In 2018, he synthesised sixty years of field work into a book: Order Without Design: How Markets Shape Cities, published by MIT Press. It became, quickly, one of the most important books in the canon of housing and land use reform, providing the most robust framework available for combining urban economics with urban planning.

In two hours of conversation, we cover the functioning of cities as labour markets, what communist cities taught him about what markets actually do, and how to diagnose a city the way a doctor diagnoses a patient — with specific numbers, rather than adjectives.

We also got, at the very end, an admission from Bertaud: that leaving the importance of urban design out of Order Without Design was a mistake, and Australia, of all places, is the one that convinced him this was so.

Listen via Substack, or wherever you get your podcasts.

Purchase a copy of Alain Bertaud’s Order Without Design.

Writing Prize open till June 30th

Thank you for the dozens of pitches we received thus far to our inaugural writing prize! Do not stress if you did not get a pitch in—we remain open to final essay submissions until midnight June 30th.

More details

We understand that committing to a long-form writing project with no guarantee you’re on the right track can be daunting. To help solve this problem, the Inflection Points team will be offering feedback to writers who want to pitch a piece in advance of entering the Prize.

Pitches are open until March 27th at 11:59pm - ten more days.

A pitch should be a short summary of the article explaining what the problem/solution you are interrogating is, and why it is important to Australia.

Writers should go beyond merely identifying a problem, and work to interrogate solutions. We are interested in writing that engages with how the barriers to progress can be overcome, or have been overcome in the past.

Please find more information and submit your pitch on our website.

Ryan Ginard (Fundraise for Australia) argues that without fixing the infrastructure, the $5.4 trillion intergenerational wealth transfer will pass the charitable sector by.

Clare Ozich (Justice Connect) explains exactly what the system is, why it fails, and what the Productivity Commission’s solution would do.

Grace Adams (Effective Altruism Australia) shows how DGR rules actively distort giving away from some of the most important causes of our time.

Myriam Robin of the Australian Financial Review moderates the panel.

Read Ryan Ginard’s essay “The Generous Country” in Inflection Points: https://inflectionpoints.work/articles/the-generous-country

Support Justice Connect’s Unlock DGR campaign: https://justiceconnect.org.au/campaigns/unlock-dgr/

• Rewarding Effort in Taxing Times by Allegra Spender.

• Rewiring Incentives by the Independent NEM Review Panel (Tim Nelson, Paula Conboy, Ava Hancock & Phil Hirschhorn).

• Liberal Foundations by Keith Wolahan.

• The Generous Country by Ryan Ginard.

Rewarding Effort in Taxing Times

Allegra Spender argues Australia’s personal tax settings are breaking Australia’s intergenerational compact: labour is taxed harder than capital, bracket creep quietly loads more burden onto working-age Australians, and the system increasingly rewards structuring over effort. This has created an economy where younger Australians struggle to build wealth or buy a home without family help.

Spender argues that the time for talking about tax reform in vague generalities is over: Australia is overly reliant on income taxes, and with a shrinking worker-to-retiree ratio, bracket creep is pushing governments toward ever-higher effective tax rates by default.

To address this, she puts forward a budget-neutral proposal, with five parts:

1. Cut income tax rates by 2.5–3% across every income bracket.

2. Introduce a minimum tax rate on investment earnings to reduce trust income-splitting.

3. Lower the CGT discount from 50% to 30% to reduce property bias while preserving investment incentives.

4. Ring-fence investment deductions so losses can only offset investment income.

5. Adopt a principled, stable approach to taxing superannuation.

Read Allegra’s piece

Allegra Spender is the independent federal MP for Wentworth.

Rewiring Incentives

The authors of Australia’s recent independent review of the NEM argue that our energy market lacks the investment tools required for the next era. Renewables have risen fast (from 8% penetration in 2010 to 43% today), yet much of that build has depended on government policy, rather than durable market signals.

They contend that the links between the NEM’s three time horizons (dispatch, derivatives, and long-term investment) are weakening. While investors need long-dated certainty, retailers prefer shorter contracts. That mismatch creates a “tenor gap,” which government underwriting has partly bridged, yet often by crowding out private contracting, weakening liquidity and price discovery.

They propose repairing the NEM rather than replacing it: expand visibility and participation of consumer resources, help the derivatives market adapt to a variable-renewables era, and introduce a new market-linked Electricity Services Entry Mechanism (ESEM) that provides long-term investment incentives and bridges the tenor gap.

Read the NEM Review Panel's piece

Tim Nelson, Paula Conboy, Ava Hancock & Phil Hirschhorn led the independent review into Australia’s National Energy Market.

Liberal Foundations

Keith Wolahan argues the Liberal Party’s urban problem is structural, not cyclical: the party has been “forgotten” in the metropolitan seats that decide Australian elections, with losses concentrated in diverse middle and outer suburban electorates that remain major-party battlegrounds.

He identifies three forces driving the Liberals’ failure: First, migration has reshaped city electorates; second, rates of higher education attainment have grown sharply; and, third, collapsing home ownership is eroding the behavioural foundations of stability and aspiration that once pulled voters centre-right.

Wolahan argues renewal should be multifaceted, by:

1. Re-establishing historically liberal values for the modern day.

2. Focussing on recruiting candidates of competence and character.

3. Investing in organisational capacity of the party (e.g., via fusion teams).

4. Adopting policies on tax, housing and migration which restore credibility in cities.

Read Keith’s piece

Keith Wolahan is a barrister and the former Liberal Member for federal seat of Menzies (2022-2025)

The Generous Country

Ryan Ginard argues that the future of Australia’s prosperity will not be secured by luck, but generosity. A generous nation invests early and faithfully in its citizens, its communities, and its future, creating resilience that compounds over generations. If luck made Australia wealthy, then generosity is what will keep it so.

To turn aspiration into strategy, Ginard outlines four practical shifts to “double giving” and make generosity durable.

• Reform the Deductible Gift Recipient (DGR) system with a principles-based framework that expands eligibility and reduces complexity

• Adopt globally common giving vehicles (including options suited to retirees and everyday givers)

• Harness the $5.4 trillion intergenerational wealth transfer by normalising planned giving through advisors and new cultural expectations

• Build absorptive capacity so smaller charities can safely take and deploy large gifts

  Read Ryan’s piece

Ryan Ginard is the Head of Sector Development at the Minderoo Foundation and the founder of Fundraise for Australia.

Update: The Inflection Points Writing Prize

Last month, we announced the inaugural Inflection Points Writing Prize. This $5,000 cash prize will be awarded to the best new piece of Australian writing about the big problems our nation faces, and the solutions within our grasp.

The Prize can be entered directly until June 30, 2026. Up until March 27, we will also be taking pitches, for writers who want to scope out whether their idea is the right fit for the Prize before dedicating time to writing it.

Read more here

Our recent impact

We want to conclude this note by reflecting on the impact of Liberal Foundations, the feature piece of this edition which we released three weeks ago.

Keith’s piece was covered by almost every major media outlet, including the Financial Review, the Sydney Morning Herald, the Age, the Herald Sun, the Australian, Sky News (twice), ABC News, the Guardian and the Saturday Paper.

Keith’s piece is exactly the type of writing which Inflection Points believes has been missing from Australia’s national debate. And we’re glad it’s had such an impact. Subscribe now to stay up to date with the latest long-form writing about Australia’s future.

Share

Reform begins with ideas; and we hope you’ll help us share them. If you think someone you know would enjoy Inflection Points, please forward this email or direct them to our website.

– The Inflection Points Team

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Listen to him discuss this piece, and the future of the modern Liberal party, with Jonathan O’Brien on the Inflection Points Podcast. And read The Age’s coverage of his essay here.

“Success doesn’t really interest me anymore. It’s too easy. Analysis plus capital plus execution... anyone can do that.“ So declares fictional tech oligarch Lukas Matsson to Roman Roy in season three of Succession, adding: “...but failure, that’s a secret. As much failure as possible, as fast as possible… that’s interesting.”

Beneath the swagger lies a seductive idea that commercial success follows a formula. This essay searches for an equivalent formula for centre-right political success in the hardest political market of all: the modern city. That task must begin with failure.

As recently as 2019, Christopher Pyne described the Liberal Party as an “election-winning machine”. That claim no longer survives contact with reality. The 2025 election delivered the Coalition’s lowest seat total on record, and polling in 2026 is bleaker still.

Our collapse has been sharpest in the cities, where modern Australian elections are decided.1Australia imagines itself a land of wide-open spaces. In reality, it is one of the most urbanised democracies on earth, and is becoming more urban each year. Eighty-eight of the 150 seats in Australia’s House of Representatives are metropolitan (57% of the chamber). In the US Congress, the equivalent figure is 43%.

These metropolitan seats were not lost one by one. They were lost the way Hemingway described bankruptcy in the Sun Also Rises: gradually, then all at once. The Liberal Party held 33 metropolitan seats even after the 2007 Rudd landslide, rising to 44 in 2013. Today only nine remain, and just two sit in the inner metropolitan ring.

The scale of the challenge should not be underestimated. Across peer democracies, centre-right parties struggle in modern metropolitan centres. Republicans can afford to write off big cities and still govern. In Australia, that is not an option.

Minor or major opponents?

This arithmetic helps frame independent and minor party contests, including One Nation’s recent polling surge. Even if its strongest summer poll is sustained through to election day, One Nation will struggle to win seats where Labor is competitive, which of course includes all our cities.2 And in the regions, Hanson’s party must confront its own structural barrier: Labor and the Greens will almost certainly preference the Coalition.

This is not to downplay the political risk to regional Liberal and National seats or the Senate. But, unlike peer democracies, a party that cannot win in the cities cannot govern Australia.

Much of the commentary about a teal-led realignment of metropolitan politics rests on a misunderstanding of where the Coalition’s losses have actually occurred. Of the 44 metropolitan seats held by the Coalition in 2013, only seven are now held by teal independents or the Greens. Twenty eight, four times as many, have instead been lost to Labor in multicultural middle and outer suburban seats.

These seats differ materially from teal electorates in their demographic profile and voting behaviour, tending to be more diverse and motivated by economic rather than social concerns. In recent elections they have remained major-party contests, not insurgent independents. This distinction matters. While the teal phenomenon is real, it is not the dominant metropolitan story.

Indeed, the Liberal Party occupies a unique position on the centre-right. It is the only party capable of offering economic opportunity, national confidence, and family-focused aspiration to educated, diverse, urban electorates. That makes the Liberal Party the only centre-right movement with a credible path to governing from the cities.

Senator James Paterson explored related themes in the 2025 Tom Hughes Oration. He capably cautioned against populist drift and soulless technocracy. Those on the right who celebrate the Liberal Party’s demise should confront a harder question: what replaces it and can it be competitive in the cities?

The Liberal Party may still die

Writing off any major political party is fraught, because much of what went wrong is cyclical, and the wheel generally turns. But what if, this time, it doesn’t? A worrying portion of the political failure of the Liberal Party in urban Australia has been structural, driven by changes in migration, education, and home ownership.

Structural challenges do not solve themselves. They are not just questions of personnel or leadership. Nor are they fixed by templating campaigns tailored for a different time. Instead, they require diagnosis, honesty, and change. Who are the swinging voters in these seats? What can the Liberal Party offer them? A data-driven analysis will almost certainly conclude they fall into two cohorts: tertiary-educated millennials locked out of home ownership, and migrant families who feel, fairly or not, that the Liberal Party does not fight for them.

It has taken voices outside the party to see it clearly. Labor-aligned strategists like Kos Samaras have been making this case for years. Daniel McNamara penned a prophetic piece in December 2019 lamenting Labor’s loss. But he added this:

Now for the good news... Centre-left parties around the world are winning power by building coalitions of voters who predominantly live in cities... and are increasingly culturally diverse and university-educated... There are plenty of Liberal-held seats... ripe for the picking because their voters are alienated by the Liberals’ drift into right-wing populism... Winning the lion’s share of these... is a viable pathway to government.

Rebuilding is not certain, and nor should it be. No political party has a right to survive. I believe that recovery depends on two things: clarity about what we believe, and people of competence and character to deliver it. Without both, the party will die. With both, there might be a formula for success.

What success means

The Liberal Party exists to do two things: win elections and govern well.

Winning is not optional. A party that cannot win cannot deliver at scale. The noblest principles are worthless if they remain in opposition. In this sense, the pursuit of power is not distasteful. It is the means by which a party turns belief into reality. But winning is not enough. A party that wins without knowing why, or governs without conviction, will drift and disappoint. Victory without purpose is a tenancy.

The purpose of winning is to govern, and the test of governing is whether the country is better for it. What that looks like is more Australians owning homes and raising families, enterprise flourishing, liberties protected, and a stronger, more united nation. The result is a country worth passing on and fighting for, a sentiment Angus Taylor is right to embrace.

Success should not be complicated: win elections, govern well, and hand on a country better than the one we inherited. What follows in this essay is an account of how we have fallen short, and how we can do better.

Australia has changed faster than the party

Before John Howard’s 1996 election victory, pollster Mark Textor created “Phil and Jenny”, fictional composite voters who represented the aspirational battlers the Liberal Party needed to win. They lived in the suburbs, worked hard, did not go to university, worried about interest rates, and wanted their government to get the basics right. The strategy worked. Howard won four elections speaking to Phil and Jenny and the millions of Australians they represented.

But Phil and Jenny have grown old. Their children went to university, took good jobs, and played by the rules. Their children’s reward for following this path? They cannot afford a home, certainly not one where they might imagine raising a family (and certainly not without help from the bank of Phil and Jenny). The dream their parents lived has become a door slammed shut.

How would we describe a decisive composite voter in 2026? My guess is she is thirty-two, tertiary educated, and rents in suburban Melbourne, where her small business owner parents migrated from China three decades ago.3 She works hard. She pays her taxes. She wants to buy a home, start a family, and build a life. She believes in aspiration. She should be a Liberal voter, yet she is not.

The story of this voter highlights the structural failure of the Liberal Party. It is a failure to meet the needs of today’s Australia, told in seismic demographic shifts across migration, education, and home ownership.

Migration

The demographic shift in migration since the Howard years is stark: the share of our population who, like me, were born overseas has increased from 23% in 1996 to 32% today. When considering those who have at least one parent born overseas, this figure climbs to more than 50% of Australians, with seats like Menzies at over 70%. Australia today is not just a nation of immigrants; it is a nation of recent immigrants.

And while this shift has occurred, the Liberal Party has become worse at speaking to diaspora communities. For example, in just two elections, it has gone from holding twelve of the top twenty seats by Chinese heritage to two. This partly explains why so many seats were lost in Melbourne’s eastern suburbs.

And our challenge is widespread. Of the top 50 seats by any migrant background, the party now holds only two. The collapse has occurred in the multicultural suburbs of our major cities, among voters who came to Australia precisely because they believed in the values the Liberal Party claims to stand for.

Yet this decline is not inevitable. Despite a significant Trump-influenced swing in 2025, the Canadian Conservatives held up well in many multicultural seats, winning key ridings with large Chinese diaspora populations in both Ontario and British Columbia. Former Senator and Australian Ambassador to Canada Scott Ryan explained it simply: the Canadian Conservatives have become a diaspora-focused machine. The Australian Liberals have not, treating it as niche rather than essential.

Education

Australia has undergone a quiet revolution in education, shaping perspectives by generation and gender. Forty per cent of millennials hold a bachelor’s degree or higher, compared to just 12% of baby boomers at the same age. Since the end of the Howard Government, the proportion of people aged 25-34 with at least a bachelor’s degree has risen from just over 30% to nearly 45%. Higher education is not evenly distributed by gender, with 37% of women now holding a bachelor’s degree or above, compared with 30% of men.

This partly explains the poor performance of the Liberals in the city. In just about every poll, university-educated voters lean Labor, Greens, or independent. And the story has a main character: the shift in higher education is directly related to the growth and influence of white-collar professional women in the cities as a percentage of the labour force, who surpassed professional men in 2004 and tradesmen in 2015. To address this structural slide in support, we must recognise their concerns, hopes, and dreams.

There was no better example of which party better understands this than Labor’s 20% reduction in university debt (HECS) versus the Liberals’ 25c off a litre for petrol. Leaving the merits of each policy to one side, this was a political own goal by Liberals: while each party knew cost of living was the most important issue, Labor better understood how it manifested itself with more swinging voters in more key seats. For young professionals, the difficulty HECS played in getting a home loan was acute. It also mattered to their parents. And the results speak for themselves: in 2010 the Liberals held twelve of the top twenty electorates by percentage of professional women. Today, only one remains.

Re-earning the trust of professional women is serious and deserving of sustained attention in its own right. It encompasses issues as diverse as algorithm-driven polarisation, job insecurity in an economy increasingly shaped by AI, parliamentary representation, and the pressures faced by the “sandwich generation” (including burnout and the extra demands of caring for children and parents).

Many capable Liberal women, including Charlotte Mortlock and her Hilma’s Network, have made efforts to address this. But they should not have to do it alone, and Charlotte’s recent departure from the party highlights how we cannot assume those who genuinely care will wait forever.

And while there is something to be said for far-left bias in universities, reforming academic culture is a complex generational project. It has no clear or immediate policy lever.

Home ownership

Home ownership is both existential and amenable to action in the near term. It is an issue that cuts across gender and generation alike. And it is one the Liberal Party urgently needs to confront.

In 1981, around 61% of Australians aged 25–34 owned their home; today, that figure sits in the low 40s, and for those aged 25–29 it has fallen to around 36%. On current measures, millennials are the first generation in modern Australian history less likely to own a home than their parents were at the same age. Over the past three decades, the ratio of median house prices to median incomes has roughly doubled.

Even allowing for deposit assistance schemes, the time required to save a deposit now stretches well beyond a decade for many households. Survey research analysed by Rebecca Huntley reinforces the shift in sentiment: more than 60% of Australians, and around three-quarters of renters, now believe the dream of home ownership is no longer attainable for young people.

The disconnect between wages and house prices risks killing the Australian dream. Success in life will become less about hard work and more about the lottery of birth or marrying well. That is how most countries operate, but not here. It is why my family fled Ireland, where even your accent was key to whether you would make it or not. Many Australians don’t realise what a rare and fragile thing equality of opportunity is. If there is something worth fighting for, this is it.

The fact that this is most acute in the cities should not come as a surprise. Property prices are proportional to the distance from a city. e61 research found this has led to the dominance in metropolitan seats of younger renting Generation Z and older home-owned-outright baby boomers, with mortgage-paying millennials fleeing.

Most commentary rightly focuses on the financial benefits of home ownership, which are real and well-understood. What tends to be underexplored are the behavioural effects. Home ownership creates a series of small but cumulative incentives to invest in place and community.

As my friend, millennial demographer Toby Wooldridge, recently put it after buying his first home in the outer Melbourne suburb of Croydon:

For me, that has meant maintaining a garden, paying closer attention to neighbours including elderly residents and families with young children, doing small reciprocal favours, joining the local tennis club, and engaging with local forums like the Croydon Facebook group. It has also shifted how I think about time horizons and risk, including the confidence to plan for starting a family.

As has been widely reported, this impacts when young Australians achieve life milestones. National birthrates, for example, dropped 3.8% between 2019 and 2024, with capital cities’ rates falling most by 6.5% (Sydney dropping by 8.6% and Melbourne by 7.3%). That should alarm all of us. Some argue that young people simply don’t want families anymore. But if that were true, the decline would be uniform. It isn’t: regional Australia grew by 2.5%. Birthrates have fallen most where housing is least affordable.

The crisis is material, not cultural. Menzies spoke of the “forgotten people“ and their desire for “a home of their own.” If that is no longer within reach, the party’s core offer is hollow. A generation locked out of the property market is not listening to lectures about enterprise and aspiration. It is not that they are hostile to Liberal values: they simply do not believe the party is serious about the one thing that would make those values real.

The polling bears this out. Among renters, Labor wins 65% of the two-party preferred vote. With the electorate shifting structurally towards renting, the historical home-owner foundations of the Liberal Party are becoming shaky.

However, the political risk for the Labor Party is also real, particularly in inner-city contests against the Greens. New York City is arguably the global headquarters of capitalism, yet it serves as a cautionary tale of when young people lose hope. Zohran Mamdani is on any measure a socialist, yet has now been elected as mayor after running on an affordability agenda with housing at its core. This is the one issue that can see the politics of cities move from the centre-left to the far-left.

There’s a familiar saying that people start out on the left and drift right as they get older. What should worry the Liberal Party is that this shift is no longer happening. Millennials, now in their thirties and forties, are not moving right as they age. Instead, worryingly, they are moving left. According to the Australian Election Study, millennial support for the Coalition fell from 38% in 2016 to just 21% in 2025.

Home ownership once pulled voters toward stability. Its absence is now pushing them the other way. I am not the first to make this claim.

