The construction sector is one of Australia's largest and is vital to the functioning of the economy. It plays a critical role in meeting Australians’ housing needs, delivering the nation's infrastructure pipeline and making the energy transition. By all measures, construction has been underperforming in the productivity stakes. It's size and interconnectedness mean it has a significant impact on the national economy and is a key driver of Australia’s broader productivity weakness.

This report identifies a range of factors holding back construction industry productivity, including tax settings, regulation, lack of technology adoption, lack of innovation, unpredictable pipelines of work, poor collaboration, a fragmented sector and small firm size. The report notes many drivers of productivity, such as technology adoption, require scale and certainty. Australia has a predominance of small construction firms as a result of the cyclical and segmented nature of the industry and regulatory settings. 

Australia has been slow to deliver on critical infrastructure projects and has not built enough homes to keep up with demand. This report calls for a focus on policies to lift productivity in construction.

Recommendations

• Make local and state government regulations more streamlined and consistent.
• Help to smooth out variability in demand by creating a more consistent, predictable pipeline of construction work through their infrastructure and social housing programs.
• Better align the relative tax rates for individuals and small and large businesses as part of broader reform of the entire tax system.