Cutting through the tape – what deregulation in the construction industry might look like

In February 2025, the Productivity Commission issued the ‘Housing construction productivity: Can we fix it?’ Research Paper. The report found that, when compared to levels of productivity in 1995, Australia is building half as many homes per hour worked.

Recent comments by the Albanese government in response to the Productivity Commission’s findings hint at a pause on new red tape and the introduction of streamlined approvals processes to facilitate the Australian government’s commitment to build 1.2 million homes over 5 years.

In this article, we take a look at the Productivity Commission’s findings, the government’s response and where we might go from here.

Productivity Commission’s findings

The ‘Can we fix it?’ Paper found that the productivity gap between labour and the broader economy is significant. Labour productivity has declined by 12% in contrast to a 49% increase in the Australian economy in the same period.

The Commission identified multiple drivers of poor labour performance, including:

The Commission stresses that policymakers must balance the benefits of regulation against the decrease in productivity, improve regulatory processes and develop consistency across jurisdictions. The four main areas of focus for potential reform are:

• coordinated and transparent planning approvals and appropriately funded regulators
• an independent review of building regulations
• removing impediments to, and investing in, innovation
• improving workforce mobility and flexibility.

Government response

On 24 August 2025, housing minister The Hon Claire O'Neill, MP and environment minister Senator The Hon Murray Watt issued a joint press release stating that the Albanese Labor Government is taking decisive action to cut through the red tape and delays in approvals that are holding up the construction of more homes.

The press release identified two areas for immediate action:[1]

• Pause and streamline the National Construction Code (NCC): The pause will halt further residential changes to the NCC until the end of the National Housing Accord period (mid-2029), excluding essential safety and quality changes.
  
  While the pause is underway the government will look to streamline the NCC, including by:
  • improving useability of the 3-volume 2000-page Code to assist tradies, small businesses and households
  • remove barriers to the uptake of modern methods of construction, including prefab and modular housing
  • improve how code provisions are developed by the Australian Building Codes Board (ABCB) and consider the appropriate cadence of future NCC updates

This pause comes off the back of uncertainty around the timeline for introduction of the NCC 2025, which we reported on earlier this year.

• Fast track assessment on more than 26,000 homes currently under Environment Protection and Biodiversity Conservation Act 1999 (Cth) (EPBC Act) consideration and speed up assessment of new applications by:
  • establishing a new strike team within the Department of Climate Change, Energy, the Environment and Water to accelerate assessment of existing applications
  • ensuring better access to the existing rapid EPBC assessment pathway for new applications
  • piloting AI to simplify and speed-up assessments and approvals.

Can we fix it?

Calls for a reduction in bureaucracy and red tape in Australia are not new. Earlier in the year, KWM commented on five areas we saw as critical for reform in cutting through red tape in the construction industry, including:

• harmonisation of domestic building regulations
• licensing requirements
• design regulation
• security of payment legislation, and
• OHS regimes across the States and Territories.

We will continue to monitor developments and share our insights on simplifying regulation in the construction industry, including the Commission’s other areas of potential reform.

Watch this space…