As Tim Wilson has argued, when access to home ownership erodes, the social contract itself weakens, and with it the legitimacy of the economic and political system. In a widely reported January 2020 email to Mark Zuckerberg and other Facebook executives, Peter Thiel warned that a generation burdened by student debt and locked out of housing was accumulating what he described as “negative capital”. People without a stake in the system, he argued, should not be expected to defend it. As Sydney barrister and fellow veteran Gray Connolly has often put it, “why would people vote conservative if they have nothing to conserve?”

Australia has changed, and so must we

Yet when asked, too many in the Liberal Party still hold on to an image three decades out of date, placing a premium on their own intuition over data, demography, and psychography.4A challenge this fundamental demands a willingness to question the Liberal Party’s most settled assumptions. Is it an institution which respects facts and data? Does it understand how to appeal to a new generation of multicultural aspirational Australians? How does its founding values stand up to a changing world?

What we believe: A Liberal House

Values mark the foundation of an enduring yet contemporary Liberal House. Foundations do not change with fashion. They bear weight. They hold firm when storms come. Get them wrong and nothing built above will last. Today, we need to inspect our foundations.

We’ve not made our own case

Last year I attended a major multicultural small business awards ceremony in Melbourne’s eastern suburbs. Hundreds of migrant small business owners filled Melbourne’s Exhibition Centre. The organisers, fiercely and fairly non-partisan, invited elected officials to address them. Given Melbourne’s state and federal seats are overwhelmingly Labor, almost every speech came from their side.

I sat there imagining I had arrived in Australia six years ago. What would I conclude? That Victorian Labor is the party of small business. The claim is preposterous in the context of the burden that Victorian Labor has placed on business in the past few years. But it would be a fair assumption if that room was all I knew.

A generation that has never heard the Liberal case clearly stated cannot be blamed for not believing it. The failure is not theirs. It is ours. We have assumed that values are self-evident, when they must be argued. We have assumed that history speaks for itself, when it must be taught. This is doubly true for migrant communities.

The daughter of parents who arrived from Vietnam or Iran or China did not grow up hearing grandad talk about Menzies or mum about Howard. She has no inherited loyalty, nor any reservoir of goodwill built over decades. Australian politics is new to her family. There are no core equities to draw upon.

Nor can we rely on the family being gathered around the television for the evening news, where grabs of both sides of politics reached whole households at once. That world is gone. Today, each family member scrolls a separate feed, shaped by algorithms that reward outrage and skip explanation.

Core equities must be earned with each generation, explained to each new audience, and demonstrated in each term of government. The onus is on us to build them. In our cities, we have to start again.

Seventeen statements today

In 1944, Robert Menzies formed the Liberal Party. Ten years later he gathered delegates in Canberra to settle seventeen statements beginning with “We believe.” They remain true today. But ask any Liberal to recite them and you will be met with a summary or silence. This is not a criticism: seventeen statements are too many to remember, let alone act upon.

So what did Menzies and his delegates write? To paraphrase, that we believe in parliamentary democracy, in the rule of law, in institutions that outlast any single government. In free thought, free speech, and free association. In the family as the foundation of society. In private enterprise, fair reward for effort, and the dignity of work. In equality of opportunity, not equality of outcome. In a nation united, secure, and worth defending. These are the load-bearing walls of a decent society and a party that Australians have trusted with power more than any other.

But while the foundation is fixed, the furniture is not. Reasonable people and reasonable Liberals can disagree about how a room should be arranged. They can argue about the size of the table, the placement of the chairs, whether the curtains should be drawn. These are questions of policy. They are the domain of democratic contest. A party that confuses furniture for foundations will tear itself apart over trivialities. A party that forgets its foundations will have nothing to hold it together.

Our task today is to distil seventeen statements into something that can be remembered, repeated, and acted upon. Many claim to speak for Menzies, but I am confident he would enjoy condensing them for his Instagram and WeChat followers. There are many ways to do this and there is no right answer. But we owe it to the electorate to try.

In my first speech I put it as democratising prosperity and democratising power. Giving people agency and freedom only works if monopolists and government have less. I saw the conservative tradition being expressed in gratitude for the past, and the classical liberal tradition as hope for the future. Today, I would lean into gratitude and hope:

We believe in a nation where free people dream, families flourish, and enterprise thrives: a nation worth passing on and fighting for.

Let’s break that down.

Free people dream

This is the Liberal commitment to individual liberty: the freedom to speak (the foundational right), worship, own property, and associate. It rejects the paternalism that says government knows best or that we should be judged by group characteristics. It trusts citizens to make their own decisions and bear their own consequences. To dream is to hope for a better tomorrow, to cherish opportunity, and take a chance.

Families flourish

This is the recognition that society is not built by the state but by the institutions that precede it: the family, the community, the voluntary association. These are the nurseries of character and citizenship. But families also require a home and support from an efficient state, including in health and education.

Enterprise thrives

This is the belief that prosperity comes from work, risk, and reward; that the small business owner and the entrepreneur are the engines of a free economy. That government should encourage effort, not punish it. And that government should live within its means, keeping taxes lower, and debt sustainable.

A nation worth passing on

This is the conservative instinct: that we are stewards, not owners. That we show gratitude for the institutions built by those who came before and owe a debt to those who come after. Stewardship also extends to nature. Caring for the environment must be the natural expression of a philosophy that refuses to leave the next generation poorer than we found it.

And fighting for

Freedom takes sacrifice. A nation must be defended: its borders, its values, its way of life. This is about more than hardware and alliances. It is about our collective will to put service above self when required most. It is about inviting migrant communities into our most sacred story. ANZAC cannot remain the inheritance of some Australians; it must become the covenant of all. A defaced war memorial offends all of us, not just veterans.

***

These ideas are not new. But for many voters, they might as well be. The task is not to rediscover what Liberals believe. It is to say it clearly, mean it, and field candidates and leaders who prove it.

Who we should aspire to be

In two elections, no one stopped to tell me they disliked what the Liberal Party stood for. No doubt those people are out there. But those who wanted a word had a different complaint: they disliked or were disappointed by those who spoke for it.

At times that criticism was directed at me personally or a leader. Some of this was driven by unfair and predictable scare campaigns. But much more of it was sincere and valid, a plea for us to do and be better.

If the values are sound, the question becomes one of people: how the party selects, supports, and develops them. This must apply at both a parliamentary and leadership level. What should the party demand of those who seek to represent it?

People of competence & character

In isolation, competence and character are rare. In combination, they are rarer still.

Competence comes from a healthy combination of academic smarts, experience, work-ethic, self-awareness, appetite for risk, and judgment. In politics, being a good communicator is essential. It requires understanding contemporary Australia as it is, not as it was or as you wish it to be. It also demands an open mind, an open heart, and a commitment to favour perspective over perception.

Character is about what motivates you. People who put their hand up for elected office are driven, perhaps irrationally so. It takes hunger to get there and resilience to keep going. But what drives you? Is it something higher than your own advancement? Do you conduct yourself differently when you think no one is watching? Do you truly believe in the party’s values or are they a rhetorical device when safe? When it counts, will you show courage or give in to fear?

It also matters in the little things. It is the discipline to resist easy outrage in favour of patient explanation. It is in how you treat people when they offer you nothing. It means at key moments choosing truth over tribe and principle over power. This is what sets us apart from the populist right. And it is what has built a reservoir of trust over decades.

The problems facing Australia are complex, and governing is hard. Competence and character are the minimum requirements for being trusted with either.

Candidates & membership

If the party wants better representatives, it must select its best candidates. Preselection is where our renewal begins in earnest or fails altogether.

A preselection process that rewards loyalty over merit will yield representatives who lack the standing to persuade anyone beyond the already converted. It also makes politics overly transactional and unpredictable.

This points to a deeper imperative: the party must remain a broad movement, with membership that reflects the communities it seeks to represent. A narrow membership produces narrow candidates, and fewer of them.

As Tony Barry has often stated, there are more members of the Melbourne Storm rugby league team than the Victorian Division of the Liberal Party. And Melbourne is an AFL town.

A membership drawn from across the community, including the migrant families and young professionals now absent from our ranks, will demand representatives who understand their concerns and can speak to them credibly. Many of these members should become great candidates themselves.

Evidence-led decision making

Quality candidates and committed members alone are not enough. A modern political party requires professional infrastructure, organised to produce superior policy developed and executed at scale.

The Liberal Party has professional and dedicated staff in its various wings. But it is lacking in its capacity to fuse and analyse intelligence from multiple sources. What is missing is a fusion team. This is not a policy team (parliamentary led) or a campaign team (secretariat led).

What is missing is a separate cell that works with the secretariat and parliamentarian wings, fusing data, demography, geography, psychography, polling, mapping, as well as human-to-human feedback from members and candidates. A capable fusion team would help both wings make better decisions, searching for causations, interrogating correlations, moving from complexity to clarity, from ‘what’ to ‘so what’ to ‘now what’.

Today, the culture of the Liberal Party more often than not relies upon the intuition of key people, especially the parliamentary leader or a preferred pollster. That can work from time to time, but it is akin to flying a plane without instruments. Deference to ‘judgment’ has contributed to the failure to notice seismic demographic changes outlined here. And this has led to an unforgivable misallocation of scarce resources.

To that end, it was not lost on me that the first people Labor head strategist Paul Erickson thanked in his post-election press club speech were the data teams. This is one of many fronts the Labor Party is outplaying the Liberal Party. But they weren’t always like that. More than a year out from the election, Labor posted LinkedIn job ads seeking more data analysts. Evidence-based decision making has become core to who they are.

Building a fusion team is an urgent fix that money, talent, and software can address. It needs to be embedded in how the party thinks, not bolted on as an afterthought. This only works if the shift is led from the top.

Too often I saw well-meaning policy ideas fail because they were not intelligence-led or wargamed. A capable fusion team would help with both. For example, such a team could have assisted in avoiding the acknowledged missteps on tax cuts, HECS, and work from home at the last election.

A fusion team would ensure that policy formation and campaign execution operate as one system, guided by evidence rather than instinct alone. It would challenge inherited assumptions early and direct scarce resources where they matter most. Winning parties institutionalise learning; losing parties rely on chance. The difference is organisational capability.

Tone

Finally, Australian voters have a finely tuned ear for authenticity. They recoil from nastiness and performative outrage. They reward representatives who explain rather than denounce, who seek to persuade rather than score points. A party confident in its values does not need to shout down views it disagrees with. It listens, engages, and trusts the strength of its own case. To put it another way, if we speak from the heart we will connect to the heart.

This particularly matters in key debates that touch on identity, including gender, migration, and climate/energy. We can and should have fierce contests driven by values and the national interest, but do so in a way that makes people feel heard and appreciated.

I don’t know why, but my sense is metropolitan seats are more attuned to tone. There must be conviction in politics, and there is a place for passion and fire in the Parliament. Nonetheless, bar some exceptions, the spectacle of Question Time is not one that makes Australians proud or pushes the country forward.

There is no one fix to increasing polarisation, but how we debate has to be part of the solution.5

Markers of policy principle

Policy is usually where papers on the revival of the Liberal Party begin. That instinct is understandable, but misguided. Unless we first reconcile our values for modern Australia, put our best people forward, and make better decisions, policy proposals will miss more than they hit.

Even so, we know enough about who we are and the country we seek to serve to set urgent markers of principle. Fair minded Liberals will of course have many views. These are questions of furniture, not foundation. That is why the contest of ideas is not a weakness, provided it is anchored in shared purpose. Accordingly, here are five markers of policy principle:

The party of balanced budgets

The Intergenerational Report looks over the horizon to 2063, and notes our current government spending trajectory (not including states and local government) is entirely unsustainable. Addressing that is about more than inflation and interest rates. It is about intergenerational equity.

Let’s rededicate ourselves to being the party of limited government and balanced budgets. We have reputational ground to make up post COVID. This demands a serious audit of Commonwealth functions and a willingness to say what we would stop doing, not just differently. This includes functions the Commonwealth has accumulated that duplicate state responsibilities or exist to manage problems government created.

The party of lower income tax

Australia’s income tax burden is too high and unfairly concentrated on working households, discouraging effort and constraining economic growth. We should never again go to an election as the party of higher income tax.

First, eliminate bracket creep permanently through legislated indexation.

Second, propose a voluntary system of capped income splitting for couples. Treating families as economic partnerships would correct inequities between households on similar incomes and allow families, not the tax system, to determine how work and care are shared.

The party of proportionate migration

Migration volume and standards should be explicitly linked to demonstrated capacity in housing construction, infrastructure delivery, and social cohesion. These metrics should be transparent and reviewed regularly.

We cherish those who have made their lives here and cannot fold to populism. That requires recognising that a generous migration policy operates on social license, grounded in public consent. In making this case, we must be vigilant to how the migration debate can be heard by diaspora communities. For this reason, we must clearly distinguish ourselves on migration from One Nation on both policy and tone.

A broader population policy must also consider how we grow, not just by how much. This should include a whole-of-federation analysis on distribution and decentralisation. Fast rail, fast internet, and zonal taxation, within constitutional constraints, are worth exploring as incentives for people to move out of stressed metropolitan centres.

The party that values service & higher education

Australia faces a deteriorating strategic environment and, despite recent upticks, an ADF struggling to meet recruitment targets. At the same time, universities have become disconnected from, and sometimes hostile to, military service.

The party should expand the already proven ADF Gap Year program, with an additional incentive linked to HECS. If a person successfully completes a gap year (which does not necessarily have to fall immediately after secondary school), followed by a period of ongoing effective reserve service, they qualify for a 50 per cent reduction in HECS, capped at four years of study. No compulsion, but a genuine incentive.

This avoids the illiberal and unconstitutional dimensions of national service. The ADF receives a deeper, more experienced reserve base. Universities regain a connection to national purpose. And young Australians receive meaningful debt relief from a grateful nation. This should all be at a cost certain to be less than a full-time ADF position.

Over time, such a scheme could be considered for other forms of service.

The party for first home buyers

An existential crisis requires existential action. Housing supply matters most, but supply alone will not solve the problem. Migration settings and the balance between owner-occupiers and investors also shape outcomes.

Current tax settings tilt incentives toward investors, particularly in existing stock. They reward bidding rather than building. The result is predictable: higher prices in constrained markets and too little new housing. Debate about tax has become unnecessarily binary. At a time when young Australians are delaying families and the Liberal Party faces electoral collapse, maintaining the status quo is not an option.

Rather than abolishing negative gearing, its operation should be refocused toward new supply. The Liberal Party should lead with this: cap negative gearing for established dwellings at one property per investor, while allowing the deduction for up to five newly constructed homes. The case for rebalancing is clear. In 2025, 82% of loans to investors were for established dwellings. Economist Leith Van Onselen makes the valid point that this is pumping demand far more than contributing to new supply.

Australia has changed since 2019, and so must the politics. That is why, in addition to providing certainty, existing arrangements must be fully grandfathered. To demonstrate that this is more than an election tactic, the offer should be made to pass this reform now. Young Australians might just look at the Liberal Party with fresh eyes.

A formula

Returning to Succession, Lukas Matsson was right: failure is interesting, but only if it teaches us something. Perhaps the formula is obvious: values plus people equals success. Here is my plea:

If we believe in a nation where free people dream, families flourish, and enterprise thrives; a nation worth passing on and fighting for.

And if we become a party that nurtures leaders of competence and character; a party that bends to truth over tribe, principle over power, and perspective over perception.

Then the Liberal Party will once again earn trust, win elections, and govern well.

If the Liberal Party is to have a future, we can’t be fainthearted.

We must be brave.

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Keith is a barrister and the former Liberal Member for federal seat of Menzies (2022-2025).

He won the seat in 2022 by unseating a thirty-year conservative incumbent at preselection. Three years later, he lost that same seat as the Liberal party’s metropolitan vote collapsed beneath his feet.

In his essay for Inflection Points, Keith argues that the Liberal Party’s failure is structural, not cyclical, and driven by three forces: migration, education, and home ownership.

The party has lost the multicultural suburbs. It has lost university-educated professionals, particularly women. And it has lost a generation locked out of the housing market—people who, as Keith writes, are “not hostile to Liberal values; they simply do not believe the party is serious about the one thing that would make those values real.”

This is a podcast about the seriousness required to bring a political party back from the brink.

Read Keith Wolahan’s essay, Liberal Foundations, in Inflection Points.

Hello! It’s Jonathan here, the Editor-in-Chief of Inflection Points.

The first six months of this publication have been more successful than our team could have ever imagined. That I’m writing this to more than 2,500 total subscribers is on its own a fact worth celebrating.

In our first six months, we have published 14 essays devoted to building a bigger, better Australia. Those essays have in turn received coverage across the ABC, the Australian, the Financial Review, and the Sydney Morning Herald. In turn, we have had the honour of connecting our writers behind the scenes with the stakeholders that matter to the issues they write about.

And Issue 04, out one week from today, promises to be our best yet. We have a set of brilliant writers putting forth new and challenging ideas, and we are expecting it to make quite a splash—so stay tuned.

Today, though, I’m emailing to announce three other things:

• The inaugural Inflection Points Writing Prize

• The introduction of paid Inflection Points subscriptions

• Our upcoming Melbourne event with Effective Altruism Australia

  ---

The inaugural Inflection Points Writing Prize

The Inflection Points Writing Prize is a $5,000 cash prize, which will be awarded to the best new piece of Australian writing about the big problems our nation faces, and the solutions that may be within our grasp.

Entries to this prize should be focused on a specific issue that fits into at least one of the Inflection Points focus points: state capacity, infrastructure and housing, productivity growth, and human flourishing.

Writers should go beyond merely identifying a problem, and work to interrogate solutions. We are interested in writing that engages with how the barriers to progress can be overcome, or have been overcome in the past.

Entries are open until the 30th of June. Criteria, conditions, and an early pitching process are available on our website.

Prize details

Why a prize?

There is much Australian writing about the problems we face as a nation. There is less about the potential—and historically successful—solutions.

We founded Inflection Points to create a platform for long-form writing about Australia and the institutions that drive its success. Our publication exists to deepen engagement with our nation in its own right—not in comparison to others—and to in turn build a national shorthand for the unique ways Australia functions.

We at Inflection Points believe that Australia is full of great writers—but that there is a lack of diverse platforms to publish and nurture those writers to reach their full potential. Our magazine aims to play a positive role in enabling our nation and its media environment to flourish for years to come. This Prize is one small part of that mission.

Introducing paid Inflection Points subscriptions

Inflection Points is incredibly proud to punch above its weight. After publishing three impactful issues, we feel confident in our ability to continue growing our impact for years to come, as we play our role in building a bigger, better Australia.

We believe in our mission, and we know our subscribers do too. And so we are introducing paid subscriptions for those who want to support this mission directly.

Ensuring full, open access to Inflection Points is crucial to our theory of change. This is why Inflection Points will not be moving any content behind a paywall. At this stage, subscribers will be supporting us to continue our mission of publishing high-quality Australian writing.

Soon, we will be unlocking subscriber-only opportunities, including commission requests and ask-us-anything podcasts. For the long-foreseeable future, though, our core product will remain free.

Melbourne event: Fixing Australian Philanthropy: Why DGR Reform Matters

A live Inflection Points podcast, co-hosted with Effective Altruism Australia.

Australia gives billions of dollars to charity each year. But the rules governing where those dollars can go are outdated, inconsistent, and often misaligned with impact.

Join Inflection Points and Effective Altruism Australia (EAA) at the Wheeler Centre for a live podcast recording, examining how Australia’s Deductible Gift Recipient (DGR) system restricts philanthropic impact—and what could be unlocked if it were reformed.

Book your tickets now

And that’s all from us! Thank you for subscribing, and we’ll see you in a week—for Issue 04 of Inflection Points.

– Jonathan O’Brien
on behalf of the Inflection Points team

The article below, written by Jade Lin, was published in edition two of Inflection Points in November last year.

My mum looked after my grandma in her final years. She helped her bathe, drove her to appointments, took her for walks in the park. My grandma got to stay at home until near the end, when her cancer got too much and she went into palliative care.

My grandma had just about the best last few years she could have hoped for because my mum is a superhero. But what if my mum hadn’t been there?

1.4 million Australians will be funded by the Australian Government under its Support at Home program to have personal care support by 2035, and many others will self-fund it. Over a million Australians will be on the NDIS, many of whom will also require personal care.

Millions of us at any given time will be asking personal care workers to help us go to the toilet, swallow our medicine, or get out of bed. These are strangers who we are trusting with our bodies in our most vulnerable time. This is a critically important workforce.

But despite their importance, in the coming years we’re likely to face a shortage of these workers. Central to both of those challenges is that care is a deeply human job: it’s really hard, and it’s slow to innovate.

