The Monday Build | Australian Residential Weekly Update

The 2026 Intergenerational Report (IGR) is presented as a 40-year outlook, but reads like a defence of current policy. Housing - the major source of generational insecurity - barely appears.

“Housing supply” occurs five times in 352 pages - see AI is of some use - while the report claims recent tax changes will create 75,000 additional owner-occupiers.

Meanwhile, approvals have risen but completions remain far short of target, costs are climbing and higher interest rates are reducing borrowing capacity faster than prices are falling.

Treasury expects productivity and AI to lift future prosperity. Housing cannot wait for that dividend. It needs a delivery path based on feasibility, finance, labour and completed homes.

1. This is an assumption - not a forecast

The 2026 Intergenerational Report assumes productivity growth recovers to 1.2% annually, helping the economy more than double and real incomes per person rise 55% by 2065–66.

But the report repeatedly presents measures already legislated by the government as solutions to the challenges it forecasts. That makes it as much a statement of policy intent as an independent picture of the future.

Productivity recovery is assumed. The delivery mechanism remains very unclear.

Churchill could have been talking about the IGR instead of Russia when he quipped "a riddle, wrapped in a mystery, inside an enigma".

2. Housing barely makes the plan

A search of the report’s 352 pages finds the exact phrase “housing supply” only five times. Yes I do use Chat and a few others AI’s too.

The document claims negative-gearing and capital-gains-tax reforms it will help 75,000 renters become owner residents over the ten years from 1st July 2027 when the May 2026 budget tax reforms commence.

This magic 75,000 will happen by restricting negative gearing to new homes and changing capital-gains taxation, government expects fewer investors to bid for established properties, allowing more prospective owner-occupiers to purchase them instead.

Moreover this is a forecast change in tenure, not 75,000 additional homes.

Young Australians’ central problem is not simply whether an existing dwelling is owned by an investor or an occupier. It is that too few suitably priced homes are being completed in places where people can afford to live.

3. Approvals are rising faster than delivery

Approvals are 26% above their pre-Accord level and commencements are 15% higher. Yet only 308,000 homes were completed during the Accord’s first seven quarters.

Around 173,500 dwellings were finished during the year to June - well below the 240,000-a-year pace required. Another 244,000 were under construction, tying up builders, trades, finance and working capital.

House-construction costs rose another 2% during the June quarter alone and remain 51% above pre-Covid levels.

Australia does not have an approvals shortage alone. It has a conversion problem.

4. Lower prices do not guarantee better affordability

Housing affordability can deteriorate even while prices fall. If interest rates reduce borrowing capacity faster than dwelling values decline, buyers are left able to purchase less and continue paying rent for longer.

Low-deposit purchasers are particularly exposed. A 5% price fall can consume a 5% deposit before transaction costs or principal repayments are considered.

One downside analysis estimated that around 34,000 recent government-backed low-deposit loans could face negative equity if prices fell 10%. That was a risk scenario, not evidence that these borrowers are already underwater.

5. AI cannot build the missing homes

The Productivity Commission estimates Australia produces roughly half as many homes per construction hour as it did in 1995. Since the mid-1990s - so over the past 30 years - quality-adjusted construction productivity has fallen 12%, while economy-wide productivity increased 49%.

In other words and to help make this crystal, the Australia construction workforce now delivers about half the dwelling output for each hour worked compared with 1995. Even after allowing for larger, better-quality and more complex homes, productivity is still 12% lower. Causes include fragmented approvals, bespoke designs, regulation, trade shortages, site delays, rework and limited prefabrication adoption.

And yet when I outline in these Missive posts or at workshops and speaking events that we need to change what and how we build I still get more pushback than acceptance.

Looking ahead, AI may improve design, documentation, estimating and assessment.

AI - and I don’t care what the futurists and especially what the vested interests say - cannot replace serviced land, skilled trades, development finance, viable margins, coordinated infrastructure or even repeatable building systems.

Without those fundamentals, technology will process unviable projects faster not make them buildable.

AI could help with building prefab and modular systems but we would have to allow such homes to be built which includes changing risk profile, financing and the bureaucratic process.

My two bobs worth

The IGR is more useful as a statement of government intent than a reliable housing plan. Its housing references are thin, its 75,000-owner-occupier claim does not create 75,000 dwellings, and its productivity rebound is assumed rather than delivered.

The likely near-term result is fewer feasible projects, more approved-but-unbuilt stock, greater builder and lender caution, and less independent wealth formation for younger households.

Australia needs serviced land, viable margins, finance, skilled labour, repeatable designs plus uniform and stable rules. AI can improve paperwork and coordination, but it cannot fund, build or settle a home on its own today.

In short the IGR is another example of Lights. Camera. Distraction!

About Michael Matusik Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive