is that it’s great going up, but you’ve got to make sure that you’ve got adequate infrastructure around it. You know, do you have substations that are actually going to enable another 1000-odd units on that load? Is the sewage system up to scratch? Do you actually have schools and hospitals and doctors and shops nearby? The list goes on.
Michael: Well the answer to the schools is no apparently, judging by what I read last week.
Denita: That’s right. And so what we’ve got to do is do this really well, ensuring that we don’t have stranded communities. And I know from the outskirts of Sydney, with new developments, there are many a stranded community that are simply not getting the basic infrastructure needs that they have, even though their houses are there. So that is also a significant planning problem as well, once you even, not even talking about just houses themselves. So this is a crisis. This is something that all governments have got to be held to account. And we say that voters have got a right, whether it’s at a state government, local government or federal election perspective, you’ve got to hold your politicians to account on this, because until you do, we’ll still get the same problems facing us for the next 10 years.
Michael: That’s right. That’s right. Good to speak Denita. We’ll speak again soon I’m sure. Thank you for your time.
Denita: Thanks so much.
Media contact:
Dee Zegarac
National Director, Media & Public Affairs
0400 493 071
dee.zegarac@masterbuilders.com.au