In a national conversation about how we supercharge the economy with AI and other emerging technologies to make it more productive , it’s worth asking whether that applies to the care economy too. Historically, the sector has been dismissed as inherently low-productivity, due to slow productivity growth over the last three decades: in 2025, a carer can only physically help so many people in a day, whereas with the help of spreadsheets and computers a junior analyst at a bank can fly through the analysis of yesteryear. In this school of thought, as the care sector grows to comprise more of the economy, we should expect it to drag down aggregate productivity as well.

But this is an unnecessarily defeatist and bleak attitude. The care economy allows other more productive sectors to thrive—after all, a highly productive worker with an ageing mother can only go to work if their mum gets help. That’s why it’s important that we get the policy settings right.

There are many productivity gains still to be had within the sector. Many tools already exist that let carers increase both their quality and volume of care, but most are slow to be widely adopted in this fragmented industry. Yet the frontier for care is seldom closely examined. It’s a tough job, for sure, but could it be marginally less so with clever technological assistance? The work is low-paid for now, but can we share the gains of new efficiencies with workers?

This piece considers these possibilities, and what they might mean in the context of a highly regulated and often poorly functioning labour market for care economy workers.

We need more personal care workers

Demand for personal care for older people at home is expanding as the population ages. In 2035, more than 20% of Australians will be over 65 compared to 13% in 2009. 5% of the Australian population will receive home care funding from the Australian Government, compared to 4% today, and 3% in 2017.

To maintain the current ratio of personal care workers to older Australians, the number of people working in older people’s homes needs to expand by 42% between 2023 and 2035. If we removed the cap on home care package funding that drives the current “waitlist” model, we would need an enormous 62% expansion of the personal care workforce.

The Aged Care Royal Commission’s interim report condemned the “waitlists” older people endure as cruel and discriminatory. It noted that many older people died before receiving their packages, or were prematurely moved to residential care because of their place on the “waitlist”. Since then, the formal “waitlists” to access packages have lengthened, and staff shortages mean that even when you reach the front of the queue, in some areas, there are no providers to supply those services to you.

We lack good data on care shortages

Tackling Australia’s care sector future requires understanding where the most acute shortages will occur, and when. This analysis is severely constrained by the Australian Government’s current data collection. It is surprising—given that aged care has been at the forefront of policy discussions for at least a decade—that the only way to get useful workforce data on aged care at home is to rely on a sporadic survey (the Australian Institute of Health and Welfare GEN Aged Care Data Aged Care Provider Workforce Survey).

I wanted to know how many home care workers there are working in aged care contexts. Straightforward enough, right? Turns out, not so much. The ABS offers the relevant category: ‘Personal Care Assistant’ (ANZSCO 423313), and Jobs and Skills Australia tells us that there are 42,300 people doing this job. But then it also has ‘Aged or Disabled Carer’ (ANZSCO 4231), which Jobs and Skills Australia reports to comprise 367,200 workers. The tasks listed in those jobs are overlapping, and the contexts in which they’re done are unextractable—we can’t know if they’re being done in a residential care facility, at home, or in a hospital.

Compare these two broad categories to the intense specificity offered in other sectors of the economy—such as fire protection plumber (334117), vehicle trimmer (351532), driller’s assistant (821931) or lagger (821932).

This leaves us with limited data on the specific shortages of care workers. From the same survey that these projections are built on, we know that in March 2023 there were 43,000 vacancies in directly employed nursing, personal care, and clinical care manager positions across all aged care. What proportion of those vacancies were in home care, and how many were covered by contractors and overtime is unclear—meaning we cannot actually know the existing shortfall in home care workers.

As such, consider 43,000 the lower-bound of the number of additional workers actually needed. The real number may be much larger, and even meeting this lower-bound target will be no easy feat.

Care sector jobs face problems

There are three main problems driving the workforce shortage. The first is low wages, the second is lack of career progression, and the last is poor conditions at work.

But before diving into those, it’s worth recapping how the home care market works.

In simple terms, demand is driven by demographics, and supply is driven by government regulation, funding, and award structures. That is, the government says “we will fund X packages and they will be worth $Y”. The middlemen—providers—are then allowed to charge a maximum of $Z for the administration of care and packages. These providers can use a third-party employer of personal care workers, or they can directly employ those workers themselves. All workers are paid at a mandated award rate based on their role.

The government then disburses taxpayer dollars to clear this constructed market.

That’s a bit of a simplification of the value chain in the home care economy, but ultimately it shows that the government largely shapes the rigid economics of this market by controlling and capping demand, and also by setting the prices of the various services involved.

Home care workers have relatively low wages

Low wages are a major driver of the care economy labour shortage, given pay is below similarly skilled occupations, no doubt partially due to the impact of gender biases that undervalue highly feminised industries. Without outside market forces shaping the sector, wages historically grew slowly and off a low base.

To their credit, the Australian Government increased the minimum wage for at-home aged care workers by ~36% over the last 4 years. These are once-in-a-generation pay increases funded by the federal government that have raised the award wage for a full-time employed home care worker in aged care from $45,000 in 2022 to $61,000 in 2025. It’s still far less than the median full-time wage ($88,400), but it’s certainly a big change, and more than the median full time annual salary for the equivalent role in the US ($34,000 USD, or ~$52,000 AUD). This wage increase alone might mean that the staffing gap closes substantially, but we’ll have to wait until the next Workforce Survey to see.

Government-funded wage rises are unlikely to fully close workforce shortages. Highly productive sectors are producing more for less every year: think manufacturing. Meanwhile, care work becomes less and less attractive over time: few perks at work, and relatively lower and lower wages compared to jobs taking off in the other parts of the economy. While taxpayer-funded wage rises are inevitable, governments will likely move slowly on them, and they will always be chasing the increasing salaries of more productive sectors.

Home care roles offer limited career progression

Career progression matters because having experienced, specialised carers matters. Even if good starting wages can attract lots of people to do entry level care roles, we’re not just looking for bodies in homes. A strong care economy should have skilled, experienced carers: people who are specialists in adults with particular mobility issues or dementia, for example.

The industry experiences a lot of turnover: in 2021-2022, it was 41%. Some of that turnover is a care worker moving from one employer to another—but some of it is people dropping out of the industry altogether. Once again, we don’t have good data to work out what proportion that is.

It is exceptionally hard to see real career progression as a home care worker. There are 6 levels to the category in the Social, Community, Home Care and Disability Services (SCHADS) award, capping out at $77,000 with a Cert IV and supervisory role—only 26% above someone with no experience at all, and still below the median wage. This is obviously discouraging to experienced care workers, and not a strong case for people considering whether to stay or leave the industry.

The current award wage progression is structured such that you need a new certification or a certain number of years of experience to get to the next pay grade (for example, 4 years to move from Level 3 to 4). The Australian government clearly cares about home care workers being skilled, having made many relevant TAFE courses fee-free (or heavily subsidised) for eligible students.

Certifications and years of experience are the best proxy we currently have for understanding how skilled a worker is, but we can get better at measuring this. For instance, there are lots of reasons people don’t go to TAFE—they might be caring in their job and also at home, or they might have a lot of difficulty with English or academic environments, or they might not be eligible for fee-free TAFE. So some workers, who have put in years of hard work in the home care sector, may not be able to move up the award scale, and struggle to transition to different careers that might build off their skills. That’s even the case for those who have spent hundreds of hours with patients and developed soft skills, familiarity with certain conditions, and administrative and management prowess.

This means we might be losing really skilled workers because they can’t progress fast enough, even though they’re absolutely smashing it in the job.

Offering better career trajectories could also transform the types of workers attracted to the industry in the first place. It could fundamentally transform people’s view of a job as “just for now” or “just to pay the bills” into a long-term commitment. And we’d all rather someone who viewed this as their career, rather than a side-job, to be caring for our parents.

And finally, on a more personal note, career progression is important because it gives hope, meaning and structure to workers. Many people reading this piece likely work in an office job. Many of us have the next title and pay rise in mind, or have climbed a ladder to get to where we are. That’s satisfying, and gives us something to look forward to. Why shouldn’t home care workers have the same? It’s an industry in which workers develop meaningful skills over time, skills that could be translated to nursing or care administration with little stretch of the imagination. But our current system hasn’t set workers up to get there with any ease.

Working conditions are unpredictable, and often poor

The flipside of entrusting your loved ones with home care workers in vulnerable situations is that these workers have to enter new, private environments all the time. This is the third problem: working conditions. It’s not clear what they’ll be like—is the client a hoarder and their house physically unsafe, will the family ask for more work than the worker is paid to do, will it be an emotionally hostile situation? Aged care workers have to do work that you don’t even want to do for your parents, some of it filthy, and much of it just physically hard. Given these conditions, it’s hardly surprising that fewer people than we need want to work in the sector.

Home care workers experience injury rates of 12-20% a year by various global estimates; in Australia, a 2019 sample of 5,000 home care workers found 45% had experienced a workplace injury in their careers. Safework NSW lists risks to home care work as muscular stress, slips, trips and falls, workplace violence and aggression, and psychosocial hazards (where such hazards like ‘role overload’ and ‘low job control’ cause stress responses). Atticus Maddox and Lynette Mackenzie published a study in 2025 which found that 76% of occupational therapists they sampled had experienced workplace violence (verbal, physical or sexual). Occupational therapists are not the same as home care workers, but they represent a similar cohort of professionals entering into a vulnerable person’s home to provide them a service; it’s likely that a study on home care workers would find violence rates to be similar.

Technology will disrupt the care sector

With such a bleak outlook, one could feel despair. But with new technology on the horizon, like rapidly innovating AI use-cases, there’s cause for both optimism and caution. Used well, these have the potential to follow in the footsteps of historical technological improvements to patient care. But early signs suggest that some technologies in the workplace, like monitoring software, can be hostile to workers’ experiences, threatening both its uptake and possibly worsening already poor work conditions.

Improvements in care are possible

AI and other new technologies offer workers two compatible opportunities:

1. To spend less time doing undesirable tasks. For instance, by using machines to perform tasks that have previously required humans, particularly those tasks that are high-cost or time-consuming.

2. To improve patient care. For instance, by using technology to better triage and manage patients, improving their experience and making sure workers are focused on doing the highest value tasks.

For example, take innovation in patient beds as an example of doing fewer bad tasks. Previously, nurses would spend time each day cranking their clients’ beds to be in comfortable positions. Not only did this pull nurses away from important things they could be doing, but it also meant patients relied on support workers for a very basic part of their day. The question that was asked in the 1960s, as part of a detailed study in the UK, was:

What mechanical and powered assistance would be necessary if the same quantity of care and attention had to be given with half the present quantity of woman-hours

In addition to reducing the burden on labour in the system, the development of hydraulic and then electric beds allowed for greater independence among a cohort typically facing a loss of such agency in out-of-home care.

Another example is the remote monitoring of client vitals. Historically, care workers were required to check vital signs by physically visiting patients and checking if they needed support. Today, care workers are able to check in more regularly on their patients through remote systems, including many which provide alerts when things go wrong. This has reduced disruptions for residents, enabled staff to deliver a similar level of care to a greater number of patients with continuous, rather than periodic, monitoring.

Both of these innovations show that improvements in care can be enabled by technology. Not only can this technology deliver more efficiency gains, but it also often comes with an increased quality of care and sense of independence from the residents or patients.

But these are physical changes to home care. AI and software platforms present an interesting new nexus that asks whether more or better information, organised differently, can change home care.

We’ve seen genuine innovations

There’s reason to believe that these new technologies will deliver similar improvements of care, across each of the categories outlined above. While it’s too early to know what fraction of activities done by humans will either be eliminated or done more efficiently, it’s clear that new technology will play a role in addressing challenging labour shortages.

Spending less time doing undesirable tasks

There have already been innovations that have pushed workers to be able to focus on more critical tasks, by automating or speeding up routine or low-value activities. Consider three areas.

AI tools reduce administrative burden, as they have across the economy. Innovations that have helped other parts of the economy have also spilled into the aged care sector. Hireup is an Australian based disability and aged care support company with 11,000 NDIS and aged care clients and 14,000 workers. Jordan O’Reilly, the cofounder of the company, told me that they’ve started implementing AI to summarise customer care calls, saving at least 10 minutes of administrative time after every call. This is one of the simplest applications of generative AI: supporting customer service staff. Stanford and MIT academics produced the first paper that studied generative AI’s economic impact when deployed at scale in a business: that business was a customer service centre. They find that generative AI chatbots can increase the number of issues centre agents can resolve for customers by 14%, and that most of this gain accrues through less experienced and lower performing staff.

Smart scheduling leaves more time for patients. Biarri, an Australian commercial mathematics firm, helped Australian Unity with a new algorithm to optimise worker schedules (i.e., route optimisation). They had enormous success—15% reduction in cost per visit, 15% reduction in travel time, increase in visits delivered as planned from 60% to 90%. That’s an awesome outcome for workers, who don’t have to spend as much time in traffic or going forwards and backwards, and for patients, who see their care provider when they said they were going to be there.

Robots can reduce physical labour if we can get them right. One promising area is the use of advanced robotics to support elderly patients receiving care—robotics is particularly important because AI on a computer alone cannot lift an old person (yet). Perhaps unsurprisingly given its aging population, Japan has been at the forefront of developing such technologies. Waseda University, in collaboration with industry partners like Hitachi, have developed the AI-Driven Robot for Embrace and Care (AIREC). A similar technology is in development by MIT. They both aim to assist elderly residents to do day-to-day tasks including:

• Getting in and out of bed

• Putting on clothing and socks

• Getting in and out of a shower

• Sitting on a toilet

• Collecting basic biometrics data (e.g., blood pressure)

These impressive robots are slated for commercial release in 2030, and will initially cost $67,000. They will likely be most viable in residential care facilities, where they will help with the tasks they do best, enabling the stretched care workforce deployed to other key tasks.

Less complex assistive technologies are already deployed in nursing homes. For example, lifting patients has been made substantially easier with wearable exoskeletons for workers. These devices sense the action that the worker is trying to undertake and activate mechanical features (e.g., extra resistance in some parts, motors and hydraulics in others) to reduce the strain on the worker lifting. Robot adoption in Japanese nursing homes has been linked to improved quality and productivity of care, and has increased employment and retention.

Additionally, less complex labour intensive elements outside of care provision have seen progress. Time consuming tasks—like cleaning floors and transporting linen—have all benefited from the adoption of industrial scale robots. AI has been important in enabling this, given the importance of situational awareness in aged care facilities (as aged care facilities are populated by elderly residents); large neural networks have played a crucial role in ensuring robots do not disrupt or injure residents.

It’s critical to note that many of these robotic developments are targeted at residential facilities, rather than home environments. That’s because homes are often non-standard, have a higher degree of clutter, and large, expensive pieces of equipment are harder to justify for one older person compared to dozens of them in a residential facility.

But improving efficiency in standardised environments, like residential facilities, is still valuable. It frees up workers to navigate the more complex and high-value tasks that make the best use of their skills; it might even relieve some demand for residential care workers, allowing more carers to work in home care. And, eventually, some of this technology will adapt to non-standardised environments like home care.

Improving patient care

We‘ve also already seen substantial improvements in patient care using technology, allowing for patient care to improve in a cost-effective way through smart investments.

Machine learning predicts health risks, and enables triage. Cera is a UK based digital-first home care provider. At each of the 2.5 million patient home visits they deliver each month, Cera’s carers and nurses log patient symptoms and observations in the Cera app. AI algorithms then use this data to predict a patient’s risk of falling or developing an infection. This allows Cera to flag high risk patients and mobilise staff to prevent these outcomes. Cera has experienced enormous success at using AI to predict whether clients will have a fall—calculating a client’s risk of falling with 83% accuracy, 7 days in advance. This technology has been endorsed by the NHS, and is already used in almost two thirds of care systems across the NHS. By predicting when clients are at risk of falls and providing them with additional support, Cera can both improve the quality of their service users’ lives, and prevent the extensive costs of call-outs for staff. Speaking on the topic, Charlotte Donald, Cera Care’s director of operations, said:

Most families who have an elderly relative will have experienced the impact or fear them falling. Falls are painful, some people never fully recover from a fall and those who do tend to lose some confidence in themselves and their independence. Preventing one person from falling is significant, being able to prevent tens of thousands is nothing short of groundbreaking.

Having access to this technology makes it easier to systematically understand what kind of care and preventative support is needed for different service users, and is seen as a win-win-win across clients, workers and payers.

Chatbots can increase the average skill of workers, but risk atrophying the skills of experienced carers. ChatGPT itself is promising, though not perfect, in helping home care workers work out what to do on the job. One study of popular large language models (LLMs) to see how close they got to gold standard responses in 10 common home care scenarios.

They concluded that “although not yet surpassing professional instruction quality, these models offer a flexible and accessible alternative that could enhance home safety and care quality”. Given home care can be done by people with no qualifications, having a chatbot on side might improve the average skill of workers. But there is a risk of skills atrophy, as one study in the Lancet found occurred to endoscopists before and after having access to AI to diagnose adenomas. This might make highly skilled workers less skilled over time as they come to depend on AI.

Critically, and unlike a specialist, a home care worker faces a very wide range of daily tasks, which spans multiple patients, overlapping conditions, different environments, and any number of tasks. In this way, access to a well-calibrated chatbot or similar may offer a lot of value in helping with tasks a worker has never encountered before, and may well never encounter again.

Digital companions could combat loneliness in older people. Critically, as baby boomers who spent their working years navigating computers, the internet, and smartphones begin to move into aged-care settings, their digital fluencies and expectations of care will begin to reshape what is possible. On-demand services may become more sophisticated, as our aging population becomes more familiar with app-based interfaces. This may give rise to the development of companion-based technologies—varying from table-side assistants to humanoid robots (including one developed in Australia). Early studies from Japan on PARO, a therapeutic AI inside a stuffed toy seal, have found it improves medication compliance, anxiety, agitation and depression in adults with dementia.

To some, this sounds dystopian. How can older people get a sense of connection from a robot? Wouldn’t we rather they get it from a person? In an ideal world, technology will give home care workers more time to spend with their elderly clients in a purely social manner. But if studies continue to show improved health in older people who are using these digital companions, there’s no reason not to invest in them too.

But innovations are costing workers

On another hand, the expansion of new technology tools runs the risk of eroding workers’ rights. In a sector which already struggles with worker retention due to poor work conditions, limited career progression and low wages, we should be concerned about the risk that this poses.

In the care sector, bosses are already using AI and associated technologies in a way that harms workers. Workers have every minute clocked by GPS, and these inputs are fed into AI systems that rank and assess them. Workers express that this is driving extra work: having to argue with their bosses about the GPS tracking messing up their paychecks. They’d be right to worry about what the AI ‘thinks’ about these inputs. Some workers complain that their shifts are changed inexplicably—that they’ll call a client to confirm that they’re coming, only to click into their apps and find they’ve been switched to a different client at the last minute. Maybe it’s AI, maybe it’s a simpler if-this-then-that machine, but regardless of the underlying technology, it has workers worried.

There are worries that they will be asked to use new apps and tools that tell them what to do and they feel pressure to act, even if their judgement says “we don’t need to do that”. The UTS Human Technology Institute did a deep dive with nurses, and their experience is illustrative of how new assistive technology in care settings can actually make work harder. Consider one nurse’s story:

We were using facial recognition in NICU to confirm babies’ identities before administering medication and the system kept giving false alerts ‘face doesn’t match’. So you constantly have to override and say ‘yes, this is the right baby’. It causes extra work and also defeats the purpose if you [sic] just going to ignore all alerts.

It isn’t that AI is bad in and of itself, but many current use cases put employers on the front foot, chasing slightly better margins, and think little of employees. This typifies the care sector’s core problem: it’s structurally limited in its embrace and investment of new technologies.

The sector isn’t geared to adopt new technologies

Given the promise of AI, one would expect aged care operators to be rushing out to roll-out such tools. Unfortunately, substantial barriers exist in technology adoption in the sector. This isn’t just speculation: currently less than 10% of aged care providers have used the My Health Record platform, which is used by 100% of Australia’s GPs. These barriers will flow through to the adoption of AI by care economy participants. Consider three unique factors of the sector which have prevented its adoption.

The sector is fragmented

Australia’s aged care system is notoriously fragmented. There are more than 850 approved providers of home care services and more than 600 approved providers of residential care operating across the country, the vast majority of which are small not-for-profits. In home care, more than 95% of providers (representing nearly 60% of the sector’s activity) each receive less than $70m in government funding. Across the industry, the average government funding per home care provider is $10m.

This fragmentation undermines investment in new technologies: most small providers are unable to take advantage of the economies of scale or pools of capital required to invest in the platforms and equipment which underscore productivity growth. In the case of AI, smaller providers may also struggle to grapple with the ethical demands of deploying AI across a highly vulnerable population. And with many operators siloed into specific geographies, knowledge transfer across the sector is difficult.

