States will be asked to compete for a share of a $900m fund to boost competition and economic activity in the federal government’s latest play to improve productivity.
Federal Treasurer Jim Chalmers announced the National Productivity Fund on Wednesday in a speech to the Australian Business Economists in Sydney, where he acknowledged that productivity growth over the last full decade had been the lowest in 60 years.
The policy will allow states and territories to access funding from a “menu” of approved projects, each intended to help streamline commercial planning and zoning provisions or make it easier for developers to adopt new construction methods.
The treasurer said the new policies would be key in boosting the nation’s long stagnate housing supply and help the building industry finally break free of the cost hikes impeding new builds during the current labour shortages and material price hikes.
“This will incentivise states to achieve productivity gains through pro-competitive policies, choosing from a menu of options,” said Chalmers.
“It’s all about rewarding states with more revenue, where they deliver meaningful and measurable economic reforms.”
Mr Chalmers will also flag increasing competition as a key priority, with a Treasury report claiming a boost to the sector could bring GDP by up to $45bn a year, or about $5000 per household every year, and reduce prices by 1.45 per cent.
It’s expected two policies that will be prioritised will include “the adoption of trusted international product safety standards and developing a general right to repair”.
“More competition means a more productive and more dynamic economy, with better jobs, more choices and growth, and fairer prices,” Mr Chalmers added.
Builders are (mostly) on board
With the funding competition promising an influx in building activity over the coming years, Master Builders Australia thanked the Treasurer for putting productivity “back on the national agenda”.
“Productivity in building and construction has been in decline for too long, with labour productivity down 18 per cent over the last decade,” said CEO Denita Wawn.
“Productivity is more than a buzzword. When productivity is down, prices go up and our ability to build the homes and surrounding infrastructure communities need is slowed down.”
The move comes only a week after the group released an analysis of the nation’s lagging build times. According to the figures, build times have increased over 40 per cent in the last 15 years alone, going from 9 months on average to build a freestanding house from approval to completion in 2009 to 12.7 months in 2024.
Ms Wawn hoped that this renewed focus on planning and incentives to support modern construction methods would mean a more positive outlook for the nation’s housing market.
“A number of governments around the country are looking to utilise modern methods of construction through the use of prefabricated or modular building products,” she said.
“This Fund will add to housing initiatives already on the table to support a faster roll out of housing across state and territories.”
However, experts from the Australian Industry Group are still doubtful that yesterday’s announcement will be enough to “shift the dial” on the nation’s lagging productivity.
“Our productivity, which is crucial to our economic success, national prosperity and lifting living standards, has virtually stood still since the mid-2010s,” said the group’s chief executive Innes Willox.
“Unfortunately, a relatively small fund to encourage states – who have been amongst the worst offenders at stifling productivity – is unlikely to shift the poor policy and regulatory outcomes that have hobbled productivity growth.”
“It is imperative that this fund actually achieves positive outcomes where it can. We have seen other funds like the National Reconstruction Fund so far struggle to gain any significant traction.
“Throwing money at our productivity problems is no substitute for actually implementing real policy reforms.”
Willox claimed that the minimum required for moving the productivity needle would be “sensible policy settings” that cut out redundant regulation, development of a competitive tax regime, an upgrade to our skills base and allowances for a “more flexible workplace relations system”.
“Without those enablers, we are fighting the productivity battle with one hand tied behind our back,” she added
“The Treasurer deserves support for at least starting a long overdue national conversation on the need to boost productivity. He now needs his colleagues at federal and state level to get serious about fixing the problem.”
