Klein and Thompson’s Abundance: How We Build a better Future

Can future-oriented growth restore government capability and solve scarcity?

 

It's interesting the way some books arrive at the appropriate moment. This book had its genesis in articles written by the two authors a few years ago for their respective publications in the US, The Atlantic and The New York Times, and in Abundance they argue that liberalism has not only lost the ability build and deliver projects, but liberals and progressives have prevented building necessary things such as housing, renewable energy and public transport in the US through legislation, rules and regulation. For example, environmental regulation stops replacing fossil fuels with green energy and local zoning prevents housing developments. Basically, ‘To have the future we want, we need to build and invent more of what we need.’

 

One has to be careful about terminology. In Australia and Europe ‘liberalism’ generally means limited government and less intervention, which in the US would be called libertarianism, but the book is about the US, where ‘liberalism’ means civil liberty, social justice and regulation of industry. In the US, liberals and progressives are left or centre-left and opposed to conservatives on the right or centre-right (although these days the centre in the US is much diminished). Klein and Thompson say ‘a politics of abundance … asks what it is that people need and then organizes government to make sure there is enough of it … sometimes governments has to get out of the way, as in housing. Sometimes it has to take a central role.’

 

The majority of the book looks at the problems and issues involved in the social and political economic issues of housing, energy, health, and innovation. The problems of slower development and less delivery are well-known, and the outcome is various forms of scarcity: too little new housing, energy, medicines, infrastructure and technology. Klein and Thompson say ‘For years, we knew what we needed to build to alleviate the scarcities so many faced and create the opportunities so many wanted, and we simply didn’t build it.’

 

Klein and Thompson focus on the supply-side of the economy and believe economic growth should be revived before it is redistributed. They show the Biden administration loaded the CHIPS and Science Act with requirements to favour minority, veteran and female-owned businesses, and its industrial policy became hamstrung with red tape. They believe the major challenges of the twenty-first century, like the housing and climate crises, require a reorientation in ideas and a renewed emphasis on economic growth. 

 

One of the strengths of the book is its use of current relevant research on the issues. The authors are across contemporary thinking on these, and for those who are not engaged with policy debates this will be a valuable introduction. For those who follow these issues, there might not be much in the way of new information, however, that does not detract from the overall usefulness of these chapters [1].

 

There are many examples of the problems. They start with the housing crisis, where housing scarcity is due to restrictive zoning, regulations, requirements, and community veto, which collectively prevent housing from being built where it is most needed and raise house prices. In the US, cities and states with Democrat Party (i.e. progressive) administrations build so little housing that it has become unaffordable, while Texas, a state known for fiscal conservatism and a libertarian attitude toward business, has led in building both green energy and affordable housing. Exclusionary zoning laws and the right to appeal development proposals have prevented building of new housing in states run by progressives. 

 

California features in the examples. In one the only way to build a new social housing project in San Francisco with 145 studio apartments for chronically homeless people was to reject government funding and rely on private philanthropy, because that did not come with costly requirements to employ minority-owned or woman-owned contractors and meet onerous building standards. Another is California’s failure to build high-speed rail, after decades of development and billions of dollars in funding, in part because federal funding was tied to measures to reduce air pollution in poor communities, which determined where work started. 

 

Progressive policies have reduced the ability to build because environmental laws (in the US) allow anyone totake developers to court add delay, uncertainties, and cost to projects. The role of the National Environmental Policy Act is the most important issue here. While this legislation may have originally been intended to reduce pollution and prevent new fossil fuel power plants opening, they are now used to prevent new housing, solar farms and transmission lines, as permitting across state lines runs into the localism that also stops housing projects. The abundance approach emphasises enabling supply of these economic inputs such as energy, housing, transport and skilled workers, and making them plentiful and cheap.

 

Klein and Thompson advocate focusing on outcomes and outputs instead of processes, procedures and inputs, on how much actually gets built as a result of government spending rather than the amount of spending. They say the ‘big government-small government divide is often more a matter of sentiment than substance’ and their solution is to break through coordination problems.

 

The book also discusses funding for research in health and science. The first problem here is the process of grant application and assessment, which has ended up with a lot of ‘safe’ research on well-understood topics that does not produce breakthroughs. Not funding research with a high risk of failure also excludes new ideas that could lead to major new treatments or inventions. The second problem is that research funding has become process-driven, with up to half researcher’s time and money going on applying and reporting, rather than actually doing research. The third problem is the poor track record of turning inventions into products and industries in the US, where solar cells and microchips were invented but production is now in China and Taiwan. ‘The US needs a plan to build what it invents.’

 

Some of the most interesting parts of the book are on successful programmes run by governments during crises or emergency situations. Two examples are the development of penicillin in World War 2 and the rollout of vaccines during the COVID pandemic. Both show that the ‘mythology of invention’ as ‘eureka moments’ of discovery is wrong. Klein and Thompson argue ‘Politics should take technology more seriously. Innovation can make impossible problems possible to solve, and policy can make impossible technologies possible.’

 

The fortuitous discovery of penicillin in 1928 is often cited as one of the most important scientific developments of all time. However, ten years later there was no method to manufacture penicillin in bulk and only a handful of patients had been treated, some of whom died. In 1941, the U.S. government was looking for medical technology that would be useful during the World War, and they picked up the UK invention of penicillin and created a large team of scientists, technologists, and engineers to develop methods of mass production and distribution. The number of lives saved since the 1940s may be ‘hundreds of millions, if not billions.’ The lesson of penicillin is that ‘implementation, not mere invention, determines the pace of progress.’

 

The second example is Operation Warp Speed, which shortened the development time for a new vaccine from 10 years to 10 months in 2020. Again, this took a large team of many specialists, but the success of the programme was due to the removal of barriers to development such as extended trials and grant funding processes. Solving the science of mRNA, organising clinical trials, manufacturing and distributing the vaccine was all done by industry, but the government funded and coordinated the process, bought the vaccines, then provided them for free. The pandemic and its aftermath provide another lesson on the importance of government capability, from managing test kit distribution to vaccine deployment. 

 

It is not until the penultimate chapter that the book gets to the solution to the problems. In a section called ‘The Bottleneck Detective’ the authors argue is that government has to identify and remove the barriers to progress that have been created over the last few decades, ‘to recognize that wise policy begins with an investigation rather than an ideology.’ Sometimes this is about removing restrictions, sometimes it requires new programs, sometimes prizes or incentives like advanced market commitments will work (i.e. committing to buy a new product to accelerate its development, like vaccines or green cement). 

 

Although it is clear there are coordination problems in research grants, public administration, rules and regulations on energy, infrastructure and housing, the problems are distinct and different in each case, and they each have vested interests that will oppose any reforms. Can committing to future-oriented growth be the solution? Can government’s ability to act be restored? What is the right balance between a market- and state-led approach? 

 

One problem with the book is it focuses exclusively on the United States and how these issues are playing out between blue Democrat and red Republican states, where the economies of red states like Texas and Florida have grown significantly faster over the last few years than blue states like California and New York. Abundance is directed at progressives in the US, and wants to make it easier for the federal government there to do big things. That is understandable because, firstly, the authors are American, and secondly, how these issues managed in the US is highly specific and particular to that country. On the other hand, it's not like other places in Europe and Australia don't have similar difficulties in resolving these issues.

 

A second problem is a lack of detail on how, and how much, Klein and Thompson want to change regulations affecting infrastructure and housing developments. It is one thing to acknowledge the trade-offs required, but they do not go into details about how or which environmental laws should be amended and how NEPA should be revised. They say ‘What is needed here is a change in political culture, not just legislation.’ A change to less regulation and more growth is a challenge to the degrowth movement’s objectives, NIMBY objections to more housing in affluent suburbs, and conservationists opposing solar and wind farms. The ‘book has offered a critique of the ways that liberals have governed and thought over the past fifty years. It also reflects an opportunity open to liberals now.’  