It remains to be seen whether the involvement of private equity (PE) in home care (such as Quadrant’s 50% acquisition of St Ives in 2016) leads to investments in technology to deliver quality care at a lower cost. Quite reasonably, many Australians are worried that it will instead lead to the erosion of quality observed in the United States as PE firms have purchased residential aged care assets. Because PE firms are looking to make a substantial profit in 3-7 years, they are incentivised to find shorter-term profitability, rather than the profitability that may be yielded from long-term investments in innovative technology and capacity. These incentives can lead to bad outcomes: one study found that PE ownership of US nursing homes led to an increase in resident mortality of 11%, alongside lower rates of compliance with care standards. With this in mind, we should be wary of expecting sector consolidation alone to drive meaningful improvements in care quality in home care.

Regulation & funding models discourage investment

The prevailing design of the home care economy leaves providers with little cash to invest. Tight controls on cost and provision are understandable—after all, the Aged Care Royal Commission revealed many dodgy practices, such as charging clients ‘exit fees’ of more than $4,000 to disincentivise changing providers. But this doesn’t mean the government has got its payment structures exactly right. For instance, 32% of home care providers weren’t profitable in 2022-23, meaning there was either no cash to reinvest in innovation, or the investments they were making left them unprofitable. Providers, profitable or unprofitable, also aren’t paid based on the quality of client outcomes—they’re paid based on the size and number of packages that they have on their books. This means incentives to invest in marginal improvements are low.

On top of this highly regulated funding model, care economy providers must navigate clinical guidelines associated with how care is delivered. While these quality standards are essential to preventing the widespread failures observed throughout the Royal Commission into Aged Care, their continued evolution risks adding undue complexity to delivering services in a digitally enabled manner.

Ben Maruthappu, the founder and CEO of Cera, attributes the success of his 9-year-old company (already one of the largest home care providers in the UK) to innovating in all parts of the business, based on the needs of frontline staff. That means his technology development has focused on both the flashy, important bits (the fall prediction capability described earlier) and the more boring, but equally important bits, like digitising paperwork and auto-filling forms. He says: “We have carers that apply for work because of the tech—because they hear they can get scheduled for work more easily and deliver more care”.

Ben’s company has flourished against all odds. He tells me that one of his biggest barriers to innovating further is the current funding framework for home care providers in the UK: providers are rewarded based on the volume of care they provide, rather than being incentivised to embrace prevention or focus on outcomes. He wonders how things might be different if providers were paid based on outcomes, rather than hours: avoided hospitalisations, for example.

Ben’s got a good point. The costs of hospitalisations and residential aged care far exceed the cost of home care, and so if home care is particularly good and keeps older people out of institutions, then it’s a cost-effective investment. A different payment structure could be used to explicitly incentivise home care providers to deliver high quality care, and reduce overheads associated with an ageing population.

Cera’s payment-incentives challenge resonates in Australia too. Australian home care providers are explicitly only allowed to charge their actual costs, including a margin on the cost of capital, to deliver services that are reimbursed by the Australian government. In 2026, these prices will be explicitly capped. This ‘cost-based’ pricing makes sense to prevent the rorting of Australian taxpayer dollars. But it poses a huge barrier to productivity-enhancing investment.

Recommendations

To support the adoption of these platforms across the economy, the government should consider driving three substantial shifts in the sector.

1. Change incentives to drive innovation

2. Use microcredentials for progression

3. Develop worker incentives

Reform incentives to drive innovation

As has been established, most Australian home care businesses have limited margin to reinvest in delivering better outcomes or more efficient service. And they’re not necessarily incentivised to. If it takes half the time to care for a client, then they’ll have their revenue cut in half too. Under these conditions, it will take a long time for providers to catch up to best practice.

If we want innovation, the Australian government has to radically restructure the incentives of home care companies to invest in cutting-edge administrative and care-provision technology and processes. That would likely involve reshaping hours-based funding models, towards a measure that takes into account the outputs (quality of care) rather than the inputs (number of workers).

That could look like a base payment model to providers, per the current model. Then, an additional dividend, based on quality outcomes (avoided hospitalisations, for example, against an expected base). This model would allow successful, innovative providers to make capital investments and scale, and give all providers greater reason to try.

Use microcredentials for progression

Victor Dominello’s call for a skills wallet makes sense across the economy. I want to push the idea even further to say that care workers should be able to upskill, move up pay levels and ultimately move into adjacent fields through their work alone. In critical industries like home care where we have worker shortages, the government should actively redesign credentialing processes and award systems to automatically recognise capabilities and skills learned on the job.

Think of it from a client perspective: if you could have a worker in your home who is certified based on what they actually did on the job (demonstrating skills, following protocols, and creating good outcomes) versus through some number of years or TAFE certification, which would you prefer?

The government could develop a digital microcredentialing tool while simultaneously reforming its award system and accreditation requirements to make those microcredentials valid. This would require a lot of testing to make sure it is as watertight as it can be in certifying workers, but it’s likely to be the assessment model of the future.

Picture this: a smart schedule assigns workers to clients based on existing and progressive skills they’re gaining, and clocks the hours spent. The notes workers take record their actions and patient outcomes. This data, likely processed in part by AI, is then used to assess competency, and the model can automatically assign credentials (e.g. 200 hours of dementia care that meets care guide expectations). These credentials can then be recognised as part of earning a more advanced degree like nursing.

This would enable home care to be an industry with real progression, and a stepping stone towards other related careers if desired. Plus, in a demanding job, it would be incredibly motivating to know that the next micro-promotion is just around the corner, rather than four years away or available only through extra work and sitting exams out-of-hours. For this whole system to work, the government’s key contributions would be:

• Developing a mechanism to pull anonymised data from home care businesses’ client notes and schedules

• Developing a certification algorithm to analyse this data

• Running a pilot demonstrating that the certification algorithm is accurately classifying people’s skills and is at least as good as, if not better than, in-person testing

• Coordinating various government departments to support and recognise these new certifications, including Department of Health and Aged Care, Aged Care Quality and Safety Commission, the Australian Industry and Skills Commission

• Making an application to the Fair Work Commission to overhaul the award system to create more granular levels based on these new certifications

Cera currently has its own internal pay progression known as ‘Career Pathways’. They provide learning and development pathways from sector newcomer to leadership, including nursing qualifications. Cera has used AI to scale this training across its workforce, delivering 1 million hours of training to date. 45% of salaried operational vacancies were filled internally due to this training pathway. They’re proof that not only can home care be a meaningful career path, but that setting it up as such is critical to running an effective, fast-growing home care provider, and that AI has an important role to play.

It would be nice if every home care provider currently operating was like Cera, but these systems only currently work at substantial cost to the employer, and are infeasible for smaller operators. Cera also still ultimately needs their staff to undergo face-to-face certification due to government requirements.

The government needs to rethink the incentives of this labour market that it designed to be more reflective of the skills and desires of its workforce. The reality is that the government has full control over how people can be certified, and how much they should get paid once they are. If we are serious about managing the oncoming aging population crisis, making home care a substantial career is a critical unlock for our future.

Develop worker incentives

If reforming business incentives is one side of the coin, reshaping worker incentives is the other. Home care is uniquely reliant on its workforce, but workers often see little upside from taking on extra shifts, adopting new technology, or helping their employers solve structural challenges (two-thirds of aged care services employ personal care workers on awards). In fact, the system too often disincentivises flexibility and innovation at the frontline. Yet with well-designed incentives, governments and providers could unlock a win-win: higher productivity for employers and better pay and career satisfaction for workers. Consider three mechanisms that could be implemented.

Incentive bonuses: there are many win-wins available to workers and their employers. A last-minute shift, referring a friend, filling out documentation on time are all incredibly valuable to an employer, and can be made more valuable to an employee. Where an employer might be calling around to scrounge up an employee for a shift, algorithmic tools can automatically calculate the value of that shift to the employer (considering for example the cost of losing the client and the likelihood of that happening). They can then offer a portion of that value to the employee on top of their regular rate.

Series A startup Jolly is emerging as a key player in the US home care incentives market, already deployed to more than 30,000 frontline workers. Its gamified app lets employers set priorities and allocate funding, which is then delivered to staff as targeted incentives. The approach has driven measurable improvements—for example, Jolly campaigns lifted on-time documentation completion rates 30%, boosting providers’ ability to get paid promptly. For workers, these campaigns have translated into a modest but meaningful lift in overall compensation.

Tech dividend: employers have a particular difficulty getting staff to embrace technological and ways of working change. Australia has been particularly slow at adopting AI, and the healthcare industry even slower—the cumulative impact being that home care is very tech backwards. If employers offered a portion of the cost savings or revenue improvement offered by a tech change to employees that actively participate in making it happen, both could win. And there’s no downside to the employer.

On top of the redesign of incentives and payment structures suggested above, the government also has a role in this to provide international best practice to the highly fragmented market of home care agencies. Many have worried about how to pay their staff more and struggled to find the time to develop new mechanisms. As part of the government’s broader innovation push, information is a critical tool.

Now is the time to make the care economy work

My mum was an extraordinary carer for my grandmother. I hate to publicly admit it, but I’m scared that I won’t be nearly as good as she was. But I love my parents dearly, and I need to know that they’ll be in good hands.

If we want that for our families, we need to start by treating care workers better. That means removing the barriers to technologies that can make their jobs easier and make the lives of those in their care more fulfilling.

New technologies can help employers put a price on an employee going above and beyond, and provide them a financial incentive to do so. They offer us better data on worker actions, skills and outcomes; this data changes the bar at which we can give someone a promotion. And, they might make work a little easier and less dangerous, as exoskeletons and robots in the works come onto the market.

AI, robotics and other technologies have the potential to improve the care sector. The real question is whether they will be adopted and if that adoption will leave residents and workers better off. That’s something government can, and should, make happen.

In this episode of the Inflection Points Podcast, Matthew Maltman, Senior Research Economist at the e61 Institute, joins Jonathan O’Brien to discuss his landmark essay, “Best Practice for Supply Side Reform”. Drawing on the empirical evidence from Auckland’s 2016 Unitary Plan, Maltman explains how broad-based upzoning successfully lowered rents and boosted construction productivity where other measures failed.

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Matthew and Jonathan unpack Maltman’s three principles for effective reform: focusing on removing “bans” (prohibitions on density) rather than just reducing “burdens” (red tape), prioritising market health over the specific concerns of incumbent firms, and controlling policy inputs while monitoring outputs. Matt argues that while cutting paperwork is popular, it is ultimately ineffective if policies that ban the things we need remain in effect.

Read Matthew Maltman’s essay “Best Practice for Supply-Side Reform” here.

Listen to the podcast on:

• Apple Podcasts

• Spotify

Matthew is a Research Economist at e61 Institute and runs One Final Effort, a supply-side economics blog.

In this episode, Brendan Coates, the Housing and Economic Security Program Director at the Grattan Institute, outlines the findings of their latest report, “More homes, better cities”, arguing that the root cause of the crisis isn’t immigration, tax settings, or banking—it’s that our planning systems say “no” by default.

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Brendan and Jonathan discuss how 80% of residential land near Sydney’s CBD is restricted to three stories or less, and how removing these bans could unlock hundreds of thousands of new homes. Brendan explains why “gentle density”—allowing three-story townhouses as-of-right—is the key to affordability, better streetscapes, and economic productivity.

Read Brendan Coates’ “Planning is the Bottleneck to New Housing” here.

Read Grattan Institute’s full report here.

Brendan is the Housing and Economic Security Program Director at Grattan Institute.

You can listen to Brendan Coates discuss his essay and the Grattan Institute’s newest housing report on the latest episode of the Inflection Points Podcast, wherever you get your podcasts.

By Brendan Coates

For the first time in decades, Australia’s housing stock is growing more slowly than its population. In the latter half of the 20th century, we consistently built enough to absorb population booms. Since 2000, we haven’t.

The problem runs deeper than simple population math. Falling household sizes, rising wealth, and work-from-home patterns mean we need to build more homes than population growth alone suggests. But because we’ve failed to build, house prices have exploded—from four times median income in the early 2000s to more than eight times today. In Sydney, the median home costs more than ten times the median income.

The shortfall is worst where it matters most

Australia has a particular problem: we’re not building where people want to live. Between 2006 and 2021, most major cities added the fewest new homes in the desirable inner- and middle-ring suburbs: precisely where housing is most expensive and demand is highest.

Many people would prefer a townhouse, semi-detached dwelling, or apartment in an inner or middle suburb, rather than a house on the city fringe, if more of those housing options were available in our biggest cities. But instead of enabling supply to meet demand in established areas, we’ve pushed the bulk of our development to the urban fringe.

The result is that Australian cities are far less dense than comparable wealthy cities like Toronto, Copenhagen, or Vienna—cities that match or exceed ours on quality-of-life measures, yet house far more people per square kilometre. If inner Sydney were as dense as Toronto, it would have 250,000 additional well-located homes. If inner Melbourne matched Los Angeles, it would have 431,000 more. It’s no coincidence our nation’s cities have some of the most expensive housing in the world.

We are undermining our own prosperity

Australian cities are our economic engines. Cities generate productivity gains through agglomeration—clustering workers and firms creates economies of scale that boost wages. International surveys suggest every 10 per cent increase in employment density raises wages by up to 0.4 per cent. One Australian study found that doubling local density increases wages by 1.6 to 2.7 per cent.

But scarce and expensive housing is pushing people away from these opportunities, particularly the young, and particularly in Sydney.

The New South Wales Productivity Commission recently warned that Sydney risks becoming a city without grandchildren. Sure enough, from 2001 to 2024, 16 inner-Sydney areas saw their under-30 populations decline even as Sydney grew by 1.5 million people overall. Between 2016 and 2021, Sydney lost twice as many 30–40 year olds as it gained.

Those pushed to the outer suburbs face longer commutes and access to fewer jobs, making it harder for both parents to work, with women generally being the ones who end up working less. Rising housing costs are turning our most productive cities from ladders of opportunity into barriers to entry.

But there is hope. The political clout of renters has grown and the YIMBY movement has gained momentum. And for the first time in decades, the Federal Government is focused on housing.

This article lays out exactly what state and federal governments should do: first, by laying out the rationale for better land use regulation; then, by laying out the reforms that states—as the custodians of land use planning systems—should implement; and then, finally, by demonstrating how the Federal Government can and should play a coordinating role in bringing these reforms together.

Reforming state and territory planning systems will be an endeavour of the same scale as the great microeconomic reforms of the past—such as dismantling trade protectionism or establishing national competition policy. And like those great productivity-enhancing reforms that helped usher in decades of strong growth in Australians’ incomes, the returns to getting more housing built could be just as big.

Part I: Planning is the biggest (if not the only) problem

When the demand for housing in a location increases, so does the price of land. Land—and location—is in fixed supply.

But the amount of housing that we can supply at a given location is not fixed, because building upward is possible. Where planning controls permit extra housing to be built, the higher value of residential land prompts developers to build more dwellings on each unit of land, such as townhouses and apartment buildings. Townhouses and apartments use much less land per dwelling than freestanding homes, helping to keep housing affordable as demand for housing, and land values, rise at a location.1

But when restrictive planning controls prevent developers from building apartments and townhouses, the cost of housing will continue to increase with rising land values in high-demand areas. In recent decades, the price of land has risen faster than the price of buildings. In 2024, land accounted for more than 70 per cent of the value of residential property, up from 50 per cent in 1990.

Developers have not been able to build the density that would correspond to these rising land prices because our land use policies have forbidden them from doing so. And so housing has become much more expensive.

These restrictions on the construction of new housing are at the core of Australia’s housing woes. Too often, our planning systems prohibit more homes where people want to live and work, making housing scarce and unaffordable.

Of course, planning isn’t the only problem holding back more housing.2 But it’s the biggest. And the good news is it’s also the easiest to fix: it can largely be done without governments passing any new legislation, or spending more public money.

State and territory land-use planning systems have long managed the impacts of particular land uses and development on others.

Planners aim to manage the spillover effects, or ‘externalities’, arising from land uses—such as noise, pollution or buildings overshadowing—on the neighbours. Planning systems separate land uses that are clearly incompatible—such as putting a chemical refinery or an abattoir next to a school or housing.

And planners play a vital role in enhancing the public realm by coordinating the provision of infrastructure and green space.3

But existing planning controls restrict new housing in ways that are hard to justify against these core objectives of planning. There are three problems.

The first, and by far the biggest, is that state and territory planning systems say ‘no’ to new housing by default, and ‘yes’ only by exception. Built form controls make it illegal to build more housing on a lot of scarce and valuable land across our capital cities.

Second, approval processes for new housing, where it is allowed, are slow, costly, and uncertain.

And third, the governance of planning systems is biased against change, since councils prioritise the interests of existing residents, and there are no checks on bad rules being imposed that hurt those who don’t already live in those neighbourhoods.

Let’s take these problems in turn.

Problem 1: Land use planning controls say ‘no’ by default, and ‘yes’ by exception

State governments are responsible for land-use planning systems: they set the overall framework via legislation, they lay out the tools planners can use, and they allow for plans—maps and rules—that apply the tools to dictate what land can be used for. And in most states, these powers are delegated to local councils—including processing most development applications.4

Planning controls include zones that can be used to separate different land uses and regulate their intensity, as well as other prescriptive rules, such as:

• minimum lot sizes,

• minimum lot width,

• setbacks,

• site coverage maximums,

• floor space ratios, and

• other protections such as heritage and neighbourhood character, which further limit what can be developed.

Dense housing is banned across most of our capital cities

About 80 per cent of residential land within 30km of the centre of Sydney, and 87 per cent in Melbourne, is restricted to housing of three storeys or fewer.5

But this isn’t just a problem in our two biggest cities: three quarters or more of residential land in Brisbane, Perth, and Adelaide is zoned for two storeys or fewer.6

And planning controls are often even stricter in regional Australia.

Other prescriptive rules—such as minimum lot sizes, setbacks, and street frontages, and other protections such as heritage—further limit what can be developed. In fact, these other controls are often just as big a barrier to greater density as height limits.

Site coverage maximums make housing difficult to build

For example, while parts of Ku-ring-gai Council in Sydney permit multi-dwelling housing, they set a maximum site coverage of 40 per cent and a minimum setback from the front boundary of 10 metres. This means that for a 10 metre by 40 metre parcel of land, the 100 square metres closest to the street is off limits, and only 160 square metres of the remainder is available to build on. After taking into account other controls such as minimum side and rear setbacks, and minimum private open space rules, it quickly becomes difficult to build multi-dwelling housing on a site that is—on paper—zoned to allow it.

New South Wales’s floor space ratio controls undercut reforms intended to enable density

Maximum floor space ratio (FSR) controls control how much floorspace can be constructed on a given site. For instance, a 1000 square metre lot with an FSR of 2 would enable 2000 square metres of floorspace to be constructed. An FSR of 0.8 would enable just 800 square metres of floorspace to be constructed, regardless of height limit controls.

And across NSW, highly stringent maximum floor space ratios are widely used in ways that undercut residential zones notionally intended to permit higher-density.

For example, the ‘high-density residential’ zone in NSW is intended to ‘provide for the housing needs of the community within a high-density residential environment’. But nearly three-quarters of land zoned as such in Sydney is subject to a maximum FSR of less than two, even after recent planning reforms.

High minimum lot sizes make even subdivisions infeasible

Even recent reforms to allow the subdivision of existing blocks in NSW for dual occupancies are hampered by restrictive minimum lot sizes. These restrictions range from 450 square metres for sites in many councils to 1,000 square metres in Ku-ring-gai Council, to 6,000 square metres in Albury.

The combined impact of these controls means development theoretically allowed is often practically infeasible, especially in the case of urban infill where the existing home must be bought and then demolished.

Broad heritage controls lock up much of our inner-cities

These rules impacts are often exacerbated by heritage protections, which further limit where housing can be built. While prominent heritage buildings are specifically listed on federal and state heritage registers, the bulk of heritage protections are applied by local councils to properties within broad areas via local planning schemes.

Inner-city councils in Sydney and Melbourne have used these powers liberally. In Sydney, 21 per cent of residential land within 10km of the CBD is covered by heritage protections. In Melbourne, 29 per cent of residential land within 10km of the CBD is covered by a heritage overlay.

And ‘character zoning’, unique to Brisbane, requires the retention of pre-1947 homes, and requires that additional buildings reflect the existing character of the area. Character restrictions apply to nearly 13 per cent of all of Brisbane’s residential-zoned land, and most residential lots in the highly desirable neighbourhoods within 5km of the CBD.7

Protecting certain sites that enrich our shared understanding of history is important. But these controls are often imposed extensively with little acknowledgment of the consequences of stymieing the supply of housing in areas where people most want to live.

Heritage protection ultimately means fewer homes. In Melbourne, sites with heritage overlays were about 50 per cent less likely to have had significant infill development than those without from 2017 to 2022. In this same timeframe, mixed-use developments in heritage overlay areas had on average 28 per cent fewer storeys than those elsewhere.

