I acknowledge the Ngunnawal people, the Traditional Custodians of the land on which we meet, and pay my respects to Elders past and present.
Thank you to the Australian Sustainable Built Environment Council for bringing together so many people who are helping shape Australia’s built environment.
In 2014, something impressive happened on a building site in Melbourne.
A 9‑storey apartment building, containing 34 homes, was assembled in 5 days.
Thirty‑six prefabricated modules were craned into place, creating a building complete with balconies, double‑glazed windows and a 6‑star energy rating.
The building was called One9. Its construction used a system developed by Australian architect Nonda Katsalidis and manufactured by Hickory Group.
The entire project took considerably longer. There were designs to prepare, approvals to obtain and modules to manufacture. But the assembly of 9 storeys in 5 days showed different way of building.
More than a decade later, Australia is starting to turn that demonstration into an industry.
Today, I want to talk about modern methods of construction, and how they could change the way Australia builds homes over the coming decade.
Let’s start with a troubling statistic.
According to the Productivity Commission, Australia builds around half as many homes per construction worker as we did 30 years ago.
Over those decades, we’ve seen enormous technological progress. Computing power has soared. Manufacturing has become more automated. Digital design has changed what architects and engineers can do.
Yet housing construction productivity has gone backwards.
Some of this reflects larger and more complex homes, alongside higher building standards. But even adjusting for that, there’s been a 12 per cent drop in building sector productivity over the past 3 decades.
Much of our construction industry still operates in ways that would have been recognisable to builders a century ago.
A house is assembled on‑site, with different trades arriving in sequence. Work is interrupted by rain. A delay in one part of the project cascades into another.
Economists are big on specialisation.
In 1776, Adam Smith described how workers in a pin factory could dramatically increase production by specialising in particular tasks.
In 1913, when Henry Ford introduced the moving assembly line, the assembly time for a Model T fell from over 12 hours to just 93 minutes.
Yet today, much of our housing construction still takes place through a succession of trades working on individual building sites.
Modern methods of construction offer a different approach.
Prefab wall panels, bathroom pods and complete modular units allow more work to happen in controlled factory environments.
A factory can standardise processes and invest in specialised equipment. Factory manufacturing can also proceed while foundations are being prepared on‑site.
There’s a few advantages to building under a roof. Work can continue on days when it’s pouring rain or blazing hot.
The Productivity Commission estimates that a 2 per cent increase in construction output could lift Australia’s GDP by around $5.7 billion.
Small productivity improvements, spread across a large industry, can have big economic benefits.
And we can already see what this might look like in Australia.
In Sydney’s Macquarie Park, a 20‑storey student accommodation tower is being constructed using volumetric modular construction.
The project will contain 528 student rooms. By September, 12 levels had been assembled, approximately 13 weeks after the first modules arrived.
Each module is manufactured with its internal fit‑out and facade already installed. Work continues at the factory as the building rises on‑site.
When completed, the project is expected to be Australia’s tallest volumetric modular building.
There’s also considerable promise in regional and remote Australia.
In remote communities, conventional construction can be prohibitively expensive. Specialist trades may need to travel long distances, and bad weather can delay projects for weeks.
Manufacturing components elsewhere and transporting them for assembly can make a substantial difference.
And consider crisis accommodation.
Under the Housing Australia Future Fund, $71 million is supporting 117 crisis and transitional homes using modern construction methods.
These include homes for women and children escaping family violence.
When construction time falls, people who urgently need secure accommodation can get it sooner.
Now let’s look at the economics.
A CEDA and Urbis report estimates that modern methods of construction can reduce building times by 20 to 50 per cent. At scale, construction costs could fall by around 20 per cent.
Right now, some modular developments still carry a cost premium of 10 to 20 per cent. In other applications, particularly regional construction and high‑density developments involving repeated unit designs, costs can already be around 10 per cent lower.
Part of the explanation is scale. Factories need a reliable flow of orders. Expensive machinery delivers its greatest benefit when production is steady.
Design is another factor. Standardisation works best when it’s incorporated from the beginning of a project. Retrofitting a conventional design for modular construction can be expensive.
And the benefits of faster construction extend beyond the direct building costs.
Finishing a project earlier reduces financing costs. It also means that rental income starts flowing sooner.
For a developer, those savings can determine whether a project stacks up financially.
For a homebuyer, better productivity can eventually mean a lower price.
But achieving these gains requires us to rethink some of the rules governing construction.