 

The Abundance agenda of ecologically friendly economic growth, regulatory reform, more public investment in housing, infrastructure and technological progress, is an attractive idea. It will not appeal to anyone on the further extremes of the left or the right. Critics on the left will argue this undermines social democracy and the welfare system, and deregulation favours corporate interests. Critics on the right will argue it is anti-market, that building state capacity is about big government and managing the economy. Neither are accurate. 

 

There is, however, is something of a disconnect in Klein and Thompson’s agenda, and how to reconcile the deregulatory emphasis of Abundance with increasing government’s ability to develop policy and deliver projects will be an ongoing debate.  They conclude ‘What we are proposing is less a set of policy prescriptions than a new set of questions around which our politics should revolve. What is scarce that should be abundant? What is difficult to build that should be easy? What inventions do we need that we do not have?’ Their answer is to confront the reasons for scarcity, to increase supply, and to turn away from a politics of scarcity toward a politics of abundance. 

 

 

Ezra Klein and Derek Thompson, 2025.  Abundance: How We Build a better Future, Avid Reader Press/Simon & Schuster. 

 

 

 

 

[1] Two other books recently published on the issues in the US raised in Abundance are Why Nothing Works: Who Killed Progress—and How to Bring It Back by Marc Dunkelman, which mainly looks at building and infrastructure projects, and Stuck: How The Privileged and the Propertied Broke the Engine of American Opportunity by Yoni Appelbaum, on the decline in social mobility.

 

 

 

Report on Housing Productivity has New Data but No New Ideas

 Did the Productivity Commission miss an opportunity to change the debate? 

 

The Australian Productivity Commission has released a research paper on the residential building industry, with new data on its declining productivity and recommendations to improve it. The Productivity Commission (PC) is an advisory body that provides research and analysis to the Treasurer and, as an independent agency mainly staffed by economists, has a long history of advocacy for market-based solutions. It plays an important role in developing policies through inquiries done at the request of the Australian Government on policy or regulatory issues, does its own research across seven work streams, and has benchmarking performance monitoring responsibilities.

 

The research paper is titled Housing Construction Productivity: Can We Fix It?  A team of eight people worked on it, there were three roundtables with the Urban Development Institute of Australia, the Housing Industry Association and the Australian Local Government Association, and over 40 organisations and individuals participated in the research. There are new estimates for a set of proxy measures for dwelling construction productivity that ‘encompass the entire homebuilding process, from site preparation and project management to the installation of fixtures and fittings’.

 

This post looks at the key outcomes of the research. These are the five issues that have contributed to falling productivity and the seven ‘reform directions’ the paper has identified. How significant are these outcomes?  How should the reforms be implemented? What other industry issues or characteristics have not been considered relevant or important? 

 

 

Productivity Performance

 

Because there are no ABS estimates of productivity for Australian dwelling construction the PC developed a set of labour productivity proxies. This involved estimating outputs and labour inputs from ABS construction statistics across the two industries of residential building construction (builders and developers) and construction services (tradespeople that build the dwelling). The claim is these ‘productivity proxies capture the broad underlying changes in productivity in the sector’. 

 

Figure 1 shows the PC’s measures of productivity in the dwelling construction industry declined between 1994‑95 and 2022‑23 as:

·      The number of new dwellings built per hour worked declined 53%;

·      Dwelling construction gross value added per hour worked declined 12%; while

·      Labour productivity in the broader economy increased 49%.

 

Figure 1.  Housing productivity

 

 

 

The average time taken to complete new housing has increased significantly. ‘In 2023‑24, the average time to complete a single detached house was about 10.4 months, up from about 6.4 months a decade earlier. The average time taken to complete new townhouses rose from about 9.4 months to 12.9 months, and for new apartments, from about 18.5 months to 27.8 months (though this only covers apartments in New South Wales, Victoria and Queensland)’. Higher density construction performed better than houses according to the PC, in Figure 2. 

 

Figure 2.  Houses compared to higher density 

 

 

Methodological issues with these proxy measures include: indexation and the choice of 1994-95 as the base year; lack of data on annual growth rates; how accurately construction services are accounted for in hours worked; and the use by the PC of their own deflator. The ABS productivity measures for the whole of construction show no growth but nothing like the decline the PC has found. In a 2022 post on construction productivity for the ABS sectors of Building, Engineering and Construction services I found no significant fall in GVA per person employed between 2007 and 2021, in Figure 3.