Problem 2: Planning approval processes are complicated, long, and uncertain

Most new housing requires a planning approval, typically from a local council. But approval processes for new housing—where it is even allowed in the first place—are slow, costly, and uncertain.

Over time, the work required to lodge a development application and comply with planning rules has increased significantly.

For example, a development application to build an apartment building in Sydney in the late-1960s was just 12 pages long. Today, a development application for planning approval for a similar apartment building runs to hundreds of pages and requires extensive environmental, traffic, and often heritage assessments.

These are typically prepared by consultants, adding thousands of dollars to the cost of building new homes.

Broadly, councils accept or reject proposals based not only on what the specific rules of their local plan say, but also the strategic objectives for a given parcel of land. And councils tend to have a wide berth to lay down restrictive objectives for areas.

Here are just two examples.

Boroondara Council in inner-eastern Melbourne has added an objective for some of its jurisdiction to maintain the ‘spacious, suburban character of the area’, as well as the area’s ‘leafy’ feel.

Similarly, Woollahra Council in inner-eastern Sydney says that development in its most common zone (R2) should be ‘...compatible with the character and amenity of the surrounding neighbourhood’ and ‘...of a height and scale that achieves the desired future character of the neighbourhood’.

In the best case, it’s difficult to understand how to comply with these objectives; in the worst case, they are actively hostile to new development.

Wait times for planning decisions are also often long: they are nearly a year on average for developments of 20 or more homes in NSW and Victoria.

Most states and territories have created streamlined pathways for development applications, but too few new housing developments typically qualify.8

And in some states, especially Victoria and Tasmania, third parties—neighbouring landowners, tenants, or members of the broader community who may be adversely affected by a proposed development—can appeal against planning decisions.9 This gives yet another group the right to either veto, or delay, housing.

Delays add to project financing costs, and increase the markup required to make new housing commercially feasible for developers.

These delays can cause developers to abandon or postpone projects. And because construction is highly sequential, delays and disruptions can create ‘cascading failures’ which push up costs by requiring repeat consultants’ reports, or delaying timed access to scarce labour and materials.

The additional holding costs—mostly financing and taxes - from waits can be material. For instance, an extra six months of permit processing time after buying a block of land in Sydney to build townhouses can add about $18,700 in developer costs per home.10

And many development applications are approved subject to conditions, including variations to the design of the building, or approvals from energy or water infrastructure providers. These conditional approvals stretch out timelines even further.

One NSW developer reported that they went through a development approval process with 230 conditions that needed to be addressed before they could receive a construction certificate.

These can make otherwise profitable developments commercially infeasible, especially when these changes are requested late in the planning and design process.

Problem 3: The governance of land-use planning is biased against change

The governance of land-use planning—who decides what gets built and where—is biased towards local residents who oppose change. People who might move to the area—were new housing to be built—don’t get a say.

Councils are mostly held accountable by those opposing change, meaning that they receive little pushback on rules that are overly restrictive.

When Ku-ring-gai Council in Sydney consulted residents on proposed upzoning reforms in 2024, just 4 per cent of respondents were renters and 12 per cent lived in apartments. This is a large shortfall when compared to the 2021 Census, which showed that 20 per cent of residents in the area were renters, and 27 per cent lived in apartments.

Similarly, an analysis by YIMBY Melbourne of community consultations found that older residents were over-represented in 14 of the 15 consultations examined, and homeowners were over-represented in all 15.

In many other areas of policy, those proposing to restrict peoples’ choices would be required to reckon with the impact. But new land-use planning rules are not subject to any robust regulatory impact assessment process.

Land-use planning rules benefit existing residents by, for example, preserving views or preventing increased congestion. But studies conclude that the costs of restricting building are much larger—for example, inadequate housing, higher housing costs, and lower incomes from foregone agglomeration scale economies.11

Legacy planning rules make housing scarcer, and more expensive, than it needs to be

By restricting the ability to build denser housing in desirable areas, planning rules drive a wedge between supply costs and market prices. The gap between what people would be willing to pay to put apartments on a block of land and the current price of that land per extra apartment is an effective measure of how much planning controls are restricting housing on a given site.

To estimate the impact of those controls, my colleagues and I at the Grattan Institute have estimated average excess profits from building new housing if it were allowed—i.e. profits above the 18 per cent margin usually required to finance development—by comparing the cost of building a series of urban infill housing project of up to 12 storeys in Sydney and Melbourne to the likely sale prices of the new homes across both cities.

Among commercially feasible projects—selecting the most profitable infill option for each site—we estimate an average excess profit of up to $490,000 in Woollahra Council in Sydney, and up to $270,000 in the City of Melbourne. That is, developers could currently sell these extra homes, if they were permitted on these sites, for substantially more than the cost of building them, even accounting for the costs of acquiring the land, all fees and charges, financing costs and a developer profit margin of 18 per cent. Average excess profits are highest in Sydney’s beach-side suburbs, and Melbourne’s inner east, reflecting greater unmet demand for floorspace in these areas.

Similarly, work by Reserve Bank researchers in 2018 estimated that planning restrictions added up to 40 per cent to the price of houses in Sydney ($489,000) and Melbourne ($324,000), and about 30 per cent in Brisbane ($159,000) and Perth ($206,000), up sharply from 15 years earlier.

Part II: What state governments need to do

For too long one of our most important regulatory systems -- that which regulates where people can live and in what types of housing, and where they can work—has been left to planners, councils, and state planning departments. This lack of oversight has led to the creation of a set of systems that say no by default, and yes only by exception. They force developers to build fewer homes than they would have otherwise, and force individuals and families to settle for housing options that often don’t best suit their needs.

But planning systems should be designed to maximise people’s choices about where they live, work, and do business. The higher the demand for a location, the more housing should be permitted at that location. Land use policy should be focused on enabling supply to meet demand, through coordinating and pricing infrastructure, and resolving public-realm conflicts—instead of defaulting to implementing restrictions.

By employing laser focus on maximising choice and delivery in line with demand, planning systems will be more effective and empowering for Australians. And planning controls that restrict where housing can be built—but which can’t be justified on the basis of these fundamentals—should be removed.

We need to allow a lot more housing than we ever expect to build

Local councils and government planning agencies will often argue that they have zoned sufficient land for further development.12

Yet much of this zoned capacity is merely theoretical. Much of this zoned capacity is commercially infeasible to develop once the cost of demolishing existing dwellings is taken into account, especially where the number of extra homes that can be built is low. The more homes that can be built on a given site, and therefore the higher the potential profit, the more likely the development will go ahead.13

And not all sites will be built on: many owners of sites that could profitably accommodate more housing will not want to sell. Or it may be impractical to service all commercially feasible sites with the necessary infrastructure.

So it shouldn’t be surprising that a recent survey of zoned capacity in California showed that on average, only about 1 per cent of all zoned capacity is built as new housing each year. And a recent New York study found that only about 9 per cent of any increase in permitted floorspace was developed into new housing over 10 years, with only profitable sites subsequently redeveloped.

Given all these frictions, we need to allow for a lot more housing than we ever expect to build over the next few decades.14

Three-storey homes should be legal across our capital cities

Australia’s state, territory, and local governments should relax planning controls to permit more housing—especially townhouses, units, and apartments—in our capital cities where demand for housing is highest.

State and territory governments should adopt a Low-Rise Housing Standard that permits townhouse and apartment developments of up to three storeys on all residential-zoned land in Australia’s capital cities. There should be no prescribed minimum lot sizes, and the permissible site coverage should be at least 65 per cent.

These developments should not require a planning permit, just like many knock-down rebuild homes in many states already.15 Developments would still need to secure a building permit and therefore meet all building standards.

This reform would permit substantially more homes in our cities while imposing only modest costs on neighbours via overshadowing or changes in the streetscape.

Townhouses take just under a year to build, on average, compared to just over two years for apartments. And three-storey townhouses are likely to be particularly profitable to build, since a garage at ground level is much cheaper to construct than sinking a basement carpark, and the extra height to three storeys will in many more cases justify the cost of demolishing the existing home.16

Subdividing large family homes for townhouses is an easy way to boost density and allow more housing on scarce inner-city land without the need for lot amalgamations. Around half of all residential-zoned blocks in Sydney and Melbourne are larger than 600 square metres, as are nearly two-thirds of those in Brisbane, Perth and Adelaide.

For example, allowing three-storey townhouses and units across all residential land in Sydney, as we recommend (and as is largely already permitted in Melbourne), would add capacity for more than 1 million new homes that could be profitably developed today.17

Apartments should be legal around transit hubs

Australia’s state and territory governments should also adopt a Mid-Rise Housing Standard, which permit developments of a minimum of at least six storeys in high-demand locations in capital cities, such as:

• Within at least 2km of the edge of the CBD

• Within at least 400m of key transit hubs, including train, tram, and high-frequency bus stops

• Around other high-demand locations, such as other inner-city locations, and commercial hubs.

Many of the world’s most iconic and liveable cities—such as Paris, Vienna, and Copenhagen—provide for medium-density housing of six or more storeys broadly across much of their inner areas. This allows many more people to live where the city is at its best: near transit and cultural hubs, near their jobs, and near their friends, their families and their communities.

Allowing six or more storeys in high-demand locations also increases the prospect that the extra homes will be profitable to build after accounting for the costs of purchasing and then demolishing any existing buildings on a site.18

And state governments should also permit much higher densities than six storeys in capital city CBDs and other high-demand locations where those densities are commercially feasible to build.

While neighbours and urban planners often prefer low- and mid-rise apartments for urban infill, the commercial realities of building new homes often demand higher densities to make projects commercially feasible since the costs of acquiring a site can be spread across more homes.

An assessment of New Zealand’s National Policy Statement on Urban Development (NPS-UD), which required councils to allow for apartment buildings of at least six storeys along key transit corridors, found that the benefits of greater density exceeded the costs by a ratio of seven to one in Wellington and five to one in Auckland.

NSW and Victoria are already enacting ambitious reforms

But thankfully, the politics of planning are shifting. The state governments of NSW and Victoria have responded to the crisis with bold reforms to planning controls to allow more homes to be built in the established suburbs of Sydney and Melbourne. What’s more, these efforts appear popular.

Grattan Institute calculations show that the NSW government’s reforms could boost zoned capacity—the number of homes that are permissible to build—within Sydney by more than 900,000 dwellings, the equivalent of 40 per cent of the city’s existing housing stock.

Whereas similar reforms in Victoria allow for an extra 1.6 million homes in Melbourne. That’s the equivalent to 70 per cent of all homes in Melbourne today.

And the better news is that about one third of that capacity can be profitably built today, despite higher construction costs. This is particularly the case for townhouses in both cities, which remain nearly as cheap to build as new freestanding homes on the urban fringe, and taller apartments in the eastern and northern suburbs of Sydney.

But both states’ reforms fall short of recent reforms in Auckland, which lifted zoned capacity by the equivalent of 100 per cent of all existing homes.

The NSW government, in particular, could unlock capacity for more than 1 million extra commercially feasible homes in Sydney if they followed Victoria and allowed three-storey townhouses on all residential-zoned land.

But all state governments still have more to do.

More homes would make housing cheaper, and our cities better

A planning system that allows more homes where demand is high will lead to more and cheaper homes, especially in the long term.

If our proposed reforms had the same impact on new housing construction nationwide as is expected with similar reforms in New Zealand, they would lift annual housing construction in Australia by an average of more than 67,000 homes each year, over the next decade.19

Such a boost to housing construction would result in house prices and rents being up to 7 per cent lower than otherwise after five years and 12 per cent lower after a decade. The typical renting household could be up to $1,800 a year better off, and more than $100,000 could be shaved off the cost of a median-priced home.

And the benefits of these reforms would continue to build in the long term. For instance, should the uplift in housing construction continue over two decades, these reforms could deliver an extra 1.3 million homes, reducing house prices and rents by more than 20 per cent.

These estimates are not merely theoretical. In 2016, about three-quarters of the residential land in Auckland, New Zealand, was up-zoned.20 Researchers have found it led to an increase in housing supply of at least 4 per cent in just six years. Most of this new stock was extra townhouses and small apartment buildings. That extra housing reduced rents for two- and three-bedroom dwellings by up to 28 per cent compared to where they would have been without the reform. And today, house prices in Auckland are 15 per cent lower in real terms (i.e. after inflation) than in 2016, compared to a 13 per cent rise for New Zealand as a whole.

Auckland’s experience reflects a large body of evidence which shows that when planning controls are relaxed, the result is more and cheaper housing. And removing minimum lot sizes in particular can boost density in less built up areas, which is likely to be especially important in our smaller capital cities.

In fact, relaxing planning controls means that housing supply can accelerate at the same time that house prices grow more slowly, or even fall. By substantially increasing the number of sites where new housing is allowed, planning reform can reduce the cost of land for development by reducing the scarcity premium built into land values today. Since developers would pay less for the land they need for each new home they build, they could sell homes for less and still make a commercial return.

And there are good reasons to be optimistic that we can build that many homes in the long term. For example, over the past 10 years, the number of people employed in construction in Australia grew by 30 per cent to reach 1.3 million—almost one-in-10 workers.

Newly-built townhouses and apartments, while often expensive, are much cheaper, on average, than the existing freestanding homes that they replace. And building more expensive homes can “soak up” demand for housing from wealthier residents who might otherwise bid up the price of less-expensive homes..

Boosting housing supply would especially help low-income earners. Irrespective of its cost, each additional dwelling adds to total supply, which ultimately improves affordability for all. This is because the people who move into the newly-built dwellings vacate their existing homes. These ‘moving chains’ quickly free up cheaper homes for lower-income households.

And newly built homes in established suburbs are also typically much higher quality than the homes they replace. For example, 90 per cent of established houses have an energy efficiency rating of less than 6 stars. The 2022 edition of the National Construction Code requires a 7 star minimum—requiring around 25 per cent less energy than the 6 star equivalent.

Allowing more housing would boost Australians’ incomes

Relaxing land-use planning controls—and thereby letting more people live and work where they want—could boost Australians’ incomes by up to $25 billion a year (in today’s dollars), or 1 per cent of GDP in the long term.

That boost would come from letting more people live in high-wage locations, and from larger agglomeration scale economies arising from greater density. And that estimate doesn’t capture the big benefits Australians would enjoy from accessing housing that better suits their needs.

Our cities would change only gradually

There is no reason we cannot have more homes where people want to live while also still protecting green spaces and key heritage sites. For instance, adding extra homes in the northern and eastern suburbs of Sydney, or the leafy eastern suburbs of Melbourne, would simply ensure that more residents could enjoy the abundant open spaces and other amenities in those suburbs.

Despite producing a substantial increase in housing construction in high-demand areas, the urban landscape would change only gradually.

If Melbourne were to absorb 20 per cent of the extra 1.3 million homes we anticipate nationwide over the next two decades on land within 15km of the CBD, population density in that area would still be lower than that of Los Angeles today.

Building more homes close to the centres of our major cities would add much less to congestion than if those new residents were pushed to the outer suburbs. For example, congestion costs per extra resident are up to seven times lower in areas closest to the city centre of Sydney.

Denser cities are also better for the climate—a sprawling, car-dependent city pumps more CO2 into the atmosphere.

And denser cities are better for the economy—allowing more employers to locate closer together increases knowledge spillovers and gives workers more options.

Increased density can also encourage everyday interactions, and foster greater understanding between individuals from different backgrounds.

Building more housing in established suburbs is also cheaper for taxpayers. Servicing a new home in an established suburb with infrastructure can be up to $75,000 cheaper than servicing the same home on the urban fringe.

In short, these planning reforms would leave Australians better off on practically every dimension that matters.

Part III: What the federal government should do

For the first time in decades, Australia has a federal government that appears serious about solving Australia’s housing supply problem, and the National Cabinet agreement to build 1.2 million homes over five years from 2024-25 was a major step forward.

That Plan included $3.5 billion in incentive payments to push the states to get more housing built. But those incentives need major improvements in order to effectively move the needle in favour of more housing supply.

Federal and state governments are falling well short of the Housing Accord targets

An ambitious target is important in focusing attention on the problem of our national housing shortfall and building momentum for change. And building 240,000 homes a year over five years would make housing in Australia significantly cheaper, especially if that pace of homebuilding was maintained over a decade or more.21

The highest-impact policies available right now should focus on tipping the scales for state governments to take the actions needed to get more housing built in the future.

The federal government’s trump card to date has been the $3 billion New Homes Bonus: an offer to pay the states $15,000 per home that gets built over five years to 2028-29, above that state’s share of a 1-million-home baseline.22

But the New Homes Bonus isn’t working. The post-COVID downturn in housing construction, caused by a sharp jump in both interest rates and the costs of construction materials and labour, mean the target is unlikely to be met. There were only 188,000 new housing approvals in the year to August 2025, and the National Housing Supply and Affordability Council expects net new housing supply to total just 938,000 homes over the five years to 2028-29.

That means the states collectively are likely to substantially undershoot the national baseline for qualifying for the New Homes Bonus, even if they undertake ambitious reforms now. Only Victoria is on track to exceed the baseline and receive any payments.

The New Homes Bonus is not working

This points to the limits of paying state governments for an outcome—the rate of new housing construction each year—which they do not fully control.

Relaxing land-use planning controls would lead to substantially more new housing being built each year on average. But housing construction would likely remain highly cyclical.

For example, changes in interest rates materially affect the flow of new housing, as do construction and labour costs, which are driven in part by global and national economic conditions.23

Over a decade or more, these cyclical factors would wash out. But an incentive scheme covering such a long period is inconsistent with the length of state or federal parliamentary terms.

The New Homes Bonus could be made somewhat more impactful by bringing it forward to be paid in instalments, subject to progress towards meeting a recalibrated baseline — rather than it being paid out as a lump sum at the end of the five-year period.

But the federal government should focus on rewarding state governments for specific reforms that evidence tells us should lift housing construction in the long term and which are entirely within their control.

The federal government should reward states that adopt specific reforms that lead to more housing

The federal government should reward state governments that enact specific, ambitious, and verifiable reforms that relax residential land-use planning controls to allow more housing to be built.

Specifically, the federal government should reward states that adopt the Low-Rise and Mid-Rise Housing Standards outlined earlier. These reforms would tackle the two big problems with land use planning and housing: that existing planning controls are too restrictive; and that development approval processes are costly, slow, and uncertain.

There’s plenty of precedent for the federal government helping to pay for specific, verifiable economic reforms. Under the National Competition Policy, the Commonwealth paid the states almost $6 billion over 10 years in exchange for much-needed regulatory and competition reform. The Productivity Commission later concluded that this reform boosted Australians’ incomes by 2.5 per cent.

An inherent principle of National Competition Policy is that it’s better to pay for specific changes to law or regulation that offer an economic payoff, rather than simply rewarding states that boost GDP per capita year-to-year.

These payments should be made to the states by extending the National Competition Policy to cover reforms to residential land-use planning rules.24 The National Competition Council should monitor whether states have enacted these reforms.

State governments could be offered a menu of options that reflect different levels of ambition towards meeting the new Standards, with lower payments offered for less ambitious reforms.

For example, states that adopt a variation of the Low-Rise Housing Standard that permitted only two-storey developments (rather than three) in all residential zones could be paid a lower amount than states that adopt that standard in full.25

Similarly, states could be offered the opportunity to adopt a less ambitious version of the Mid-Rise Housing Standard that requires only four storeys around transit hubs, rather than six storeys.

And state governments that have already made meaningful reforms to relax planning controls to allow more housing, such as the NSW and Victorian governments, should be rewarded with a top-up payment in recognition of those reforms, subject to agreeing to doing further work.

The federal government has already committed $900 million via a new National Productivity Fund to encourage state and territory governments to adopt “pro-growth” policies from a menu of options, including reforms to commercial planning and zoning.

Given that most states appear unlikely to qualify for the full $3 billion on offer via the New Homes Bonus within the five-year window of the Housing Accord, payments for planning reforms under the National Competition Policy could be funded by reallocating $1.5 billion from the New Homes Bonus to National Competition Policy.

The federal government could, in time, offer incentive payments to state governments that relax car-parking requirements, apartment design controls, and heritage policies in ways that makes more housing commercially feasible to build.

Australia needs better federal housing research

New Zealand’s Productivity Commission proved pivotal in driving their country’s national planning reforms to boost housing supply. But government action in Australia to boost housing supply is hampered by a lack of research and analytical capacity on the barriers to building more homes.

The Australian Housing and Urban Research Institute (AHURI), funded jointly by federal and state governments, has historically focused on the provision of social and affordable housing, rather than barriers to more market housing. For example, in a keyword search of 268 AHURI research papers published between May 2011 and April 2025, ‘social housing’ appeared 44 times, ‘homelessness’ 28 times, and ‘affordable housing’ 24 times—but ‘housing supply’ appeared just seven times and ‘planning’ just six.

