Speech by The Hon Brendan O’Connor MP

Address to the Residential Markets Summit, Parliament House, Canberra

Location: Parliament House, Canberra

Thank you for inviting me to the Residential Development Council’s Residential Markets Summit. I’m very pleased to be able to deliver the Keynote Address at today’s Summit, and to speak directly with you as a sector as Minister for Housing, Homelessness and Small Business.

Together, we share a vision for Australia’s future – we want all Australians to have a place to call home.

As I have said previously, there is little that is more important for Australians and their families than having a roof over their head.

And at the outset I want to acknowledge that without the residential construction industry, this is a goal that government could not achieve. We can only achieve our ambition of access to safe, secure and affordable homes for all Australians if there is a thriving industry to build those homes.

The theme of today’s Summit is very appropriately ‘Finding Windows of Opportunity’. Many of you will be looking for opportunities to contribute to this goal through participation in the residential market and the Government is looking to help.


Firstly, let me talk about the federal Budget that we handed down earlier this month, and how it will help build the economic conditions that all sectors of our economy, but particularly the housing sector, need to thrive. This was an important Budget.

It is clear that working Australians are worried about the cost of living. Electricity, rents, school uniforms, groceries, the mortgage. We know that while our economy has strong fundamentals, not everyone is feeling the benefits of the mining boom.

So this Budget is all about spreading the benefits of the mining boom across the economy. It’s about delivering much needed new financial relief to families and businesses under pressure.

We are returning the Budget to surplus to provide a buffer in uncertain global times and give the Reserve Bank room to cut interest rates further if it chooses to do so – as it did earlier this month by a cut of 50 basis points to the official cash rate.

The official cash rate is now 300 basis points lower than it was when we came to office, and a family on a $300,000 standard variable mortgage is now paying around $3,500 a year less in repayments than they were under the Howard Government.

In fact, we now have the lowest official cash rate than at any time under the Howard Government.

We’ve achieved a surplus despite global uncertainty ripping around $150 billion from government revenues.

Our economy is the envy of all developed nations. We have solid growth, low debt, very low unemployment, contained inflation and an unprecedented pipeline of investment gearing up.

All of us in this room know how important the housing sector is to our economy, and vice versa.

But despite our strong economy, we know that residential approvals and finance for new houses and apartments are currently weak. We know that over the last decade, private sector rents have risen by 81 per cent, slightly less than house prices, which are up 87 per cent.

We also expect that housing investment will contract by around 1 per cent in 2011-12 and remain soft in 2012-13. This weakness follows relatively strong conditions in the housing market in 2010, with housing investment growing by 4 per cent and Australian property prices rising strongly by 12 per cent.

The question is why?

And there is no simple answer. But it is clear that there are both cyclical and structural impediments at play.

Many of the structural barriers to building new homes come from the planning system and local hostility to new developments. There is community opposition to building new homes and increasing dwelling density in areas of high demand. This may be understandable, however it means development is forced further towards the urban fringe or prevented from happening at all.

We hear daily about the problems this creates in our capital cities – such as nightmarish two-hour commutes to get to and from work.

I note that these are issues that the Property Council’s Peter Verwer spoke directly to in his recent Address to the National Press Club when he proposed a “new deal for Australian cities”.

He said:

“An undersupply of housing reduces savings and forces people to live in places that rob them of control over their own lives”.

And there is undoubtedly much truth in that comment.

As has been noted by both the Productivity Commission and the Henry Review, there are also challenges around how to deliver and fund infrastructure to support new homes.

This infrastructure can significantly increase the cost of producing new dwellings, either making these homes more expensive to buy, or making them commercially unviable.

There is also a cyclical element that is slowing the delivery of new housing supply at the moment, such as higher borrowing costs than in the past, and fragile short-term consumer demand. Much of this is an echo of the global financial crisis.

Housing supply

As my predecessor Tanya Plibersek said in 2010:

“We want a housing market where an ordinary person who works hard and saves hard can afford a reasonable home of their own.”

But we know that we are not building enough houses – particularly in our bigger cities.

In fact, the National Housing Supply Council has estimated that underlying housing demand had outstripped growth in housing supply by 187,000 homes in the nine years through to June 2010.

Of course, this does not mean that 187,000 households are out on the street. It is a theoretical concept.

The Supply Council has come to a view that the widening housing gap is effectively a decline in satisfactory levels of housing. This is not a new phenomenon. A gap has probably always been with us – and in fact may always be with us – as the housing we aspire to falls short of what we actually have.

But the concept of a housing gap is useful because it reflects real constraints that have real consequences for real people, such as being excluded from home ownership and increasing pressure in the private rental market.
So given the likely impacts, the question is – why is the market not providing enough homes?

Current policy initiatives

Since we came to office in 2007, this Labor Government has put a range of policies in place to begin to tackle housing supply and affordability. We made housing a priority at the federal level – for the first time in over a decade. And we have made unprecedented investments in housing supply and affordability – to the tune of more than $20 billion dollars. Much of this is still in the pipeline.

And now having a Housing Minister at the Cabinet table reinforces our commitment.

I won’t go into detail about the various initiatives we have put in place – most of you would be aware of them. But for example there is the $4.5 billion National Rental Affordability Scheme, the more than $400 million Housing Affordability Fund and the $100 million Building Better Regional Cities program. And there’s the stimulus investment we made during the global financial crisis including the $5.6 billion Social Housing Initiative and the $2.2 billion First Home Owners Boost.

