Productivity is paramount – lessons from the Queensland Productivity Commission’s Construction inquiry

The Queensland Productivity Commission (QPC) has released its Final Report (the Report) regarding the impacts of policies and regulation on productivity in the Queensland construction industry.

The Report comes at a crucial time as the industry faces what has been described as “the biggest decade of infrastructure delivery in our history.” Queensland’s construction pipeline is at capacity and with labour and resources becoming harder to source and more costly, the industry must find ways to increase productivity and speed up project delivery.

The QPC has identified four key areas where building regulations are either likely to be affecting productivity or where issues have been consistently raised by stakeholders:

• building codes and standards
• financial regulations, including trust account regulations and minimum financial requirements
• regulations affecting modern methods of construction
• workplace health and safety (WHS) regulations.

In this two-part series, we discuss the QPC’s recommendations and assess the Queensland Government’s responses. Part one examines Queensland’s regulatory framework and three of the four areas above, while part two focuses on the recommendations concerning WHS regulations.

Our planning team also covers the Report’s recommendations on land use regulation reforms in this article.

Queensland’s regulatory framework

Queensland’s building and construction regulatory framework is governed by state legislation, including the Building Act 1975 (Qld) (Building Act) and the Plumbing and Drainage Act 2018 (Qld) which give effect to the National Construction Code (NCC), the Queensland Development Code (QDC) and the Queensland Plumbing and Wastewater Code (QPWC). The QDC and QPWC address specific matters that fall outside the scope, or vary elements, of the NCC and prevail where an inconsistency arises.

The Planning Act 2016 (Qld) (Planning Act) establishes the development assessment framework undertaken by local government and the Queensland Building and Construction Commission Act 1991 (Qld) (QBCC Act) establishes the Queensland Building and Construction Commission (QBCC) as the regulatory body of the Queensland building industry which ensures compliance with relevant Australian and international standards.

The QPC’s analysis of Queensland’s building codes and standards identified a growing disconnect between the objectives of contemporary building regulation and the practical realities faced by the construction industry. It, therefore, made numerous recommendations pertaining to regulatory objectives, the capacity of the construction industry and legal compliance obligations.

Current challenges: NCC complexity, increased costs and regulatory imbalance

Stakeholder feedback repeatedly raised concerns with the NCC, making it a primary focus of the QPC’s inquiry.

When applied consistently across all jurisdictions, the NCC has been credited with delivering scale, efficiency and substantial economic gains. However, its evolution has come at a cost. Industry stakeholders warn that growing complexity and increased costs associated with the NCC are imposing a significant burden on builders and threatening to erode the very benefits it was designed to deliver. The most prominent concerns identified in the Report include:

• moving beyond ‘minimum standards’: the NCC has moved beyond minimum necessary standards toward features more aligned with market best practice, often without a demonstrated net benefit to the community
• Queensland ‘opt out’: the importance of the Queensland Government’s authority to amend or ‘opt out’ of the provisions of the NCC through the QDC and the QPWC as a safeguard
• accessible housing standards and energy efficiency: where regulatory changes impose widespread costs on new home buyers (such as accessible housing and energy‑efficiency standards), Queensland should take a measured approach to their adoption. The QPC notes that mandatory standards may be ‘inefficient’ and ‘inequitable’ when more cost‑effective and better-targeted regulatory or non‑regulatory alternatives are available
• impact of frequent changes: the importance of finding an appropriate balance between keeping pace with evolving Australian Standards, reducing the risk of defects caused by inconsistent understanding of new requirements and supporting resilience and innovation in the industry. As part of this effort, in October 2025, the Commonwealth, State and Territory Building Ministers agreed to pause further residential changes to the NCC until 2029, except for essential safety and quality matters
• confusion and inconsistencies: the significant benefits in having nationally consistent building requirements. In their current form, the interaction between the Building Act and Planning Act has raised concerns of regulatory overlap, inconsistent application, and overreach by local government resulting in ‘grey areas’, confusion and delays in development outcomes.

In addition to the above, the Report identifies concerns regarding Queensland’s insurable works threshold (which has been fixed at $3,300 since 2000) and the 5% deposit cap on Level 2 contracts (being contracts valued at $20,000 or more pursuant to QBCC Act sch 1B, s 33), namely that:

• the insurable works threshold has failed to keep pace with construction costs and inflation, particularly in circumstances where the threshold is significantly lower than other states. As such, there is a strong rationale for increasing the threshold to reflect contemporary construction costs;
• the 5% deposit cap has not kept pace with pre-construction costs, applicable levies and approval fees, and therefore places significant financial constraints on small businesses that experience cash flow issues.

The QPC’s recommendations

In light of the above, the QPC’s recommendations focus on reducing regulatory burden and improving efficiency across Queensland’s building framework.

Specifically, the QPC recommends a comprehensive review and streamlining of building regulations and standards including the Building Act and Planning Act (and their subordinate legislation), the QBCC Act and the NCC.

With respect to the NCC, the QPC also calls for:

• acceptance of manufacturers’ certificates for NCC compliance
• advocating for a nationally consistent NCC focused on minimum necessary standards
• more rigorous assessment of community net benefits and impacts before changes are adopted.

The QPC has also recommended:

• implementing the outstanding recommendations of the 2022 QBCC governance review
• preparing a new suite of outcome-focused QBCC performance metrics
• preparing a revised draft Compliance and Enforcement Strategy in consultation with licensees.

It further recommends increasing the insurable works threshold and deposit caps to better reflect contemporary construction costs, supported by actuarial advice and periodic reviews (including to review the threshold every five years to account for inflation and the cost of building work).

The Queensland Government’s responses

The Government largely supports the QPC’s recommendations in principle and is committed to staged and consultation-based reform, focusing on initiatives already underway, including:

• implementing technical amendments identified in the Department of Housing and Public Works’ comprehensive review of the NCC 2022 to make housing construction more cost-effective
• actively participating in national modernisation of the NCC and pausing further residential changes to the NCC until 2029, except for essential safety and quality matters
• progressing legislative and regulatory reviews as part of tranches 3 and 4 of the Building Regulation Renovation (Building Reg Reno).

In response to the recommendations made in relation to the QBCC, the Government noted:

• 74 of 77 actions from the QBCC governance review have been completed, with the remaining three still in progress
• the QBCC has introduced a new suite of outcome‑focused performance metrics and has undertaken stakeholder consultations to develop its 2024-2026 Compliance and Enforcement Strategy, with further consultation planned from 2026.

Finally, the Government expressed its support for increasing the insurable works threshold and for further analysis of potential changes to deposit caps, both of which are being advanced through reforms in tranche 4 of the Building Reg Reno.

Outcomes for industry stakeholders

The Queensland Government’s responses indicate an acceptance of the need to remove regulatory burden and simplify compliance through incremental and consultation-driven changes.

The responses illustrate a move toward incremental and consultation-driven changes focused on streamlining and stabilising regulation rather than a complete overhaul.

The construction industry can expect regulatory certainty supported by gradual simplification and greater performance transparency with reforms tied to expert advice, consultation and stage-based implementation.

Whilst Victoria is currently in the process of implementing its own regime, Queensland is currently the only state requiring contractor licensees to demonstrate they meet the prescribed MFRs through annual financial reporting to the QBCC.

The MFR regime aims to prevent insolvencies, but there is no evidence that it has indeed improved financial sustainability. The QPC also notes the regime has the potential to impact industry capacity and productivity by limiting the pool of available contractors.

The QPC’s recommendations

Last March, the Government removed minimum financial reporting obligations for 97% of all individual licensees. However, the QPC has now recommended removing all remaining MFR requirements immediately.

Given the significance of this recommendation, the QPC has called for the Government to conduct further investigations in the short-term to determine whether the MFRs themselves should be removed and if so, whether alternative models could achieve similar objectives to those targeted by MFRs at a lower cost to the community. Until this investigation is completed, the QPC recommends the QBCC to continue its audits.