Whereas the federal government’s National Housing Supply and Affordability Council has not, in the nearly two years since it was established, undertaken the kind of in-depth research into what exact policy levers could be pulled, and how, that’s needed to unlock more housing construction.

The result is that the federal government lacks the expertise it needs to properly design incentives for state governments to build more homes, and for states to adopt them.

The federal government should establish a new housing research function within the Productivity Commission. Ultimately reforming state and territory planning systems will be an endeavour of the same scale as dismantling trade protectionism in Australia.

The Productivity Commission should publish annual statements assessing the permissiveness of state planning regimes. Those assessments should track whether planning controls add to the cost of homes in excess of the costs of building more.26

The Productivity Commission should also regularly advise the federal government on other policy reforms that would boost commercially feasible housing capacity, such as relaxing minimum car-parking requirements, reforms to apartment design guides (including minimum apartment sizes) and reforms to the National Construction Code.

And the Productivity Commission should assess whether state planning regimes allow for sufficient commercially feasible capacity to meet at least 30 years of expected demand for housing, as the New Zealand government requires of their local councils today.

When we have a shortage of electricity, everyone knows, because we have a blackout. It’s one the reasons the Australian Energy Market Operator (AEMO) is regularly tasked with assessing whether there is sufficient energy supply in the pipeline to meet forecast demand. But when there’s a housing shortage, it’s less obvious, except to the poor and the vulnerable, who stand to lose the most.

Conclusion

The regulatory system that determines where people can live and work is one of our nation’s most fundamental. And yet for decades, this system has escaped scrutiny from those outside the silo of local councils and state planning departments.

The result is a regulatory approach across Australian states and territories that has failed to properly examine the consequences of the restrictions that it imposes on the lives of Australians, including scarce and unaffordable housing, a less dynamic economy, and a less equal society. The weight of evidence has become impossible to ignore.

Thankfully, the politics of planning are shifting. Legacy planning shibboleths are being upended daily in Victoria and NSW as state governments override commonly held beliefs, and the vocal objections of local residents, to permit more housing.

But there remains much to be done. And it will require all levels of government to play their part.

Key recommendations

To deliver the change needed to build more homes and deliver better cities, state & governments (recommendations 1 to 8) and the federal government (recommendations 9 to 11) must work together across four areas.

Relax state and local government planning controls that prevent density

• Recommendation 1: Adopt a Low-Rise Housing Standard, which permits three-storey townhouses and apartments on all residential-zoned land in capital cities, with no minimum lot sizes.

• Recommendation 2: Adopt a Mid-Rise Housing Standard, which permits at least six-storey developments on all residential-zoned land within walking distance of transit hubs and key commercial centres.

• Recommendation 3: Identify and upzone other high-demand locations for even higher densities, including land in and around the CBDs of capital cities.

• Recommendation 4: Review systems of heritage and character controls to allow more housing in high-demand areas.

Improve consistency and certainty in approval processes

• Recommendation 5: Modest-density developments (i.e. up to three storeys) should be able to get certified as ‘complying’ instead of needing a planning permit.

• Recommendation 6: There should be a ‘deemed-to-comply’ pathway for higher-density developments.

Fix planning governance

• Recommendation 7: Subject changes to planning rules to regulatory impact assessments and existing planning controls to periodic review.

• Recommendation 8: Set and enforce higher housing targets for local councils, where there is substantial unmet demand for housing.

• Recommendation 9: The federal government should ask the Productivity Commission to regularly assess the performance of state and territory land-use planning systems, including through regular assessments of commercially feasible capacity for new homes.

Sharpen federal incentives to the states

• Recommendation 10: The federal government should pay the New Homes Bonus in installments rather than at the end of the five-year period.

• Recommendation 11: The federal government should pay the states, via National Competition Policy, to adopt specific reforms to land-use planning controls, including the standards outlined in recommendations 1 and 2.

We’re thrilled to see Katie Roberts-Hull‘s essay included on Grattan Institute‘s 2025 Wonks’ List. You can give her essay a read in edition one.

By Matthew Maltman

In 2007, Steven Levitt of Freakonomics fame1 posed a question to his readers: why had the amount of shrimp consumed per person in the US nearly tripled over the prior three decades?

He wasn’t interested in seafood; instead, he wanted to test a theory: that economists are trained to think about the world in terms of supply, while others (normal people) think in terms of demand. After all, we spend most of our lives as consumers, not producers, so it’s natural our default explanations empathise with that side of the equation.

The results of Levitt’s (highly unscientific) survey partially confirmed the theory: most normal people did indeed largely conjure up demand-side explanations—we’re eating more shrimp because we’ve become more health-conscious, they thought, or because seafood advertising has become more persuasive. Few thought of supply-side factors, like improved aquaculture technology. In fact, the demand-side bias was so strong even economists responded with mainly demand-side reasoning.2

This asymmetry of intuition isn’t a problem in everyday conversation—the average punter doesn’t need to accurately explain economic shifts. But in public policy, that bias can matter. If, for example, our economic challenges stem evenly from supply and demand, we’ll be pre-disposed to misdiagnose half our problems, and quickly be left with policy problems that we can’t fix using our basic mental shortcuts.

This framing for public policy failures is crude, and it’s wrong in plenty of cases, but it does fit in others. People are generally quick to grasp that migration adds to the demand for goods and services, but slower to recognise that they expand supply too. People are good at understanding lower demand will reduce prices, but less so that an increase in supply can do the same.

The supply-side of the economy, it seems, has a PR problem. Perhaps this is because talking about “supply-side economics” conjures images of Reagan and Thatcher, of “neoliberalism”, of “trickle-down economics”, of regulatory cuts for large firms, or tax-cuts for the wealthy. Or perhaps it’s because some commentators muddy our conversations with strange views that supply doesn’t affect prices, or that output is somehow predetermined by coordination among firms.

But I think our problem is deeper than this. I think we struggle in general to tell supply-side stories. People can’t articulate what supply-side reform even looks like, let alone how it could benefit them. Often this is because the supply-side involves niche or nebulous topics that you don’t encounter in the day-to-day—planning codes, electricity grids, and quasi-markets. And when supply-side interventions work, their benefits are quiet—diffuse, incremental, and slow.

A good reform might shave a few dollars off your cost of living or slightly improve the quality of what you buy. And while everyone sees a demand-side subsidy; no one sees the price that, thanks to greater supply, never rose in the first place. I can comfortably say that Australia’s income contingent university loan (HECS-HELP) program has made my life materially better by taking the stress out of university loans. But I struggle to quickly think of a comparable policy on the supply-side which had an impact of the same magnitude to me.3

What we talk about when we talk about supply

Australia, like many advanced economies, is now grappling with how to restart its supply-side engine. And a big part of that is restarting a conversation on the side of the economy most of us really struggle to talk about. For two decades, we’ve had little in the way of genuine microeconomic reform. The reasons for that have been well covered, but at least there’s now recognition that it needs to change—that we can’t meet our biggest challenges solely by subsidising more or regulating harder.

We need to make and do more, and precisely in the parts of the economy where we have found it hardest. We need to build vastly more housing to lower rents, vastly more clean energy to decarbonise while keeping power bills low, and vastly more aged and childcare capacity to support an ageing population.

This doesn’t mean supply-side reforms always work, or that they’re costless, or distribution-neutral. But it does mean we need to get better at identifying which ones matter, and at explaining why they’ll improve people’s lives.4 For that, I think a good place to start is an example of recent success.

In August, I published a working paper arguing that a series of zoning reforms in New Zealand during the 2010s—which legalised medium-density housing across several cities—lifted productivity in residential construction. Over that decade, New Zealand, and Auckland in particular, built more homes than ever before without even close to a proportional rise in labour.

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These reforms have been written about widely already, usually in terms of housing affordability. While that framing is true and important, I’m increasingly convinced it also undersells the impact. These were classic microeconomic, supply-side reforms in the spirit of what Australia did in the 1990s: they allowed more to be produced with proportionally fewer inputs; reduced costs for consumers; expanded the market for producers; and drove economic growth. In fact, neither of the two leading New Zealand housing reforms were motivated by housing affordability directly—both were about growth and productivity.5 We should talk about them in these terms.

So, while the question “did zoning reform lift construction productivity in New Zealand?” is in some respects a narrow one, I think there are stories we can pull out from these reforms to change the way we think.6 In particular, I think they offer three ideas we should keep front of mind in our policy conversations:

First, we need to be guided by evidence on impact, not ease. We far too often reach for supply-side reforms that are politically easy but economically small. Usually this means press releases about getting government working faster, making paperwork shorter, and speeding up approvals. Worthy goals sure, but the evidence suggests that they don’t massively shift the dial. The real barriers are the rules that prohibit activity altogether. It’s the regulations themselves, not how they’re administered.

Second, reform is about markets, not firms. We too often think the supply side of the economy is just the sum of all firms within it. So, we go ask industry what it needs to grow. But good reform means creative destruction: some old firms die, and some new firms enter. Often the biggest beneficiaries are those who do not yet exist.

Third, the job of policy is to get the inputs right; the outputs will follow. Real reform is about controlling the controllables — the upstream settings that quietly shape outcomes, even if they seem abstract to voters or lack immediate political reward. Getting those settings right rarely delivers instant results; sometimes all it does is stop the bad from getting worse. Prices at the check-out reflect what happened on the trawler, the bid at the auction what happened at the planning meeting. Those points may feel distant from public debate, but by the time you’re downstream, it’s too late to change the current. The patient work of getting the settings right is what makes steady progress possible, even if it doesn’t happen tomorrow.

If we want real microeconomic reform, we need to tell better stories about it— ideally set in this century, not the last one. Too often we talk about the 1990s as if reform was easy then because the fruit was low-hanging and the consensus was clear. We need new heroes. New Zealand’s housing reforms show that expanding the pie is still possible: they got more goods for less, and lowered prices along the way. The reason this story is told again and again in housing circles is not just that it’s extremely well-researched, but that it’s totemic. It teaches us to think about supply. It helps us understand the real reasons why we’re eating more shrimp.

Part I: This is your city on supply-side reform

In the early 2000s, Harvard economist Ed Glaeser posed a simple question:7 how can home building—a highly competitive industry with almost no natural barriers to entry—coexist with housing prices far above costs?

The answer was equally simple: zoning regulations.

By restricting the ability to build denser housing in desirable areas, planning rules drive a wedge between supply costs and market prices. Over several decades of work, Glaeser assembled an impressive evidence base showing that these restrictions resulted in high housing prices in major U.S. cities. The policy implication was clear: to make housing affordable, loosen the rules that stop it from being built.

Economists read the research with fascination. Western governments, for the most part, ignored it.

****

In 2010,8 the New Zealand Government forcibly amalgamated eight Auckland councils into one single Auckland Council and directed it to produce a unified land-use framework. That process led to the Auckland Unitary Plan (AUP)—drafted in 2013 and made operative in 2016—which replaced a patchwork of legacy zoning rules with a consistent, region-wide system aimed at enabling more housing close to jobs and transport.

The AUP’s main innovation was its large-scale upzoning of suburban land. Where most of Auckland had previously been restricted to detached single-family dwellings, around three-quarters of its residential areas were rezoned to allow townhouses, duplexes, and small apartment blocks, with greater height and density permitted along transport corridors.

A more recent reform occurred in Lower Hutt, a major city of around 100,000 people in the Wellington region. In 2017 the council implemented Plan Change 43, a policy which enabled more medium- and high-density housing. In 2020, Lower Hutt became the first New Zealand city to fully remove minimum parking requirements and more recently introduced a new high-density zone allowing up to six-storey buildings across much of the city’s flat urban land. Collectively, these reforms represent a staged but ambitious upzoning program that substantially expanded development capacity across the city.9

Zoning reform led to undeniable increases in supply

In 2013—the year the AUP was first partially enacted—Glaeser found himself on a lecture tour in New Zealand. His lectures, which drew hundreds, were described by attendees as “revelationary” and left a lasting imprint on New Zealand’s emerging urban economics and policy community.

His ideas were about to get its first large-scale test: Auckland was going to be the first city in the world to meaningfully relax zoning regulations.

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I’m largely an applied microeconomist. To caricature my field for a moment, our usual approach goes like this: identify a policy challenge, find a clever counterfactual, measure the difference between what actually happened and what would have happened otherwise—and there’s your policy effect.

At my current job, one thing I’ve learned is that if you want to do applied microeconomics effectively, you should first “show it in the raw data”. In other words, the most convincing thing you can do is to show the audience the simplest presentation of events possible. Sure, you should still do your complex statistics, generate your brilliant counterfactual—but first just show the raw numbers. If you can see an effect there, you’ll find it easier to convince people you’re not hiding anything in the statistics.

Luckily, the impacts of zoning reform are so large that they make adhering to this principle easy. In a simple time series, Auckland went from on average matching national construction rates prior to 2016, to smashing them in every subsequent year. By 2022, Auckland’s per-capita housing construction rate had surged to 30 per cent above its previous record, where population growth was negative, and while the rest of New Zealand barely moved.10 Almost all the new dwellings were townhouses built in the very areas newly legalised by the reform.

Lower Hutt’s effect is even more obvious. The city had never built more than 2.5 dwellings per 1,000 residents in a year prior to their reforms.11 They built 12.2 per 1,000 residents in 2022. Once again, nearly all the new homes were townhouses built in areas newly zoned for them.

Although you can see these supply effects simply in the raw data, it’s also worth confirming using our more sophisticated economic methods. Three studies show large supply effects in both Auckland and Lower Hutt: half of the new supply or more was directly due to the reforms.

There’s always a risk of a false positive. So these studies try to push the data as hard as possible to try to make the effect go away: they ask, for instance, what if we only compare these to cities with strong population growth? Or to Australian cities? What if we change the date we expect to see a policy effect? What if we account for spillovers? Nothing even comes close—the effect is too strong.

Consumers feel the affordability dividend of new supply

Before zoning reform, Auckland’s rents had been rising faster than elsewhere in the country; within a few years they were rising more slowly, and then not at all. In 2020, for the first time on record, Auckland became more affordable to rent in than the rest of New Zealand—a gap that has continued to widen since.12

Again, more sophisticated analysis suggests rents are over 20 per cent lower than they would otherwise have been. Median house prices have fallen in Auckland since the AUP, while they’re up 30% in the rest of New Zealand. And if you’re concerned about the distributional consequences of this, rents for the bottom quartile of renters have fallen by more than higher up in the market. State-Developed Housing (New Zealand’s equivalent of social housing) also tripled after reform; the mechanism is obvious—make social housing cheaper to build, and you can build more of it with a given funding envelope.

And, while rents in comparable small cities surged during the post-pandemic housing boom, rents in Lower Hutt rose by much less. Over the four years from 2022, rental affordability deteriorated by around 1 per cent nationally—but remained unchanged in Lower Hutt.

The reward for reform is this affordability dividend — the quiet but profound gains that show up in people’s lives. It means a young couple buying their first home years earlier than they thought possible. It means a child getting their own bedroom instead of sharing. It means a university student able to move out, take on more independence, and build a life of their own. These are the stories that make the abstract language of supply and reform real — the downstream proof that getting the inputs right changes what’s possible for ordinary people.

Construction productivity can be unlocked by loosening supply restrictions

The construction sector is a global productivity puzzle. Around the world, while we have gotten better at making all kinds of stuff—like cars, phones, pharmaceuticals—we haven’t gotten better at building houses. Indeed, as Glaeser and others have shown, the productivity of a construction worker in the U.S. has remained unchanged since the 1960s. It’s a similar story for Australia.

This productivity divergence mirrors a diverge in price: houses have become more expensive over time, while cars and other goods have gotten cheaper. The improved quality of houses don’t explain these trends, nor do the techniques we use to measure construction output.

But this is a global phenomenon. The entire Anglosphere has seen flat or falling construction productivity over the past two decades.

There’s one exception.

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As much as Australians like to kick ourselves for our stagnating productivity, the slowdown has been a largely global phenomenon. It’s hard to imagine one country staying ahead of others for long in industries where materials, labour, and new ideas are shared easily across borders.13 This holds in construction. On the chart below of the Anglosphere’s construction productivity since 2000, you could easily switch the labels between Australia, New Zealand, and Canada and not lose any meaningful information—until 2013.

That’s when something weird happens. Australia and Canada begin to fall,14 and New Zealand begins to climb.15 That’s kind of strange. If construction sector productivity stagnation is a global, secular trend, how could this divergence occur?

The timing fits almost exactly with the implementation of zoning reform in Auckland. And when you dig further, more and more pieces of evidence emerge that zoning changes contributed to this rise.

First, the effects were indeed concentrated in areas which adopted zoning reform. In 2013, Auckland completed 0.16 dwellings per worker. In 2023, Auckland completed 0.34—a more than doubling. Lower Hutt saw a greater rise. The rest of the country saw a 44 percent increase (or 19 percent if we exclude the pandemic recovery year of 2022). According to CEDA, for Australia this ratio was 0.14 in 2013, and 0.14 in 2022.16

Second, these changes don’t just reflect building smaller houses. Floor space per worker also rebounded in the upzoned regions, rising from around 25 square metres per worker per year to nearly 40 in Auckland after the policy change, while remaining effectively unchanged in comparable regions.

And third, the productivity boom was concentrated in areas related to residential construction: output per worker in building construction rose by more than 20 percent over the 2010s, and in construction services by about 15 percent—while productivity in infrastructure construction actually fell.

Taken together, these facts make a coherent story. While we may never be able to run a perfect counterfactual for productivity, the evidence points in one direction: where planning rules allowed supply to respond to demand, productivity followed.

The what, how, and where of construction productivity

It seems that productivity went up due to these changes, but why? The answers perhaps lie in greater choice for firms in what they could build, increased market dynamism, and supply centralisation.

First, the reforms changed what could be built. By expanding the types of dwellings allowed, zoning reform dramatically widened the choice set for developers. Instead of being locked into detached, single-family homes, firms could now build medium-density housing—townhouses and apartments—across most of Auckland and in parts of Lower Hutt. This shift matters because:

• Even if the total floor space built stayed the same, more dwellings could be produced with the same number of workers. The data show exactly that.

• There may be genuine productivity gains in floorspace per worker as well. Medium density construction may lend itself to economies of scale. While we need more data to properly unpack this, one explanation is that builders can spread fixed costs—for instance land preparation- over a greater amount of floor space because more was completed in a common location.

Second, zoning reform changed how the construction market operated. The e61 Institute has documented that productivity growth is closely tied to dynamism: how many new firms enter a market and the competition that this fosters. The theory goes that productivity growth is in part driven by creative destruction: new firms and ideas oust and challenge old ones. And that’s what we saw in New Zealand after zoning changes.

Firm entry went up dramatically in areas with zoning changes, and the medium density housing market appears to be meaningfully more competitive than the detached housing market. This likely reflects the way reform lowered barriers to entry: projects required less land and hence less on the balance sheet at any point in time, reducing the upfront costs of participation. Those changes opened space for smaller firms to compete, brought new entrants into the market, and increased the churn that drives productivity growth.

Firms also got larger, on average. The average residential construction firm in Auckland grew by nearly 60 per cent in size between 2013 and 2023, with similar expansions in Canterbury and Lower Hutt after their zoning changes. Most of this came from small firms hiring their first employees or modestly increasing headcount, with the share of one-person firms declining. There was no change in firm size in non-residential construction, nor manufacturing, nor the economy at large. The theory is that larger firms can capture economies of scale, invest in technology, and specialise—all classic channels of productivity growth.

Third, upzoning shifted where construction happened. As more activity concentrated in Auckland and Canterbury—the two most productive, and largest, construction regions in the country—aggregate productivity rose mechanically. Workers in these cities produced roughly $75,000 NZD ($2010) of output per year, compared with around $65,000 elsewhere. This benefit is itself due to their size and density, with agglomeration benefits of their scale and specialisation leading to lower costs of supply.

On all counts, it seems that as microeconomic reform goes, these zoning changes in New Zealand were a major success: they got more output, lowered costs to consumers, created new opportunities for firms, and seemingly had a positive impact on productivity.17 So why isn’t Australia following?

Part II: The anatomy of good supply-side reform

In Woollahra Council in Sydney, a development application submitted in 2024 took around 184 days on average to be approved. But there’s a simple trick to speed up the response from the council: ensure the development application contained a request to subdivide the property into a duplex. Chances are you’d hear back quickly: with a no, because duplexing is banned in Woollahra.ollahra.

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New Zealand and Australia are intertwined in all sorts of ways. There’s a provision in our constitution which allows them to become a State, if they ever so wish. We poach loads of their great economists. Our statistical agencies, helpfully, use the same definitions for industry codes. And, each year, we go through the humiliation ritual that is playing them in rugby union for the Bledisloe Cup.18

This allows us to make a like-for-like comparison on building construction productivity between the two nations. The result might as well be as bad as the Bledisloe.