 

Figure 3. Australian construction productivity by industry sector

 

 

 

Factors Driving Poor productivity

 

The PC discuses five issues that contribute to falling productivity in housing construction. The PC’s issues are: 

 

1.  Complexity and slow approvals –the development and construction approval process is complex, with major development projects such as new housing estates and apartment complexes taking ten years or more. After approval delays can continue as projects need construction certificates and infrastructure connections. Because construction is highly sequential, delays and disruptions can create ‘cascading failures’, which push up costs. 

2.  Fragmented - construction is done by small firms and individual subcontractors and is one of the least concentrated industries in Australia. The combined market share of the largest four firms is the lowest of any sector, at 12% in 2017, and the average residential building construction firm employs less than 2 people. ‘To a degree this is a function of the development and building process and subcontracting’, however:

·      Regulations differ across geographic areas, which makes it hard to replicate a development or construction process across the country and for successful firms to scale up;

·      Building regulation tends to be project‑based rather than firm‑based, requiring new regulatory approval for each new project. In other industries, regulations are a fixed cost that encourages firms to scale up to spread those costs over a larger revenue base. In construction, if a builder scales up, regulatory costs scale up proportionally, reducing or even negating the benefits of expansion;

·      Project risk management and a regulatory focus on the builder as head contractor leads to highly disaggregated specialisation and outsourcing of work. 

3.   Lack of innovation – innovation activity and spending in construction is low compared to other sectors. Only 35% of all construction firms are ‘innovation‑active’ and the sector has been slow to adopt digital technologies and new processes like prefabrication. Estimates are less than 5% of total construction is prefabricated. ‘Low levels of innovation are due to fragmentation, industry culture, lack of direct benefits to firms from innovation and the ‘chilling effect’ of frequent regulatory changes’ [1].

4.   Regulatory burden – to develop and construct housing requires compliance with layers of regulation on: 

·      Where housing can be built and state planning that affects which land is zoned for residential development;

·      How housing should be built and the National Construction Code’s minimum standards on how buildings are constructed; 

·      What housing should look like, through local government planning requirements for setbacks and roof pitches; 

·      Other indirect regulations, such as environmental regulations; and

·    The regulatory burden is increasing which ‘unambiguously increases the cost of development and construction, and ultimately the cost of housing for Australians’.

5.   Workforce issues – the sector struggles to attract and retain some skilled workers because of ‘stagnating apprenticeship commencements and completions, restrictive and inflexible training pathways for trades, and competition for labour from public infrastructure projects in recent years (at least for the higher‑density housing sector)’. Regulatory settings contributing to low labour mobility are inconsistent occupational licensing accreditation across jurisdictions and limited pathways for migrants to join the construction workforce.

 

The PC uses the housing sector, housing construction and residential construction to describe the industry that the ABS calls residential building. In discussing the issues the paper frequently moves between total construction and residential building. This might be because data is often only available for the whole of construction, but it is not helpful as it obscures the points being made. Residential building is completely different from engineering construction and there are limited similarities with non-residential building, which together have a larger share of construction industry employment and output than residential building. 

 

Reform Directions

 

To improve housing construction productivity, the PC identified seven reform directions:

 

1. Coordinated and transparent planning approvals and appropriately funded regulators – governments need to improve coordination in the planning approval process, and should consider establishing coordination bodies to speed up the process and address delays such as the Queensland State Assessment and Referral Agency. Governments need to adequately resource regulatory and service delivery agencies, ensure there is sufficient accountability, and set performance targets for planning approval decisions.

2. Review building regulations – governments should commission an independent review of the National Construction Code and its implementation by state and territory governments. A review should consider the NCC’s objectives, the regularity of code updates, consistency in implementation by governments’ in approvals, certification, compliance and enforcement, and impediments to innovation and local government rules that affect construction of dwellings.

