Government infrastructure work hits two-year low, adding pressure to national housing shortfall
A decline in public sector infrastructure work to its lowest level in more than two years is placing further strain on already-stretched housing targets, Master Builders Australia has warned, as new data exposes a widening gap between government commitments and delivery.
Latest engineering construction activity figures from the Australian Bureau of Statistics (ABS) show public sector infrastructure work fell 3.5%, its weakest result since September 2023. The drop offset a 15.9% surge in private sector activity that would otherwise have marked a strong quarter for the sector overall.
"March 2026 was the strongest quarter for private sector engineering construction in almost nine years," said Shane Garrett (pictured top left), chief economist at Master Builders Australia. "It's unfortunate that the ailing pipeline of public investment took some of the shine off. Builders are stressing the need to deliver the pipeline that has already been committed to as strong and sustained investment is vital for expanding our economy's supply-side capacity helping crush inflation."
Australia faces a national shortfall of between 200,000 and 300,000 dwellings against the National Housing Accord target of 1.2 million new homes by 2029. New home approvals are tracking nearly 60,000 below the annual benchmark set under the Accord, with the shortfall in the first 12 months raising concerns across the housing sector about the likelihood of meeting the federal government's goal. Some forecasts put the gap even higher: independent buyer's agency Propertybuyer estimates the country could undershoot its target by up to 462,000 homes.
Master Builders Australia's chief executive also warned that the Federal Budget's $2 billion infrastructure commitment falls well short of what is needed to close the gap.
"Independent modelling shows the new enabling infrastructure funding will enable just 5,300 new homes over the next four years, not 26,000 as the Budget projected," said Denita Wawn (pictured top right), chief executive officer at Master Builders Australia. "This is further diminished by the tax changes on investment that reduce new supply by 14,000.
"Together, Australia will have 8,700 fewer new homes over the next four years due to this Federal Budget. Without roads, water and sewerage, housing projects simply can't proceed, and those that do are hit with inflated costs.
"If governments want to hit the Housing Accord's target of 1.2 million new homes, they must invest more heavily in enabling infrastructure and back it with better incentives for investment. We need greater investment from all levels of government in enabling infrastructure to unlock more land and opportunities in the sector. In addition, tax incentives for developments that invest in enabling infrastructure should also be strengthened to improve the feasibility of new projects."
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