Bureaucracy, red tape holding back building industry

The building and construction industry have been under the pump, so when it comes to inflation figures and interest rate movement, they get a little jumpy.

The industry has been on the front foot trying to manage the snowballing effect of supply chain difficulties, labour shortages and broader economic impacts.

Their peak national body has been arguing the case with Government and imploring them to lift their game to reduce the red tape impediments greatly affecting the industry’s ability to provide new homes in a timely manner.

With the recent release of ABS inflation figures seeing annual inflation hit 5.6 per cent during September, the highest in 5 months, Master Builders Australia (MBA) warn that housing costs remain a significant source of inflation pressures.

MBA chief executive officer Denita Wawn said that rental prices are up by 7.6 per cent over the past year – close to a 15-year high.

“The rental market continues to be hurt by a prolonged drought in new apartment building and the negative consequences of rising interest rates.

“There was a 4.9 per cent increase in new home prices over the past 12 months and housing costs have a major impact on wages and costs right across our economy.

“Taking decisive action to speed up the delivery of the new homes we need will help us win the battle against inflation more quickly.”

The industry is greatly concerned that the cost of building homes continues to be inflated through unnecessary delays and barriers including planning impediments, lengthy approvals processes and high developer charges.

They squarely say that the ball is now in the court of state and territory governments to deliver on their commitments on planning reform.

Ms Wawn said that for many builders and developers, initiating large-scale home building projects in the current environment is simply too risky.

“Despite all the work at a Federal level to pass housing legislation and invest in skills, the Government risks magnifying costs and regulatory obstacles with its far-reaching ‘Closing Loopholes’ Bill.

“The IR Bill means businesses will have even more of their time absorbed by compliance and red tape issues – instead of being out there building new homes.”

Over the past 70 years Australia has experienced extended periods of high inflation, disinflation, and until recently, long periods of low and stable inflation.

The CPI reflects the impact on the Australian economy of global influences, such as oil price shocks, as well as domestic effects, such as policies that impact the labour market and wage growth.

Although the CPI hovered around the RBA’s target range of 2-3 per cent for some time, Australia’s CPI has surged in the past 3 years.

ABS data shows that Australia’s inflation rate peaked at 8.4 per cent in December 2022, and the latest ABS stats show the annual inflation rate is at nearly 6.0 per cent, meaning it still sits at a level uncomfortably higher than the RBA would like.