The Queensland Government’s response

While the Government agrees in principle with the QPC’s recommendation, it has proposed an alternative approach under which the remaining MFR requirements will not be removed immediately and will remain in place while the DHPW conducts an independent evaluation of the regime and considers alternatives.

Outcomes for industry stakeholders

The outcome of the DHPW’s investigation into alternatives to the MFR regime is uncertain, and the industry will need to watch for its findings.

In the meantime, the obligation to report to the QBCC annually remains in place for company licensees in categories SC1 and SC2.

Project trust accounts & retention trust accounts

The project trust account scheme has been a hot topic within the construction industry for several years. Since 1 March 2021, the scheme has been rolled out progressively but was paused on 1 March 2025. The status of the scheme’s application is:

• 1 March 2021: Queensland Government funded projects between $1 million and $10 million
• 1 July 2021: Queensland Government and Hospital and Health Service projects over $1 million
• 1 January 2022: Local Government and Private projects over $10 million
• 1 March 2025: The extension to private projects below $10 million was paused (including the reduction to projects worth $3 million or more on 1 March 2025, and the further reduction to projects worth $1 million or more on 1 October 2025).

Queensland remains the only jurisdiction that applies project trust accounts to private sector projects. While the aim of trust accounts is to improve business confidence by providing processes for securing payment, the QPC found that the extension of the regulation to the private sector lacked proper analysis and is adversely impacting the industry without improving payment security.

Stakeholder feedback and insolvency data also indicate that project trust accounts have not effectively reduced non‑payment in the industry.

The QPC’s recommendations

The QPC recommends pausing the trust account scheme rollout indefinitely to allow a formal review of the trust account requirements, noting there has been no formal assessment of their actual impact and that alternative ways to address non‑payment in the construction industry should be explored to ensure the most effective and efficient framework is implemented.

If the benefits of the framework do not outweigh its costs, the QPC recommends removing the framework.

The Queensland Government’s response

The Government acknowledges this recommendation and in response says that work is already underway to:

• reduce the regulatory and administrative burdens of the trust account requirements on trustees to make the scheme easier to use and more cost-effective
• ensure the framework operates as intended in events of trustee insolvency, allowing subcontractors to access their entitlements held in trust.

The Government is conscious that any future review of the security of payment framework must be comprehensive and continue to support timely subcontractor payments while protecting subcontractor rights when issues arise.

Outcomes for industry stakeholders

The Government has not expressly indicated whether the scheme will continue to roll out or be reassessed.

For now, the trust account framework still applies to eligible Queensland Government contracts of $1 million or more and private sector, local government, statutory authority and government-owned corporation contracts of $10 million or more. The industry will need to keep a close eye on further developments in this space.

MMC involves constructing building components off‑site in controlled factory environments using methods such as modular assembly and prefabrication. Compared with traditional on‑site construction, MMC shifts the focus to design and manufacturing, enabling greater optimisation, standardisation and quality control, which reduces defects. It often incorporates technologies such as digital tools, 3D printing, robotics and AI, with estimated time savings of 20-50% and cost savings of up to 20%.

Barriers to the uptake of MMC

MMC currently accounts for only 3% of Australia’s construction industry, but the sector is growing rapidly and is forecasted to reach $21.4 billion by the end of the decade. Despite widespread use internationally, implementation in Australia has been limited.

Industry stakeholders have raised the following as key regulatory hurdles limiting the adoption of MMC in the Australian market:

• regulatory barriers: Regulatory requirements cause contractors to focus on ensuring work is compliant while meeting time and budget targets, making it too risky to try innovative techniques
• NCC focus on conventional construction methods: The NCC is tailored towards conventional construction techniques with no nationally agreed definitions. Many stakeholders attest that the NCC’s ‘deemed to satisfy’ provisions and performance-based solutions do not provide clear direction for innovative construction methods, although others consider cost barriers are the primary constraint on MMC uptake
• staged inspection and approval processes: For complex building products, approval is given after the product has been built, risking issues with compliance. This typically means multiple tests after each prefabricated component to certify compliance with the NCC and/or Australian Standards
• fragmented and inconsistent planning and approvals framework: Local planning regulations focus on on-site construction practices and vary between jurisdictions, limiting the opportunity for MMC proponents to enjoy economies of scale or standardise components between projects.

