Budget commitment targets housing supply and infrastructure delivery through manufacturing-led reform
The New South Wales (NSW) government has committed funding to modern methods of construction (MMC) as part of its latest budget, investing in new manufacturing capability and reforming procurement, approvals and standards to build a more consistent pipeline of work.
The government will launch a two-stage competitive tender in coming weeks, seeking local and international MMC operators to deliver prefabricated components and modular housing at scale.
The program builds on the Building Bill 2026, which will formally recognise prefabricated buildings in law and integrate MMC into the approvals system.
Supporting the reforms, the government is investing $32.3 million over four years to modernise the building approvals system, including $1.6 million to establish a national MMC certification framework.
On 29 June, two funding programs totalling $4 million will open: grants of $20,000 to $150,000 for established manufacturers, and up to $250,000 for small-to-medium enterprises to pilot innovative housing products.
The Australian Constructors Association (ACA) welcomed the investment, describing it as a necessary measure to lift productivity across the construction sector.
ACA chief executive Peter Colacino (pictured right) said the announcement addresses both the immediate housing shortage and longer-term infrastructure delivery challenges.
"This is about more than housing, it's about finding the opportunity to leverage standardised components and approaches across all social infrastructure," Colacino said. "This will reduce the cost to deliver a house, as well as a hospital or school.
"The sector has faced productivity stagnation as we are still delivering projects the same way we were 30 years ago. Doing more of the same won't fix it. A step change in productivity requires new approaches."
Colacino said the ACA had been advancing the case for modern methods of construction through the forthcoming National Construction Strategy, with common standards, pipeline certainty and commercial scale identified as the key conditions for success. He noted that Western Australia and Queensland had already invested in MMC facilities.
Progress had previously been limited by a lack of government confidence in the solutions, with demand largely confined to pilot programmes.
"A clearer pipeline gives industry the confidence to invest in the skills and capability to deliver at scale," Colacino said.
The investment also reflects broader government interest in sovereign manufacturing capability as a means of managing supply chain risk.
"Reforming construction can be a key plank in the domestic manufacturing agenda," Colacino siad. "If we want to deliver large, complex projects faster and more efficiently, we need a manufacturing base.
"With large scale investment flagged for high-speed rail, the energy transition and defence, manufacturing-led approaches can allow the local industry to meet demand peaks without cost escalation."
ACA president Annabel Crookes (pictured right) said the industry should recognise the significance of the government's shift in approach.
"This is a positive step and one worth backing," Crookes said. "The NSW government is leaning in and giving the industry confidence to do things differently.
"While housing is the immediate priority, the bigger opportunity is to apply these approaches across the full pipeline. If we get this right in housing, it sets the foundation for everything else in lifting productivity, strengthening the supply chain and delivering better outcomes."
The ACA said it would continue working with governments to support implementation of the reforms.
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