3. State and territory governments should continue implementing ratings systems that improve information available to consumers about new and existing building quality to help create a price premium for higher quality builders and building.

4. There are opportunities to increase diffusion of technology across the housing construction sector, similar to the government‑funded extension services provided to agriculture. 

5. Governments should consider the adequacy of public research and development funding for housing construction to improve productivity performance. And better information, including rating schemes, could improve building quality.

6. Governments should continue to reduce unnecessary regulatory impediments to greater uptake of modern methods of construction in housing construction, including prefabricated and modular construction.

7. Improve workforce mobility and flexibility – governments should continue removing occupational licensing exemptions and conditions and work towards national consistency, address barriers to migration to improve labour supply, and improve training pathways (including microcredentials) and support for apprentices. 

 

Implementation is Missing

 

Discussion on implementation of the reform directions is not included in the paper, a serious oversight that leaves the recommended directions rudderless. For example:

·      How to reform planning if state governments are not prepared to make difficult, unpopular decisions on allowing development while restricting appeals and reviews of planning decisions? How does the PC propose coordinating planning and approvals across the 537 local councils in Australia?

·      Who will finance and who should undertake the independent review of the National Construction Code and its implementation by state and territory governments? Over the last decade the Commonwealth Government has actually been reducing funding for the Australian Building Codes Board, and the PC could have usefully recommended increasing funding;

·      What about the relationship between building defects and the National Construction Code? The reason there is a Code is to set standards and measure compliance, and state variations typically reflect different conditions [2]. The states are also responsible for the regulators that are dealing with the plague of defects in apartments built over the last ten years, their programs to replace flammable cladding that was illegally installed, and they all have different licensing criteria for builders. How would ‘consistency in implementation by governments’ in approvals, certification, compliance and enforcement’ be achieved?

·      How can funding for public research and extension services be increased when competing with priorities like defence, health and aged care?

·      What are the ‘unnecessary regulatory impediments to greater uptake of modern methods of construction in housing construction’? if these are not identified how can they be reduced? Why didn’t the PC draw on the 2024 research on regulatory barriers by Swinburne University and  the Housing Institute of Australia  or the 2023 prefabAUS industry roadmap for example? 

 

Other Industry Issues

 

A number of other industry issues or characteristics have not been considered relevant or important. Not discussed in the research paper are:

·      The volatility of approvals, commencements and demand means the building cycle from year to year can vary by 10% or more – one solution is to allow builders a tax free sinking fund so in good years money can be saved to be used to finance projects during downturns;

·      Industry contractual relationships – subcontracting is flexible and a method to manage costs and risk but direct employment has a smaller span of control and is more efficient, however, builders will only increase direct employment if there is continuity of work (see above);

·      The cyclical boom-bust nature of residential building also makes increased modular and prefabricated housing and successful industrialisation is less likely than in manufacturing;

·      Improving project management through training and education would significantly improve productivity, particularly for smaller firms. This should include access and training on digital platforms and AI enhanced systems;

·      The reluctance of banks to finance modular and prefabricated houses - although this is starting to change the traditional method of financing and standard contracts do not work for prefab;

·      The lack of standards and an industry quality assurance accreditation system for modular and prefabricated housing - there is work being done on these but nothing official so far;

·       The lack of a building products compliance system – the exception is Queensland’s 2017 Non-Conforming Building Products law that creates a chain of responsibility and requires the supply chain to take responsibility for building products being compliant and fit for purpose;

·       The potential of digital platforms and AI enhanced systems to increase productivity;

·      Automated planning assessment and compliance with codes.

 

Vocational Education and Training

 

The PC focused on occupational licensing, but there is no discussion on vocational education and training (VET) beyond noting the need to improve training pathways. This is bizarre, because beyond attracting and retaining new entrants are many issues with access, curricula, articulation and the new skills needed with digitisation and automation. To be fair, the PC references their 2020 review of the National Agreement for Skills and Workforce Development and the 2024 Department of Employment and Workplace Relations report Skills For Tomorrow: Shaping The Future of Australian Apprenticeship, Strategic Review of The Australian Apprenticeship Incentive System. Nevertheless, in this paper the discussion is limited to a few points on occupational licensing, although there have been other reports with detailed recommendations on Australia’s VET sector that could have been built upon. 