While the federal, state and territory governments have already committed to removing barriers to MMC through the National Competition Policy (NCP), state and territory governments are given discretion on how or if these reform proposals are adopted. It is therefore unknown whether the Queensland Government will endorse any forthcoming NCP changes relating to MMC.

The QPC’s recommendations

The QPC recommends the Queensland Government level the playing field by removing unnecessary regulatory barriers to the uptake of MMC, without placing it ahead of conventional construction techniques. Proposed actions include:

• legislation and certification: Support NCP reforms to introduce a nationally consistent definition of MMC and adopt it in Queensland’s building legislation. Amend Queensland’s building laws to accept manufacturers’ certificates for NCC compliance, engage with the ABCB’s voluntary certification scheme for MMC and prioritise regulatory neutrality in planning schemes and consumer protections
• production-neutral provisions: The NCC’s performance-based provisions and the government’s procurement policies should be production-neutral. Allowing for performance-based solutions in contracts and policies is crucial to minimising the regulatory burden currently faced by project proponents and suppliers seeking to use MMC
• training: Upskill the next generation of labour with a focus on advancing toward a future with greater use of MMC. The QPC proposes that TAFE Queensland review relevant vocational education and training courses to ensure MMC is appropriately represented.

These recommendations aim to neutralise the planning and approvals process so neither MMCs nor conventional construction techniques are favoured, giving stakeholders a fair chance to use MMCs where appropriate.

The Queensland Government’s responses

The Government has agreed, either in principle or fully, to each of the QPC’s recommendations.

Relying primarily on existing government initiatives, the Government’s responses acknowledge the QPC’s advice to equalise the regulatory playing field between conventional construction techniques and MMC, including by:

• remaining engaged with the future development of the NCP reforms, until it is suitably defined for Cabinet consideration
• continuing to advocate for production-neutral provisions in the NCC through participation in the voluntary manufacturers’ certification scheme led by the ABCB (which is expected to be delivered in 2028)
• supporting the pursuit of innovation and performance-based solutions in the forthcoming Queensland Procurement Policy 2026 and the DHPW’s suite of standard contracts for building construction.

The Government also foreshadows a training product review by TAFE Queensland, in partnership with the Queensland Department of Trade, Employment and Training, to ensure MMC is appropriately represented.

Outcomes for industry stakeholders

The Government’s responses suggest that barriers to MMC will be slowly drawn down as the development and uptake of new building technologies becomes ever more prevalent.

Project proponents using MMCs should keep a keen eye on the ABCB’s development of the voluntary manufacturers’ certification scheme, which is expected to reduce red tape and fast-track approvals for prefabricated components.

For now, stakeholders seeking to implement MMCs in their projects should ensure contract terms are production-neutral and allow for performance-based solutions.

While part two of this series will assess the impacts of the QPC’s recommendations concerning WHS regulations on industry stakeholders, in brief, stakeholder feedback suggests that the implementation of WHS in the construction industry still has room for improvement.

The QPC therefore advises the Queensland Government to consider alternative options for reducing regulatory burdens without compromising safety, including:

• developing a single, harmonised incident reporting framework, with single point digital reporting
• reviewing the Office of Industrial Relations' Compliance Monitoring and Enforcement Policy so that it provides adequate guidance and direction for ensuring compliance and that monitoring and enforcement activities appropriately manage WHS risks while minimising unnecessary costs to businesses.

We will continue to explore these issues in the next part of this series, but if you have any questions about how WHS laws affect your business, please contact our Workplace Relations & Safety Partner Louise Hogg.

If you have other questions regarding this article, please contact us here. For more legal insights and our analysis on recent developments in the construction sector, subscribe to our newsletter here.

Disclaimer
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.

Published by:

Kirsty Smith

Kate Milward

Luke Moore, Alex Mebrahtu

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