This isn’t due to a difference in caring—Australia has had several reviews of our National Construction Code over the past 20 years, we’ve had a Productivity Commission review into the construction sector, and we’ve seen dozens of serious articles written on the topic. Nor is it the case that New Zealand has outperformed Australia in general productivity terms—our productivity growth rate has been higher than theirs in most sectors.

But they’ve done something that has worked, and we haven’t. This is a case where we shouldn’t just be peeking over at their answers, we should be taking notes and implementing.

I think there are three lessons from New Zealand’s supply-side housing reforms that can be generalised to broader supply-side efforts. First, they targeted regulatory bans rather than regulatory burdens. Second, they focused on markets rather than firms. And third, they got the policy inputs right—even if the outputs didn’t immediately follow.

Target Bans, not burdens

In 2012, Lower Hutt, facing a shrinking population, set out to jump-start housing construction. Its first move was a “Development Stimulus Package,” waiving building consent fees and development contributions. It was a classic policy aimed to reduce the burden on firms: lower the cost of engaging with government and undertaking business, and hope builders respond.

They didn’t—at least not much. Over the next six years to 2018, just 188 new dwellings used the scheme.

Then, in late 2017, the city tried something different: a broad scale upzoning that allowed for medium density construction across most of the city. The effect was dramatic. Over the next six years, 4,867 dwellings were consented: 3,006 of them likely directly due to the zoning changes.

For the six months the two policies overlapped, 106 dwellings qualified under both, around 56% of the previous six years of Development Stimulus package.19 The problem? Too much was being built: the stimulus scheme was costing too much in foregone revenue. The council had to scrap it.

Four years later in 2021 Lower Hutt raised, not cut, development contributions to fund new infrastructure. Developers protested that the policy change would increase the cost of housing. They complained that the city’s processes were too “open-ended” and that engaging with government was too costly. The following year, Lower Hutt approved the most dwellings on record: six times their average pre-upzoning year.

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Broadly speaking—and at the risk of massively over-generalising—I think bad regulatory settings come in two forms: burdens and bans.

Burdens are instances where governments still allow things to happen, but make them slower, costlier, or more cumbersome. They require firms to spend more time, hire more compliance staff, or incur new costs due to government processes. Long wait times for permits, complex documentation, and heavy reporting requirements all fall into this category — whether it’s for a new health tech startup, a solar farm, or a housing development.

Bans, by contrast, are rules that literally prevent things from happening—or make outcomes so uncertain that firms face a real probability that a project never proceeds. These include zoning and land-use rules that restrict what can be built, as well as occupational licensing, quotas and caps that limit output, and merger controls. Even the government’s recent reforms to restrict the use of non-compete clauses belong here—paradoxically an instance where more regulation allowed more economic activity to happen, because the prior unregulated labour market was preventing workers from switching jobs at the same rate.

Another way to think about the distinction is through the margins of adjustment. Burdens operate on the intensive margin, or how much of something happens: activity can still occur, but the costs mean you probably get less of it. Bans operate on the extensive margin, or whether something happens at all: they stop activity altogether—the house or wind farm can’t be built, the worker can’t move, the firm can’t start.

Throughout the 2010s, much of the housing supply-side debate focused on burdens rather than bans.20 The shift in emphasis came only later, largely through the work of Peter Tulip at the Reserve Bank of Australia.

Tulip’s point was simple but powerful. When economists try to quantify the costs of regulatory burden in housing, they usually find modest effects—in the order of a few thousand dollars per dwelling, or around two per cent of total construction costs. But the evidence on bans tells a different story. Tulip’s work, alongside a series of international studies, shows that the economic cost of the zoning restrictions themselves is orders of magnitude larger—often well above 20 per cent of dwelling prices, or hundreds of thousands of dollars per home. Supporting analysis from New Zealand likewise finds that the benefits of zoning reform outweigh the costs roughly two-to-one, delivering thousands of dollars in welfare gains to households over coming decades.

Put plainly, reforms that lead government to say ‘yes’ more often are far more valuable than reforms that merely make it say ‘no’ faster or more clearly.

Empirical evidence reinforces this. At least five credible studies now find that jurisdictions adopting zoning reform experienced large, measurable increases in housing supply—in some cases, doubling the rate of new construction. By contrast, there are no studies showing that speeding up approvals, shortening planning documents, or reducing engagement costs produces results even in the same ballpark.

That bans appear to matter more than burdens isn’t an absolutist claim—it’s simply where the weight of the evidence currently lies. New research could well shift that view, but it would need to be persuasive to overturn what we have seen so far.

Still, it’s worth asking why this evidence gap exists. If approval times, documentation complexity, or development charges are truly the main constraints on supply, why don’t we have strong empirical evidence quantifying their effects? If longer building codes meaningfully slow productivity, or if faster local approvals materially increase output, these are important things to know—and valuable areas for further research.Either we are under-producing credible research on the effects of burden-reducing reforms, or we are massively overweighting our policy conversation towards these topics.

Empirics aside, there are also good theoretical reasons why these two kinds of reform differ. Burdens may deter entry by raising fixed costs, which is bad for competition and dynamism—but in some circumstances, they might even raise productivity if they keep out the least efficient potential entrants. Highly productive firms often find ways to enter and expand despite bureaucratic friction, because their business models remain viable even when government is slow or cumbersome.

Bans are different. They prevent activity altogether. When they bind, they block profitable, welfare-enhancing projects or ideas from ever occurring. In housing, that means it is highly profitable and socially valuable to build medium-density homes—but it simply isn’t allowed. In green energy, it means the most efficient sites for renewables can’t be used. In care services, it means a provider can’t adopt a new delivery model.

Of course, not every ban should be lifted, and not every regulation is harmful. Many burdens are simply the necessary functions of good government—ensuring quality, protecting consumers, and managing risk. Getting approval times down isn’t linearly good for productivity – at some point you start cutting important regulatory processes that help, rather than hurt, society.

And, none of this means we shouldn’t shorten the National Construction Code, or speed up council approvals, or make public systems easier to navigate. Productivity is a game of inches. But as my good friend Zachariah Hayward likes to say: governments can do anything, but not everything. Reform costs political capital: airtime, column inches, and votes. You don’t win the Bledisloe from inches. Occasionally, you need to make a big play.

Think about markets, not firms

When Auckland undertook its major zoning reform in 2016, the number of construction firms rose markedly. Firm entry rates, which had tracked the national average beforehand, jumped around five percentage points and stayed there for a decade. Today there are 4,245 more housing construction firms in Auckland than when the AUP was fully enacted.

None of these firms were consulted before the reform. They did not attend roundtables, submit to inquiries, or appear in stakeholder surveys. They couldn’t have, because they didn’t exist.

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Given the evidence that bans matter far more for productivity and output than burdens, why does our reform debate always drift back to “cutting red tape” and “speeding up approvals”? The answer lies in the political economy.

Reforms that target regulatory burden mainly impose costs on government itself—demanding more from the public service but creating no clear losers outside it. These reforms are politically comfortable—nobody likes bureaucracy except for those that are within it. “Wait, you’re telling me you can get my government to work faster, with no trade off? And the rest of us don’t have to do anything, or make any tough choices? Sign me up.”

Ban reforms, by contrast, are structural: they change who can do what, where, and with what consequences. This creates winners and losers. Tariff reform in the 80s and 90s, for instance, helped consumers and importers but hurt manufacturers. Speeding up customs procedures or foreign investment approvals would make little difference if the underlying restrictions meant approval was always destined to be “no.” It’s the removal of the ban, not the efficiency of the bureaucracy, that changes outcomes.

The same logic applies to zoning reform: lifting bans on medium-density housing expands opportunity for some builders, but threatens established interests, shifts land values and neighbourhoods, and disrupts business models. In post-upzoned Lower Hutt, firms specialising in detached homes were often entirely different players from those in the new medium-density market. It’s not clear that the existing firms benefitted from reform; to the extent that they did benefit, they had to alter their focus.

The problem is that when governments turn to “supply-side reform,” their first instinct is to consult industry—the firms already in the market. This makes sense as a first pass to get a lay of the land: speak to those who live and breathe the sector every day. But it will never be sufficient to understand the whole market.

In the Productivity Commission’s inquiry into construction productivity, for instance, stakeholders consistently pointed to slow processes and regulatory complexity. No one in industry identified zoning reform as a lever for productivity.21 NAB’s developer surveys tell the same story: construction costs and permitting delays dominate the reasons holding back new housing projects. Zoning regulations themselves aren’t even an option on the survey; the closest is “lack of development sites”, which ranks only fifth of eight. If you asked a typical Australian property developer whether allowing medium-density housing across most of Sydney would be good or bad for their business, I have no idea what they would say. This is a large divergence from the academic consensus that zoning reform is the most powerful tool to increase housing supply.

This divergence comes from the fallacy in the policymaking process that the “supply-side” of an industry is just the sum of firms currently there. This belies that incumbents, by definition, are the ones who’ve managed to succeed under the current system, and so it’s unclear how much they want it to change structurally. Nor is it even clear they have the time, resources, or incentives, to imagine what structural change could look like. They’re trying to score more points under the current rulebook—they’re not interested in rewriting the rules to make the game play better.

The supply curve—what matters for reform—is all the output that could be produced by anyone. The goal of policy is to shift that curve outward. Whether that happens through existing firms scaling up or new firms entering should be irrelevant. The market determines how many goods and services are produced, not firms.

If policymakers rely solely on the perspective of industry, they will consistently under-estimate the benefits of structural reform. The firms who can best describe the potential gains from liberalisation are those who would enter or scale up after it occurs and, by definition, have no voice in the policymaking process under the status quo.22

Control the inputs, monitor the outputs

IIn 2005, Auckland tightened its minimum apartment-size rules. The New Zealand Infrastructure Commission later estimated that these changes meaningfully reduced the city’s zoned capacity. Apartment construction—which had been rising steadily—began to fall, dragging down overall housing supply.

Three years later, in March 2008, the global financial crisis hit, sending New Zealand into a 6-quarter recession. The economic downturn crushed housing supply in Auckland, which dropped to the lowest level on record: 2.3 per thousand residents, less than half its long-run average. The affordability gains of the 2000s quickly reversed as rent-to-income ratios rose by two percentage points.

Fast-forward fifteen years. Between 2022 and 2024, New Zealand again experienced six quarters of negative growth—three technical recessions: one in each year. The construction sector was hit especially hard as the cost of materials surged by 30%. Housing supply in Auckland fell sharply once again.

But this downturn was different. Construction dropped from 12.8 dwellings per 1,000 residents in 2022 to 10.7 in 2023 and 7.6 in 2024, before rebounding. Some commentators described it as “construction crashing”. Yet activity never fell below its pre-upzoning average. In fact, Auckland’s worst year since 2018 would still have ranked as its fourth-best year in the seventeen preceding it. Commentators are now in awe at Auckland’s house-price decline—the product of years of accumulated supply.

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When economists recall the “golden age” of productivity reform—the 1980s and 1990s—they point to the microeconomic breakthroughs: tariff reductions, a floating dollar, financial deregulation. Yet even at their most ambitious, these reforms explain only a fraction of overall growth. The rest came from innovation, technological diffusion, and the creative activity of the market.23

That remains true today: governments can shape incentives and remove barriers, but global shocks, financial crises, wars, and pandemics can still derail the best-laid designs.

This makes it hard to define what “success” looks like for government. Demand-side policy lends itself to clear metrics: greater subsidies and lower prices for consumers, more places, greater access. Supply-side policy doesn’t work that way. Governments can’t declare the outcomes they want—they can only influence the conditions under which better outcomes become possible. Because of that, it’s difficult to know whether governments are doing “enough”.

Over the past decade, we’ve cycled through debates that try to measure success in unhelpful ways. During the 2010s, for instance, researchers obsessed over quantifying Australia’s “housing shortage”—an effort to put a number on whether we were overbuilding or underbuilding. Do we even need more? If so, how much? Despite using similar data, some found a massive undersupply; others, a surplus.

The divergence wasn’t about the data, it was about the economics.24 In a market without price controls, textbook “shortages” can’t persist — prices simply rise until demand and supply meet, albeit at worse living standards. It’s not about whether the number of houses is “right”, but whether Australians are living worse than they should be — crammed into smaller homes, staying longer with parents, or pushed further from work.

That’s why the question “how many homes should we build?” is the wrong one; it’s essentially meaningless. We don’t ask how many cars or iPhones Australia “needs.” There’s no department forecasting the ideal number of cafes in the CBD. The right questions are: Are there policies that would let us build more? And would Australia be better off if we did? On zoning, the answer to both is a resounding yes. To some extent, it doesn’t matter whether we’re already producing a little or a lot—the question for government is always the same: could things be better? Microeconomic reform, at its core, is the discipline of marginal improvement.

We’re now having the same conversation again, this time around the government’s ambition to build 1.2 million homes in five years. Some critics treat the target as unachievable—arguing that market cycles are dominating so the governments are powerless to hit it. There’s a kernel of truth in that: the number of homes built will fluctuate with costs, interest rates, and labour availability. But it’s the wrong way to think about what a target is for. Done right, it’s an expression of values—a statement of intent about the kind of economy we want.

I think at their best, targets are signposts, not scoreboards. They say we want things to be better than they were in the past, and that we want that to be the case soon. But that means you have to be willing to do the hard yards to make things work.

Think of government like a coach. You don’t control the scoreline, but you do control the squad, the tactics, the conditioning, the preparation. Luck and external factors matter — and they mean you’ll lose a few, in the short run. But over time, good systems win more. If you lose for decade after decade, like the Wallabies have at Eden Park, something needs to change. Targets can help with holding you to that.

So, construction costs may be high, and interest rates elevated—but that is reason to do more reform, not less. Australia will inevitably build less housing when construction costs surge. Incomes will dip during recessions. Growth will slow as lower-productivity sectors expand. The task of governments is to find ways to lose small—to ensure that in these bad times, we don’t go too far back. Even small policy gains compound. If good policy results in just one additional dwelling each year, or lifts productivity growth by 0.1 per cent annually, those incremental improvements will accumulate over time. We should not underestimate the power of compounding, even in cases where the numbers appear small.

Learning to speak supply

Reform is no fairy tale. There are always more problems to solve, more to do. Prices in Auckland are stabilising relative to incomes, but affordability has a long way to go. Outside the cities that reformed, rents have continued to climb, and out-migration to Australia has spiked post-pandemic. Some of the productivity gains that followed zoning reform have also unwound in recent years, as higher input costs and recession took hold.

Even the best-designed supply-side reforms can be overtaken by macroeconomic cycles. That doesn’t make them failures—things are better compared to what they would have been otherwise. Microeconomics works in the margins, not the headlines. Things will keep getting a little easier day-by-day, year-by-year.

Australia is, encouragingly, moving in the same direction. Both the New South Wales and Victorian governments have announced broad reforms to allow medium-density housing throughout Sydney and Melbourne, and higher-density development along transport corridors. And perhaps most importantly, the language has shifted: economists, policymakers, and the public are beginning to talk again about the supply side of the economy not as an afterthought, but as a necessity.

That shift in conversation may prove the real reform. Housing is, in some sense, the “Intro to Supply-side thinking” class. There is a clear constraint to lift and overwhelming evidence to support lifting it. If we can’t talk about this, we’ve got no chance for the next frontier. But if we get it right, we might be able to expand it to the next wave of progressive supply-side policies.

In our growing care sector, for instance, reform is far more nebulous. Nobody seems to have a clue what a tangible, implementable, policy change can be. To do so, we will need to re-think systems, not just processes. But the principles are the same: we figure out where reform delivers the most value, focus on bans rather than burdens, remind ourselves to get the market right—not just keep firms happy—and control the inputs we can control.

At its best, supply-side reform is the quiet work of expanding what’s possible. It doesn’t always make headlines; its benefits are diffuse, incremental, and slow. But over time, these benefits compound. If policy can keep bad times from becoming worse, or let markets build slightly more when conditions are tough, those small gains accumulate into something larger. The job of policy is not to win the cycle, but to raise the floor.

When we look back on the reform era of the 1980s and 1990s, it can appear simpler than it was. With hindsight the case for change feels obvious, so floating the dollar, deregulating finance, and cutting tariffs can read like a straight line. It was not. Those shifts took years of grinding policy work and a lot of persuasion. It meant telling stories: a warning that drift would leave Australia exposed, a counter-story that reform could deliver a larger, more confident economy, and a promise to hold course even when the cycle turned down.

The rhetoric of the time reflected that mix of urgency and faith. Keating’s warning that Australia risked becoming a “banana republic” without reform lit a burning platform, his claim that the 1988 budget was one which would “bring home the bacon” reframed the payoff from abstract economic reform into something tangible. Even the downturn that followed was reinterpreted as “the recession we had to have” - a necessary purge before recovery. Each phrase carried the same underlying lesson: trust the process, trust the settings, and don’t confuse short-term pain with long-term failure. These governments didn’t just cut red tape; they removed bans — on trade, on capital flows, on price controls — and placed faith in markets to adjust, even though they weren’t what all firms wanted to hear.

That instinct to link policy to possibility carried through to Keating’s later reflections on cities. Speaking to the OECD in 1995, he said, “We want cities that preserve the best of our past, celebrate the best of the present, and give a sense of the future—cities that people live in because they want to, not because they have to.” Two decades later, Edward Glaeser would speak in almost the same register. Like Keating, he told stories about places as engines of prosperity—about how cities foster connection, learning, and invention. In his telling, New York and Boston thrive because density lets people swap ideas as easily as goods; Detroit’s early carmakers learned from each other in real time, improving on each design in close proximity.

Glaeser did the analytical work — documenting how urban density drives innovation and growth — but, like Keating, he also found a way to sell it. In Auckland, his message landed deeply - to academics, to governments to policy wonks. A decade on, that story is still being written. But it’s also one we can begin to tell.

In the end, the lesson is as much about how we think as about what we build. Supply stories take imagination. They require us to picture the world not as it is, but as it could be. And it could be so much better than it is.

This essay, and its companion working paper, are written in my personal capacity, and neither should be necessarily attributed to the e61 institute.

• A Higher Standard for Standards by Flavio Menezes

• Planning is the Bottleneck to New Housing by Brendan Coates

• Best Practice for Supply-side Reform by Matthew Maltman

• Rebuilding Australian Political Parties by Travis Jordan

Read Issue 03

Flavio’s analysis was also written up in this morning’s Sydney Morning Herald, which highlighted his most striking findings. You can read the SMH article here (n.b., paywalled article).

Canberra readers: on November 25, we are coming to your city.
RSVP for our Canberra launch here.

A Higher Standard for Standards

Standards are the invisible architecture of technological progress. But, in Australia, that architecture is paywalled and crumbling. In a system where even regulated standards cost hundreds of dollars to access, the rules that govern innovation have themselves become barriers to it.

Flavio Menezes argues that the current model—where mandatory Australian standards are controlled by a private monopoly and fragmented across jurisdictions—adds cost, delay, and uncertainty to the very sectors driving the net-zero transition. His analysis for the Treasury shows that duplication and slow updates to standards are delaying investment in critical areas like batteries, EV charging, and recycling. To modernise this invisible infrastructure, Flavio proposes three shifts:

1. Make regulatory standards freely available to everyone who must follow them.

2. Base standards on rigorous analysis and consistent national applications.

3. Default to international standards, rather than bespoke Australian ones.

He argues that better standards are good productivity policy. Freely accessible, performance-based, and globally aligned standards would cut red tape, lower costs, and accelerate the clean energy transition.

Read Flavio's piece

Flavio Menezes is a Professor of Economics at the University of Queensland.

Planning is the Bottleneck to New Housing

Australia’s housing shortfall is a planning problem first. Brendan Coates shows how sclerotic land-use systems have made well-located homes artificially scarce, pushing prices and rents to historic highs, hollowing out inner-city opportunities for the young, and sapping productivity via longer commutes and weaker job matching.

Brendan’s essay shows that planning says “no” by default (bans on density across most inner and middle suburbs), approvals are slow and uncertain, and consultation is biased toward incumbents. The result is fewer homes where demand is strongest, with one of the steepest declines in housing per adult in the OECD. To solve this, Brendan proposes four main shifts.

1. Relax the rules where demand is highest, with by-right townhouses up to three storeys across all residential land and at least six storeys within walking distance of transit.

2. Make approvals predictable, with by-right pathways for modest density and a deemed-to-comply track for larger projects.

3. Fix governance and accountability, by requiring regulatory impact assessments for planning rules and enforceable housing targets for local councils.

4. Align the Federation, by shifting commonwealth incentives from long-term output targets to immediate performance bonuses for verifiable reforms.