 

The 2019 review of Australia’s VET by Steven Joyce, a former New Zealand Minister for Tertiary Education, Skills and Employment made 71 recommendations. The key issues identified were:

·      Variations in quality between providers and the relationship between the regulator and providers;

·      A cumbersome qualifications system that is slow to respond to changes in industry skills needs;

·      A complicated and inconsistent funding system that is not well matched to skills needs;

·      A lack of clear and useful information on vocational careers for prospective new entrants;

·      Unclear secondary school pathways into the VET sector and a dominance of university pathways;

·      Access issues for Aboriginal and Torres Strait Islander Peoples and second chance learners seeking skills that will help them obtain and stay in meaningful work.

 

The Joyce review concluded ‘the sector needs to be more active in emerging skills areas in order to be seen as a more modern method of education’ and the essential role for VET is training new entrants and upgrading the skills of current workers as digitisation and automation spread through the economy, including support for second chance learners needing foundation language, literacy, numeracy and digital skills.

 

A more recent 2024 review of NSW VET made 21 recommendations, including better governance, funding and pricing, with industry compacts, regional skills plans, microcredentials, updated curricula, and apprenticeship roadmaps. Other recommendations were for the government to employ apprentices, particularly in regional areas, provide support to VET teachers, simplify the complex and highly prescriptive approach to VET qualifications, expand pathways to entry for teachers, and invest in facilities. 

 

 

How Significant Are The Outcomes?  

 

None of the productivity issues in the PC paper are new and can be found in many other reports on the industry, and the recommended reforms are peculiarly limited. For context, below are the recommendations of four comparable reports on construction productivity that show how constrained the PC’s reform directions are, two in 2024 from the NSW Productivity and Equality Commission and McKinsey, and two older reports from the CIOB on the U.K. and the McKinsey Global Institute on the U.S. 

 

The 2024 NSW Productivity and Equality Commission report Review of Housing Supply Challenges and Policy Options for NSW found barriers to housing supply included high construction and borrowing costs, capacity constraints in the construction sector, and bottlenecks in the development process, with over half of the 32 recommendations on planning. It recommended reforming planning to streamline the development process and reduce approval times, and reviewing the Design and Place State Environmental Planning Policy because ‘prescriptive rules’ on land block innovation. Other recommendations included education and skills training, business regulations and tax, improving infrastructure and transport, replacing stamp duty with a land tax, establishing an Urban Development Program to report on the housing market and a housing supply council to advise on housing targets, and incentives for local government to meet targets. It argued for non-regulatory approaches wherever possible, and avoiding excessive regulation. The NSW report’s planning reforms were controversial because they would lower the quality of high density apartments, but the range of recommendations show a more ambitious agenda than the PC’s conventional and well-known seven reform directions is both possible and required. 

 

A 2024 McKinsey Insights paper called Construction Productivity is No Longer Optional identified seven issues holding back measurable productivity gains and made five recommendations: adopt project steering with production rate metrics instead of conventional project management; nurture a supplier ecosystem across projects; upskill project staff; scale initiatives across project portfolios; and apply technologies such as generative AI to streamline and accelerate engineering, procurement, and construction.

 

That report followed up on The McKinsey Global Institute’s 2017 Reinventing Construction Through a Productivity Revolution, which was particularly blunt: ‘while other sectors from retail to manufacturing have transformed their efficiency, boosted their productivity, and embraced the digital age, construction appears to be stuck in a time warp … The industry is extensively regulated, very dependent on public-sector demand, and highly cyclical. Informality and sometimes corruption distort the market. Construction is highly fragmented. Contracts have mismatches in risk allocations and rewards, and often inexperienced owners and buyers find it hard to navigate an opaque marketplace. The result is poor project management and execution, insufficient skills, inadequate design processes, and underinvestment in skills development, R&D, and innovation’. Changes are needed in seven ‘key areas’: regulations; contractual framework; design and engineering; procurement and supply chain management; onsite execution; digital technology; and upskilling the workforce. Changes in these areas would also benefit Australian housing productivity. 

