Building Australia’s Future: Why Productivity Reform Is the Key to Stronger Growth and Smarter Regulation
- Carmel Homes
- Sep 18, 2025
- 4 min read
Written by Adib Adely, Director of Carmel Homes
Australia faces a paradox. We are a prosperous nation with world-class builders, engineers, and planners, yet getting homes, infrastructure, and energy projects off the ground has become harder, slower, and more expensive. The Productivity Commission’s Growth Mindset: How to Boost Australia’s Productivity (July 2025) puts it bluntly: productivity growth – the engine of higher living standards – has stalled. Meanwhile, the Housing Industry Association (HIA) has called for a major overhaul of regulation, warning that red tape is strangling housing supply and inflating costs.
To deliver the homes, infrastructure, and clean energy Australia needs, we must embrace productivity reform, not deregulation for its own sake, but smarter regulation that enables building rather than blocking it.
The Productivity Slowdown and What It Means for Building
Productivity growth has been the foundation of rising Australian living standards for decades. In the 1960s, it took the average worker 10 minutes to earn enough for a loaf of bread. Today it takes four.
Similar gains made air travel, leisure, and housing more accessible, until recently.
As the Productivity Commission shows, labour productivity growth has averaged just 0.4% per year since 2015, compared with a 60-year average of 1.6% . If Australia could lift productivity back to its historic average, the typical full-time worker would be $14,000 a year better off by 2035.
For the building industry, this slowdown is not an abstract economic figure. It shows up in rising construction costs, slower housing delivery, and regulatory bottlenecks that delay essential projects like renewable energy infrastructure and new housing estates.
Regulation: The “Everything-Bagel” Problem
Builders know this problem all too well. The National Construction Code (NCC) has nearly doubled in size in a decade, from 1,500 pages in 2011 to almost 3,000 by 2022. Each update requires builders to redesign plans, retool supply chains, and absorb extra compliance costs. A single-storey home now costs around $8,000 more to build than before the current NCC; a double-storey, about $20,000 more.
Many of these standards, better accessibility, improved energy efficiency, greater safety, are worthy goals. But, as Productivity Commission chair Danielle Wood noted, “not delivering as much housing or infrastructure, or crimping future innovation and growth, are also deeply undesirable outcomes.”
This echoes a central theme from Ezra Klein and Derek Thompson’s 2025 bestseller Abundance: our problem is not too much government, but government designed in a way that makes building almost impossible. The authors call this “everything-bagel liberalism”, a system where well-intentioned rules accumulate into a procedural kludge that empowers veto players, slows progress, and produces scarcity.
Housing Scarcity and “Chosen Scarcity”
Housing is the most visible casualty. Despite a federal target to build 1.2 million homes by 2030, Australia is on track to fall more than 260,000 short. Meanwhile, house prices hit a record high in 2025, 14 times the average wage, compared with just 6.5 times in 2000.
As Abundance argues, this is not a natural inevitability but a case of “chosen scarcity”. Rules around zoning, design standards, parking minimums, and environmental reviews create so many choke points that delivering new supply becomes too slow or costly. In Sydney, a modest two-bedroom terrace, largely untouched since the 19th century, can fetch $1.5 million.
Smarter regulation, not weaker regulation, is the answer. As both the Productivity Commission and Abundance argue, we need “yes, if” frameworks rather than “no, unless.”
Productivity Reform for Builders: Where to Start
1. Streamline Planning and Approvals
The PC recommends faster, outcome-based approvals for energy and housing projects. This doesn’t mean sacrificing standards but aligning them with clear outcomes, like emissions cuts, accessibility, or affordability.
2. Modernise the National Construction Code
Regular updates are necessary, but they must be manageable for builders, especially small firms that make up most of the sector. A smarter system would phase in changes predictably, bundle adjustments, and focus on measurable outcomes rather than prescriptive inputs.
3. Boost Dynamism in the Construction Industry
Investment in new building technologies, digital tools, and modular construction methods can deliver productivity gains, if regulation and procurement processes don’t stifle them.
4. Build State Capacity
As Abundance stresses, the issue is not the government doing too much but not doing it well. Builders need regulators and agencies with the skills, staff, and authority to approve beneficial projects quickly and consistently.
Why This Matters: A Politics of Abundance
The payoff of reform is not only economic but political. Australians are losing faith in institutions when they see housing targets missed, infrastructure delayed, and costs rising. Delivering visible progress, homes actually built, bills actually lowered, transit actually improved, is the surest way to restore trust.
Klein and Thompson call this the politics of abundance: when people see that governments can deliver the things they want, support for reform follows. The Productivity Commission calls it a growth mindset: recognising that smarter rules, not more rules, will unlock prosperity.
Choosing Growth, Choosing Building
Australia’s future depends on our ability to build, homes, energy systems, infrastructure, and industries of the future. Productivity reform is the key to doing so affordably, sustainably, and at scale.
The question is not whether to regulate, but how. By streamlining approvals, modernising codes, and focusing on outcomes, Australia can turn today’s housing and infrastructure scarcity into tomorrow’s abundance.
As the Productivity Commission warns, productivity growth isn’t everything, but it’s almost everything. And for builders, regulators, and policymakers alike, it is the foundation for building Australia’s future.
Comments