Of course these have all been important programs, and I know they have been welcomed by the industry. But none of them is the silver bullet – they will not be able to overcome all the housing supply issues on their own.

We as a Government are now at a stage where we are reviewing what we’ve done and looking to the future and I would certainly welcome any contributions you have about what the next steps should involve – because there are no easy answers on tackling the housing supply issue.

Addressing the problem

For the Australian Government, the windows of opportunity are limited by our constitutional arrangements. Many of the levers controlling the planning system are held at state, territory or local authority level. But that’s not to say that the Australian Government does not have an important role.

We have been working with the States and Territories on examining measures that could improve the planning process and bring more homes to market. In 2009, COAG formed a working group to conduct a review of issues around housing supply and affordability.
The final report has yet to be released. However, I can say that work has focussed on a number of key issues that will no doubt have the support of many of you here. These include:

  • how greater use of code-based frameworks for assessing residential development applications can speed up processes, reduce holdings costs and increase developers’ certainty;
  • how local councils’ infrastructure charges regimes need to be more efficient, predictable, equitable, transparent and accountable; and
  • how States and Territories should assess regulatory impacts before they allow local councils to impose additional planning and building regulations that exceed state and national requirements.

This report has been a long time coming. So I encourage the States and Territories to sign up to it as quickly as possible so that we can get it released in the very near future, and jurisdictions can begin implementing any recommendations.

The potential benefits from reforms in this space cannot be overstated. For example, the Productivity Commission recently noted that full implementation of the development assessment reforms under COAG’s Seamless National Economy agenda would provide an ongoing cost saving to business of around $350 million per year.

Of course governments are just one of the stakeholders here. It will be critical to tackle communities’ underlying objections to new housing.

Many people understand the pressures faced by younger generations in getting a foothold on the housing ladder, and appreciate that more homes are needed. However, some communities, often in the most desirable suburbs, will object to new blocks of apartments in their own area.

But new homes need to be built somewhere, and the areas in greatest demand tend to be well established and well serviced by existing infrastructure. I think we would all agree that we must recognise the importance of both existing and aspiring residents if we are to keep our cities growing and retain the dynamic mix of age groups and socio-economic backgrounds.  We simply cannot push all new affordable housing to the urban fringe.

Tackling this must involve early engagement with communities. There must be a discussion with communities about the pros and cons of maintaining the existing form of their suburbs and trying to get in principle agreement on plans for the future shape of those suburbs.

There are already good initiatives coming from some States to begin reform in this area. I was pleased to hear about the South Australian Government’s decision to remove stamp duty on eligible off-the-plan apartments in the city of Adelaide, to encourage higher density living and give a boost to the building and construction industry.

I think, however, that we also need to make better use of the existing housing stock. At present, the system works against those who may wish to downsize, such as empty nesters. They face high transaction costs, particularly stamp duty, if they sell their family homes and move to smaller accommodation.

There is now a considerable body of work that argues in favour of replacing stamp duties with a wider reaching land tax to remove some of the friction in the market.


These are some of the issues that will need to be addressed as we as a nation tackle housing supply and affordability. And we will need a wide range of interlinked processes to take us forward. All governments must work together and give housing a higher priority.

A key, and largely unreported development, occurred at the COAG discussion in Canberra last month. A new Select Council for Housing and Homelessness was established, giving these issues the priority that is needed in a stand-alone COAG Council that I will Chair.

This will be an important forum that brings social housing issues together with housing supply in recognition of their inherent links. It will drive through changes that can complement and build on these two policy areas that have not had strong linkages in the past.

Another key development is the extension of the Standing Council on Transport and Infrastructure. This Council has now been given responsibility for development assessment reform. This will complement the work it is already doing on public infrastructure and strategic city planning, and lead to better and more cohesive outcomes.

This Government has also recognised that environmental regulation is often duplicative and cumbersome, resulting in unnecessary delays and uncertainty, slowing broad economic growth.  The Commonwealth has therefore agreed to:

  • develop bilateral arrangements for accreditation of state assessment and approval processes;
  • deliver improved bilateral arrangements with States and Territories to fast-track accreditation including through the development of standards while ensuring our strong environmental protections are maintained; and
  • work with jurisdictions to establish inter-jurisdictional taskforces to examine and facilitate removal of unnecessary duplication and reduce business costs for significant projects.

Perhaps, most importantly in terms of housing issues, at last month’s COAG meeting the States and Territories acknowledged the need to ensure their development assessment processes operate efficiently and do not create unnecessary delays for development proposals.

Premiers and Chief Ministers agreed to consider adopting ambitious targets to improve development assessment processes for discussion at the next Business Advisory Forum. They have also agreed to consider the business leaders’ proposal that they adopt ambitious targets to improve the development assessment process.

The Business Advisory Forum is scheduled to meet in the second half of this year and I look forward – as I’m sure you do as well – to this being a catalyst for genuine development assessment reform. This is something that I am keen to engage with the States and Territories on.


So my message to you today is that there is a strong agenda on housing reform. While many of the issues are not new, there is – I think – a more genuine recognition that we cannot ignore housing supply as a significant issue facing our nation.

Certainly there is a momentum building and there are significant windows of opportunity in this period ahead to make a difference. And we as a Government are listening to business about what needs to be done.

This Government understands the importance of tackling housing supply issues into the future. It is my intention to drive reforms that will see real change for the long term, and I look forward to working with all of you to see that happen.

Thank you.