 

A 2016 CIOB report Productivity in Construction had the subtitle Creating a Framework for the Industry to Thrive. This overview of the issues in the UK says a number of times the problems are well known, as are solutions that have been proposed. Some of the recommendations that would also apply to Australian housing were:

·      Create construction innovation and excellence hubs and promote, through incentives, clusters of construction-related businesses in key regions;

·      Improve leadership and behavioural understanding and shift the emphasis in construction thinking and policy making from industry processes to behavioural aspects of construction;

·      Develop new business models and financial models because the business models currently used inhibit progress on productivity;

·      Get better data and measures of construction productivity, and compile built environment satellite accounts, similar to those produced for tourism, to capture inputs from related professions, materials, manufacturing, plant and machinery suppliers [3]. 

·      Invest more heavily in attracting new entrants to the industry and improve the skills of the existing workforce. Investing in management professionals has great potential to improve construction productivity. 

 

Conclusion

 

By the middle of the twentieth century residential building had developed the materials, methods and processes largely in use now. While there have been changes like more electrical appliances and offsite manufacturing of trusses, windows, doors and cabinetry, the structure and services like electricity, water and plumbing in a 1960s dwelling are those found in a new build today. Houses are often larger and apartments smaller than a few decades ago, but how they are procured and built, and what they are made of, has not substantially changed in decades. Fundamentally, that is also why the level of productivity has not changed [4]. 

 

The PC has focused on regulation and planning as the main issues, but these are just two of the factors that affect onsite productivity, and arguably skills, technology and project management are more important. Also, planning and zoning decisions have no effect on other important supply side issues such as the construction and finance costs for new housing, constructing the infrastructure needed for new developments, and the rate of conversion of approvals into commencements by developers. 

 

A major problem is not what is in the PC’s research paper, but what has been left out. Without question the five issues driving productivity are important, however these are long-standing and well-known, and the paper says nothing new about them. Similarly, the seven reform directions have been suggested many times by many different industry analysts and organisations. Missing is any discussion on implementing these reforms, or how barriers to their implementation might be addressed, which undermines both the usefulness of the research and the relevance of the recommended reforms.

 

There are several other industry issues not discussed, like the volatility of the building cycle, the lack of standards for offsite manufacturing, and product compliance laws. It is disturbing that the PC does not appear to understand why there is a construction code and how it works. Improving productivity through better project management and reform of the VET system are also overlooked. There is no discussion of digitisation and automation in residential building. Apparently, as far as the PC is concerned, digital tools and platforms, AI enhanced systems and automated planning and code compliance checks are not relevant to productivity. 

 

The PC’s recommended reforms are peculiarly constrained and limited, and the paper is a missed opportunity for introducing new ideas and a failure of imagination. Although an agency like the PC is not expected to be imaginative, residential building is stuck with a well-established system of production that will only change when and if there is a clearly superior method of delivering quality housing that is also profitable. Tinkering with regulation, the NCC, planning and approvals processes, and occupational licensing might make a difference at the margin, but will not deliver the big improvement in housing productivity that is required. 

 

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[1] Innovation in Australian construction was discussed in a 2024 post, incremental innovation in this post, and innovation and procurement in this post. 

 

[2] The PC does not seem to understand how the construction code works. For example, in Far North Queensland houses have to withstand a category 5 cyclone with roof tie downs, window shutters and a safe room, but in rural Victoria bushfires are the main issue and houses have to be of non-combustible material, have cavity barriers and provision for escape. See also https://theconversation.com/better-building-standards-are-good-for-the-climate-your-health-and-your-wallet-heres-what-the-national-construction-code-could-do-better-166669  

 

[3] I have argued for a built environment satellite account for many years, including the post here and a 2019 journal article here. 

 

[4] With current technology, tools and processes, construction may be close to the efficiency frontier, see Is Productivity Growth in Construction Possible?