Interim report reveals drop in construction productivity

A Queensland Productivity Commission interim report into the construction industry reveals a marked decline in productivity since 2018, leading to fewer homes being built, higher rents and significant delays (resulting in cost increases on major projects).

It found Best Practice Industry Conditions were adding to the cost of major projects and restricting the construction of thousands of homes.

Productivity in Queensland’s construction sector has dropped by around 9 per cent since 2018, an interim report by the Queensland Productivity Commission shows.

Had productivity remained the same, 77,000 extra dwellings could have been built since 2018.

The report also found Best Practice Industry Conditions (BPICS) were adding to the cost of major projects and curbing housing supply and, if continued, would result in a net cost to the community of up to $20.6 billion by 2029-30.

Other interim report findings include:

• Productivity in the construction sector today is only 5 per cent higher than 1994-95. In comparison, productivity in the market economy increased by 65 per cent.
• The pipeline of works has more than doubled since December 2020. However, the total work done has increased by only 56 per cent. It means the difference between work done and yet to be done has increased from $12 billion to $34.3 billion.
• Dwelling completions peaked around 50,000 per year in the mid-1990s. On average 34,000 dwellings have been built each year since 2020.
• This is despite the number of construction workers in the state doubling in three decades.
• If BPICs remained until 2029-30, project costs would likely increase 10-25 per cent, up to 26,500 fewer homes would be built and rents would increase 8.3 per cent.

The inquiry into improving productivity in the construction sector is the Queensland Productivity Commission’s first task since its re-establishment in April 2025.

The construction sector is one of Queensland’s largest, accounting for 7.9 per cent of the state’s total output and employing almost 10 per cent of its workforce.

The review will examine the impacts of government procurement and contracting arrangements to assess if they delay activity, inflate construction costs, limit competition or impact the availability of suitable labour.

BPICS were suspended in November 2024 pending the results of the inquiry.

The interim report, based on stakeholder meetings and submissions, said sub-optimal procurement practices and restrictive and complex regulation had made construction more difficult and expensive.

“A principal rationale for introducing BPICs was to improve worker safety,” the report says. “However, data suggest there have been no material improvements to safety outcomes across the Queensland construction industry since their introduction.”

The Queensland Productivity Commission’s final report will be provided to the government in October 2025 following further consultation and stakeholder submissions.

The interim report can be viewed on the QPC website.