Our regulatory system evolved around buildings being assembled on‑site.
Factory production changes the process.
A completed module may arrive with structural elements and electrical systems already enclosed. Inspectors need reliable ways of establishing that these components meet Australian requirements.
Ideally, a manufacturer should be able to demonstrate that a compliant product meets national requirements, then supply that product across Australia.
Financing arrangements also need to catch up. Traditional construction finance often releases funds against progress achieved on‑site. Factory manufacturing requires substantial spending before components reach the development.
These are the sorts of challenges that become easier to solve when government works closely with industry.
The Albanese government is providing $120 million through the National Productivity Fund to help states and territories place modern construction methods on an equal regulatory footing with conventional building.
We’re also investing $4 million in nationally consistent definitions and a voluntary manufacturer certification scheme, with full commencement scheduled for mid‑2028.
Led by Housing Minister Clare O’Neil, the aim is to give manufacturers a clearer route to demonstrating compliance with the National Construction Code.
We’re supporting standardisation through the $39.3 million Kit of Parts initiative.
This will make Australian‑designed building components freely available, allowing architects and builders to combine standard elements in different ways.
Think of it as applying some of the logic of manufacturing to housing, while leaving plenty of room for architectural creativity.
We’re also investing $135 million in Construction Centres of Excellence, helping workers develop skills in prefabrication and advanced construction technologies.
And we’re backing manufacturing capacity.
In August, the National Reconstruction Fund Corporation announced an investment of up to $120 million in Built Living, a joint venture between Built and Wesfarmers.
This will support a housing manufacturing facility in Neerabup, Western Australia, designed to produce components for more than 2,000 apartments annually.
The company’s ambition is to build apartments up to 50 per cent faster and 20 per cent cheaper than conventional construction.
Those targets show the scale of investment that could emerge as the industry matures.
Modern methods of construction also illustrate why Treasurer Jim Chalmers is revitalising National Competition Policy.
Australia has one national economy, but in construction we sometimes behave as though we have 8.
A manufacturer investing in a new production line wants to serve customers across the country. Different regulatory interpretations can make that considerably harder.
One nationally certified product should be able to reach a national market.
That’s why modernising the National Construction Code is critical.
Earlier this month, building ministers agreed to pursue a simpler and more nationally consistent code, including clearer pathways for innovative construction methods.
We’re also providing $42.7 million to make Australian Standards referenced in legislation freely available online.
For a small business, paying to access the rules it is legally required to follow is an unnecessary expense. Removing that expense is a straightforward productivity reform.
These changes sit within a broader effort to make Australia a more seamless national economy.
We’re pursuing more consistent occupational licensing, particularly for engineers and electricians, so skilled workers can move more readily to where they’re needed.
And the government’s $2 billion Local Infrastructure Fund will help unlock up to 65,000 homes over the next decade.
After all, faster home construction is most valuable when suitable land and supporting infrastructure are available.
So where could we be in 10 years?
Today, significant prefabrication is used in only around 3 to 5 per cent of new Australian housing.
Compare that with Sweden, where the great majority of detached homes incorporate prefabricated construction.
Industry group prefabAUS has set an aspiration of prefabrication reaching 30 per cent of construction by 2033.
But I’d be wary of treating the market share of prefabrication as the ultimate measure of success.
The goal is higher productivity and better homes. Modern construction methods are one way of getting there.
By 2036, I’d like to see modular housing regarded as an ordinary option for developers and homebuyers.
I’d like to see Australian factories serving customers nationwide, supported by predictable demand.
I’d like to see architects using standardised components to create homes that are affordable and attractive.
And I’d like to see the environmental benefits being realised.
Factory manufacturing can reduce material waste. More precise construction can improve thermal performance. With careful choices about materials and transport, these methods can also help reduce the environmental footprint of building.
ASBEC has long recognised that productivity and sustainability can reinforce one another.
That’s especially true in housing.
Let me finish where I began.
When that Melbourne apartment building was assembled in 5 days, it attracted attention because the technique was so unusual.
A decade from now, perhaps this kind of construction will be commonplace.
We’ll still need skilled builders and creative architects. Their skills will be applied in different ways.
And if we succeed, the gains will be measured in more than construction statistics.
They’ll be measured in young people able to afford a home. In families spending a smaller share of their incomes on housing. In vulnerable Australians getting secure accommodation sooner.
Australia has spent decades wrestling with the problem of how to build enough homes.
Part of the answer lies in changing how we build them.
