Federal Treasurer Jim Chalmers will today reveal details of a $900 million fund in a speech to the Australian Business Economists.
The fund would grant money to states and territories if they enacted productivity-enhancing policies. They will be rewarded if they clear away red tape to unlock more modular homes.
The fund is not limited to housing, but it is the fourth time the Federal Government has attempted to influence housing construction using funds and grants.
"There is no more important structural problem in our economy than productivity. No higher priority for reform," the Treasurer is expected to say.
The states will compete to share the fund, aimed at boosting competition and economic activity.
As a result of the pandemic, productivity has declined since the Government's last boost. In his speech, Chalmers will acknowledge that productivity growth over the last decade was the lowest in 60 years.
A "menu" of approved projects will be available to states and territories under the policy.
A streamlined zoning and planning process, or making modern construction techniques more accessible to developers, could help achieve this.
The two tactics are hoped to boost housing supply and boost the struggling building industry.
“This will incentivise states to achieve productivity gains through pro-competitive policies, choosing from a menu of options,” the Treasurer will say.
“It’s all about rewarding states with more revenue, where they deliver meaningful and measurable economic reforms.”
One potential challenge in implementing the fund could be ensuring that the allocated resources are distributed equitably among the states.
There may also be difficulties measuring and tracking the fund's impact on productivity improvements.
Coordinating efforts across various state governments to align their strategies with the fund's objectives might present logistical and bureaucratic hurdles.
Increasing competition will also be a priority for Chalmers, given that Treasury is currently rewriting the National Competition Policy.
In the report, it is estimated that reforming Australia's competitive sectors would increase GDP by $45 billion a year, or about $5000 per household. It could result in a 1.45% reduction in prices.
Developing a right to repair and adopting international products safety standards will be prioritised.
“More competition means a more productive and more dynamic economy, with better jobs, more choices and growth, and fairer prices,” Chalmers will say.
It'll be the fourth such fund in housing. It's going with the social housing, planning reform, and housing infrastructure funds.
It will not be limited to housing, with states and territories given "a menu of options... to achieve productivity gains".
"Areas of focus could include streamlining commercial planning and zoning, and removing barriers to the uptake of modern construction methods," the Treasurer is expected to say.
"It's all about rewarding states with more revenue, where they deliver meaningful and measurable economic reforms."
According to Chalmers, the fund is part of a broader agenda to tackle Australia's economic "productivity problem".
In his speech, he'll argue productivity isn't rising fast enough across the developed world, which is considered the key to rising living standards by economists.