Allowing far more well-located homes could lift construction by 67,000 dwellings a year over the next decade, leaving prices and rents up to 7% lower in five years and 12% lower in ten.

Read Brendan's piece

Brendan is the Housing & Economic Security Program Director at Grattan Institute.

Best Practice for Supply-Side Reform

Supply has a PR problem. When asked to think about the economy, most of us think of the demand-side. But the most powerful levers for change are often on the supply-side. Mattew Maltman shows why fixing that matters, especially if Australia is to return to the successes of the 1990s.

Drawing on New Zealand’s zoning reforms, Matthew argues that the most powerful microeconomic changes don’t speed up paperwork; they remove the rules that stop things from happening in the first place. Upzoning in Auckland and Lower Hutt unlocked firm entry, lifted construction productivity, and delivered a quiet affordability dividend as rents decoupled from national trends.

Matthew outlines three principles for reform:

1. Target bans, not burdens. Cutting fees and shortening processes moves inches; legalising activity (e.g., medium-density housing) moves the field.

2. Think markets, not firms. Good reform enables entry and competition, and benefits often accrue to firms that don’t yet exist (so can’t contribute to consultations).

3. Control inputs, monitor outputs. Set durable upstream rules and let cycles play out; small, compounding gains raise the floor over time.

Read Matthew's piece

Matthew is a Research Economist at e61 Institute.

Rebuilding Australian Political Parties

Travis Jordan argues that Australia’s next democratic flourishing depends on rebuilding participation through political parties, not bypassing them. Despite world-class institutions, trust is falling as membership has collapsed and parties have drifted into cartel-like, insider control.

But structural incentives keep parties closed and citizens passive. Parties enjoy public privileges with minimal transparency, while alternatives like deliberative forums or campaign outfits can’t replace representative institutions or create durable pathways for busy people to become active members. The result is a widening gap between citizens and the organisations that convert values into policy.

To close that gap, Jordan proposes linking public money to public benefit: a $60-per-voter voucher (replacing existing party funding) redeemable only with organisations that meet baseline governance standards and grant full voting rights to voucher members, reinforced by nudges to attend events, vote in internal elections, and contribute to policy. Treating parties like regulated utilities—open, transparent, and accountable—would lower barriers to entry, boost membership, and restore confidence by turning passive observers back into active citizens.

Read Travis's piece

Travis is a campaigns consultant, lawyer and long-time political staffer.

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By Brandon Sheppard

Australia has the talent, capital and ambition to build world-class software companies. By several measures we’re already punching above our weight: according to Dealroom’s 2025 Startup and Venture report, Australia’s $360B tech ecosystem is the second-fastest-growing globally, first in unicorns created per VC dollar invested, and top-five worldwide for decacorn creation.1

What we lack is a policy stack designed for how modern software is actually built and sold. Too many of our rules were written for labs and property syndicates; they reward paperwork over product, certainty over experimentation, and incumbency over mobility. And because our domestic market is small—too small to mint unicorns on local demand alone—founders must sell into markets like the US to scale, which too often leads great Australian companies to gradually become American ones. The result is predictable: founders incorporate here but scale somewhere else, employees sit on paper gains they can’t realise, and early-stage capital drifts to assets that are easy to hold and easy to sell.

I’ve spent over a decade building software companies here in Australia, working across Sydney, Melbourne, and Brisbane, and selling into the US market. Today I’m COO at Instant, one of the country’s fastest-growing startups, but my experience stretches across three ventures that all scaled into the USA and were funded or acquired by the likes of Oracle, Telstra, Blackbird, and Hummingbird. Along the way I’ve advised founders and operators across the ecosystem, and have seen up close the patterns that enable Australian companies to go global—as well as the frictions that push them offshore. The arguments in this essay come from years of shipping products, hiring teams, raising capital, and trying to keep the wins onshore. My perspective is shaped by building in Australia while competing in the most demanding markets abroad. And my passion comes from a belief that we, as a nation, can do even better. And in the global context of the United States’s great risk of brain drain, now is the time for Australia to capitalise, and create the best system possible for building the companies of the 21st century.

I can tell you from experience: Australian startups don’t need bigger cheques so much as fewer friction points. A more competitive software economy can be powered by five flywheels that reinforce one another:

1. Research and development incentives that are simple to claim and aligned to iterative product work

2. Broad employee ownership that turns staff into partners

3. An angel market that seeds the next generation

4. Talent that can move quickly to the teams shipping value, and

5. A pipeline that brings great engineers to Australia and grows more of our own

None of these changes require spending more; they require spending smarter—trading red tape for clear rules, and rigidity for trust paired with targeted safeguards. Do that, and Australia won’t just keep startups at home; we’ll help them win globally from here.

Modernise and simplify the R&D Tax Incentive for software companies

The Australian Government’s R&D Tax Incentive, a generous scheme that lets companies claim cash refunds or tax offsets on certain “eligible” research and development, is rightly promoted by the Australian Taxation Office as its “most significant lever for funding innovation and R&D”. For early-stage companies, it can be a great incentive to build in Australia: in practice, a loss-making startup that spends $1 million on eligible R&D can receive a cash refund of up to $435,000.

Despite the generosity, the program has significant problems, and provides limited benefit for smaller, early-stage firms due to high levels of administrative burden, including excessive documentation requirements and complex eligibility requirements.

To qualify, startups must prove their work is genuinely scientifically or technologically new, treating it as lab work by documenting formal hypotheses, methods, and results for each attempt. Companies must also separately track related costs, often via timesheets that require developers to track how long each task takes them—an approach long abandoned in modern software teams. This level of record-keeping diverts resources from actual innovation, and is at odds with modern product development practices, where teams work in short cycles, constantly iterating and adapting rather than running big linear projects. The Australian Chamber of Commerce and Industry (ACCI) explicitly observes that “policy frameworks tend to treat research and development as a single linear process”, whereas in reality innovation often occurs “independently or in parallel”. In practice, many breakthroughs arise from routine development. For example, a major new feature might be discovered while fixing an unrelated bug. But innovation patterns like this are difficult to retroactively document to the R&D Tax Incentive program’s standards.

Even when software improvements are incremental rather than revolutionary, they can still create substantial economic value once they are brought to market—and this is especially true when developed in Australia and sold globally.

Credit the R&D Tax Incentive as a portion of total spend

A simpler model that allows companies to claim a reduced percentage of their total product development spend (instead of claiming individual qualifying tasks as per the current system), eliminates the need for granular timesheets, and streamlines documentation requirements, would make the program far more accessible. This approach would cut unnecessary bureaucracy, lower compliance costs, and enable more startups to participate, consistent with ACCI’s call to “[simplify] administrative processes to better support growing businesses and SMEs.” It would also better reflect the reality of how software is built, recognising that innovation often emerges from incremental work rather than formal experiments (a point ACCI makes in urging governments to “[acknowledge] that research and innovation are not always linear”). By shifting the focus from proving novelty to encouraging investment in local development, government support would capture a broader base of valuable activity without increasing public expenditure. In turn, this would help keep product development anchored in Australia, increase the number of companies able to scale globally from here, and deliver stronger long-term innovation outcomes at no extra cost to the government.

Encourage employee share option plans with simplified regulation

Today, most startups provide employees with company shares, typically through employee share option plans (ESOPs). ESOPs are one of the most powerful tools available to early‑stage software companies. They align incentives between founders and employees, attract and retain talent when cash is scarce, and reward the people who take the biggest risks in building something from nothing.

Researchers at Stanford University found that stock options attract “highly skilled and risk‑tolerant employees who are willing to sacrifice current salary for the potential of much larger future pay” and serve as retention tools. ESOPs also create a virtuous cycle: employees who share in a startup’s success often reinvest in the ecosystem, either as angel investors or by founding new ventures. As per European venture capital firm Index Ventures, in the US “thousands of employees across hundreds of startups have benefited financially following company exits” and many have gone on to become founders or angel investors themselves. A well‑structured ESOP not only helps early‑stage companies attract and retain talent but also creates a flywheel effect, enabling today’s team members to become tomorrow’s founders, investors, and mentors. This multiplier effect is how Silicon Valley has built its dominance on a culture of broad employee ownership.

Australia’s ESOP framework has improved significantly in the past decade, but it is still less competitive and less accessible than it should be. Recent reforms introduced by the Treasury Laws Amendment 2022 aim to “decrease red tape” for companies that issue shares or options, making it easier for startups to issue shares and “attract and retain talent”. These reforms expand the scope of eligible participants beyond employees and directors to “cover all people who provide services to a business”, remove cessation of employment as a taxing point, and eliminate onerous disclosure obligations for eligible schemes. Under the existing startup tax concession, qualifying companies can issue options that are taxed only at sale and at favourable capital‑gains rates.

In some ways, this is more attractive than the US system.2 But Australia’s scheme remains hamstrung by complex compliance requirements, creating a trade‑off between tax efficiency and legal simplicity. Put simply: Australian rules make it extremely difficult to offer the traditional ESOP structures that built Silicon Valley.

Australian founders have two different ESOP pathways. There is the easy way, which is simple to set up but for employees is taxed as income. And then there’s the hard way, which involves onerous disclosure, personal liability, and valuation requirements. This forces founders to choose between tax‑deferred options with an exercise price, which trigger heavier disclosure obligations, and zero‑exercise‑price options (ZEPOs), which are simpler to grant but taxed less favourably, and are therefore less enticing for employees.

The result is an ESOP program that is harder to implement than it needs to be. Even small early‑stage companies often require expensive legal and tax advice to navigate valuation, disclosure caps, and Corporations Act limits. The US, by contrast, allows companies to grant options widely with minimal paperwork under Rule 701. Australian companies that outgrow the startup concession’s criteria (notably the $50m annual turnover limit) lose access to its best tax treatment while still competing globally for talent. This forces many to ration equity or exclude junior staff from ESOPs altogether—the exact opposite of the broad participation that makes these offerings most valuable.

Broaden employee share option plan accessibility by focusing on a single turnover test

If Australia wants to match or surpass the US in early-stage competitiveness, our ESOP offerings must be simpler, broader, and more flexible. The first priority is to allow zero-exercise-price options and performance rights to qualify for tax deferral, so employees are not hit with income tax before liquidity. We should also remove the $50 million turnover cap, letting more scaling companies continue to use the startup concession.

At the same time, we need to reduce the administrative burden by creating a clear safe harbour — for example, allowing grants up to a fixed percentage of capital each year without triggering prospectus-style disclosure obligations. Finally, the $30,000 regulatory cap on grants should be lifted substantially so startups can make meaningful offers to key hires.

When more Australians own equity in the companies they help build, they are more motivated to deliver outsized results, and the returns they realise will seed the next generation of startups — a compounding advantage no grant program or tax credit can match.

Create an angel investing boom

Angel investing, when individuals use their own money to back a fledgling company, is the seedbed of a healthy startup ecosystem. It is how most world‑class startups begin: friends, colleagues and former co‑workers pooling small cheques into a founder’s early idea.

Angel investors are often themselves entrepreneurs and startup employees who invest their own wealth at the pre‑seed stage when startups have no revenue, providing strategic advice, resources and network access. For early‑stage software, angels are uniquely valuable: they bring operator experience, move faster than institutions and invest when banks and venture capitalists will not. Being an angel investor is also a way for startup employees to diversify their risk: if their own employer fails, they may still win from a friend’s company taking off. The effect compounds over time as employees who profit from an angel investment often reinvest into new ventures or found their own, creating a virtuous cycle of capital and experience that strengthens the entire sector.

Australia has the talent and private capital to domestically fund early‑stage investing, but investors are blocked from doing so by rules designed for property syndicates and passive funds, rather than modern software startups. And based on current policy trajectories, things are likely to get worse rather than better for angel investors.

Proposed superannuation taxes on unrealised gains threaten angel investing activity

The proposal to tax unrealised capital gains inside superannuation above a $3 million balance (Division 296) is a direct threat to angel activity.

Self‑managed super funds are a vital source of patient capital for small growth companies, and taxing unrealised gains would force trustees to de‑risk by shifting capital from unlisted, higher‑growth companies into liquid assets like property or listed shares. Paying tax on paper gains could require investors to sell holdings early, creating a success penalty and structurally shallowing the pool of angel capital.

Many angels invest through self‑managed super funds because it allows them to put long‑term, patient capital into local startups. Where holdings appreciate on paper before an opportunity to sell, a tax bill can create serious liquidity problems for angel investors. This liquidity mismatch will push capital away from Australian startups and into liquid assets like property or foreign shares. We should carve out unlisted, illiquid growth assets from Division 296 entirely, or at minimum defer any tax until a realisation event.

Wealth and investor testing locks many would-be angels out of the startup ecosystem

Equally damaging is the “sophisticated investor” wealth test. At present, Australians must earn $250,000 per year for two years or hold $2.5 million in net assets to invest in many early‑stage opportunities. This is already an extremely high bar, and the current government is considering raising it to $450,000 and $4.5 million, locking out even more potential angels. Parliamentary evidence shows the wholesale investor and client tests also operate as barriers to protect retail investors, requiring more disclosure and responsibility from providers when offering high‑risk investments and aiming to ensure that clients have appropriate financial knowledge and capacity to absorb losses.

These onerous gates were designed to protect people from scam property schemes, but in practice exclude the very operators we need: experienced software engineers, product managers, and startup executives who understand risks and are able to write meaningful cheques. A carve‑out for startup investing—either eliminating or significantly lowering the wealth test—would unlock thousands of new angels. Cheque sizes could scale with income or liquid assets—offering more options and opportunities than the current blunt limit on investment.

High compliance costs disadvantage new companies

Australia’s angel market also faces well-documented friction points beyond superannuation and wealth tests. The Early Stage Innovation Company (ESIC) tax incentive—a program that reduces an individual investor’s tax bill when they back very young Australian companies developing new products—is overly complex, with Azure Group, Chamberlains, and William Buck all pointing to the threefold problems of endless paperwork, uncertainty, and compliance costs. Investors often cannot tell if a company qualifies at the time they’re writing a cheque, and the professional advice needed to confirm eligibility can consume most of a small investment—while common company structures like an Australian parent with a US subsidiary can miss out entirely.

At the same time, Simple Agreement for Future Equity (SAFE) notes were designed in Silicon Valley as a standardised contract for early-stage funding, so investors could back startups quickly without heavy legal review. In the US, this standardisation has transformed the ecosystem: 88% of pre-seed rounds in 2024 used SAFEs, allowing deals to close in weeks instead of months, lowering legal costs, and broadening participation. In Australia, by contrast, SAFEs remain fragmented and inconsistent, which forces angels to pay for bespoke legal review and often excludes ESIC benefits because SAFEs don’t count as equity until conversion. The result is slower, more costly deals, and less capital flowing into local early-stage startups. Platforms like Birchal have already called for a standardised SAFE and retail investor access.

The fixes are straightforward—simplify ESIC with a checklist model, standardise SAFE notes, and align both systems with existing tax incentives—but the bigger opportunity is for government to work directly with angels, founders, and platforms to design solutions that reflect how startup investing actually works, in order to keep more early capital onshore.

Stimulate talent mobility in early-stage companies

Markets with greater workforce mobility, where people and employers can change jobs, teams, or working arrangements more easily, tend to produce better startups and attract more investment. As the Institute for European Policymaking lays out, restructuring costs increase very quickly alongside levels of labour protection. Australia is used as an example of this phenomenon: when it tightened dismissal laws in 2009, it shifted from “Denmark-type [employment protection laws] to a model closer to France or Italy”, causing firm productivity to fall by 1.2% on average, with wage growth suppressed as a result.

This high cost of adjustment shapes innovation choices: on the firm level, high firing costs tends to lead R&D investment to be directed toward mature products rather than new ones. On the macro level, countries with higher levels of labour protection tend to specialise in established industries, and leave innovation to countries with less employment protection.

For young startups, this creates a massive competitive disadvantage when stacked against US companies. Venture capitalists recognise this and avoid strict labour markets, to such a degree that the effect is measurable: early-stage company restructuring costs that equal four months of pay in the US equate to two years in Europe. In the US, a company can launch five projects, fail on four, and still profit; in Europe, the same sequence results in major losses.

Startups that do succeed in going global quickly discover the difference. Local companies that expand to the US see first-hand how flexibility changes their cost base. At-will employment means either the employer or the employee may terminate the relationship at any time, with or without cause, and with or without notice, and employers can adjust people’s responsibilities as the needs of the business change. In Australia, by contrast, it is much harder to change people’s responsibilities, move someone on after probation, or adapt arrangements at short notice. Yet governments are doubling down. Victoria is moving to legislate a right to work from home two days a week, while federally the Right to Disconnect gives employees the legal right to ignore work communications outside ordinary hours. These reforms may make sense for large employers, but founders have told me that they are already concentrating more hiring in the US, where the cost of a hiring mistake is far lower than in Australia.

Early stage startups should be able to fire faster

The truth is that early-stage startups need more flexibility, not less. It often takes several attempts to assemble the right mix of people, and roles evolve as the company learns what customers will actually pay for. Giving startups room to pivot benefits employees as much as companies: mismatches are resolved sooner, talented staff can land in teams where they grow faster, and new ideas can reach market even when they compete with a former employer. Australia already recognises this principle in a narrow way: under the Fair Work Act, employees must work for six months before they can file for unfair dismissal, and for small businesses with fewer than fifteen staff, that threshold is twelve months. Extending that full twelve-month period to startups with fewer than fifty employees would give founders a realistic timeframe to assess fit while building their foundational team.

Similarly, restricting most non-competes, as is proposed to soon be law, would empower talented staff to leave low-innovation firms and build something better, just as in California. The policy goal should not be to strip protections from workers altogether, but to create targeted exemptions for small, young startups, paired with clear choice: anyone who wants stronger protections can work at a larger company. That would boost mobility, accelerate the diffusion of skills, and strengthen Australia’s ability to build a globally competitive software industry.

Expand engineering talent pipelines

High-skilled migrants are outsized drivers of innovation. Research shows that, in the United States, immigrants make up just 16 per cent of inventors yet account for 23 per cent of patents, and their work produces larger spillovers for collaborators than that of native-born inventors. They are disproportionately likely to cite foreign research and collaborate internationally, seeding new networks of ideas. Research has shown that a ten-point increase in the share of H-1B workers at a firm boosts product reallocation rates by two per cent, a clear sign of faster innovation. Across the economy, high-skilled immigrants now represent roughly a quarter of the US workforce in innovation and entrepreneurship, and their contribution to patents and new ventures has grown steadily over the past three decades. The economic dividends are unmistakable: each one per cent rise in employment driven by immigration increases income per worker by nearly half a per cent. It is no surprise then that nearly half of Fortune 500 companies in 2024 were founded by immigrants or their children, together employing 15.5 million people and generating US$8.6 trillion in revenue.

Australia already knows this story firsthand. Nearly 45 per cent of the domestic technology workforce was born overseas. In software specifically, the share is even higher: two-thirds of Software and Applications Programmers are migrants. Engineering tells the same tale—between 2016 and 2021, 70 per cent of the growth in Australia’s engineering labour force came from overseas-born engineers. The reality is that Australia’s innovation economy is already powered by migration; the question is whether we can keep attracting the people who will power its future.

Yet our system is still designed to frustrate precisely the kind of people who could make the biggest difference. Most skilled workers come through the points-tested system, but for startups the employer sponsorship pathways are the most direct lever—and also the most broken. The new Specialist Skills Pathway is a step forward, with an aspirational seven-day processing target. Its salary threshold of $135,000 (rising to $141,210 on 1 July 2025) is defensible in principle, because salary is a far better quality filter than occupation lists or skills assessments.

But for many startups it is still set too high, cutting them off from hiring skilled engineers at competitive but slightly lower salaries. Worse, the pathway is capped at just 3,000 places and remains entangled in uncertainty: employers must still wade through occupation codes, skills assessments, and labour market testing, hurdles that add friction long before any application reaches a case officer. On top of that, nomination fees, visa charges and the Skilling Australians Fund (SAF) levy—which alone can run from $1,200 to $7,200 per worker—make sponsorship prohibitively expensive. Add migration agent costs and the true burden often exceeds $10,000 per hire.

Other countries are not standing still. Europe has launched its €500 million “Choose Europe for Science” initiative to lure displaced researchers and entrepreneurs, backed by the €93.5 billion Horizon Europe program. The United States, once the unrivalled magnet for talent, is faltering: President Trump’s September 2025 order effectively bars entry for new H-1B workers unless employers pay a punitive US$100,000 fee. With American universities and firms suddenly less welcoming, a once-in-a-generation pool of global talent is searching for alternatives. Europe is competing aggressively. Australia risks squandering the opportunity.

For Australia to lead, it must be assertive about attracting international talent

A bolder strategy is needed. The Specialist Skills Pathway should be expanded into the default entry point for global tech talent, with the salary threshold and employer sponsorship treated as proof enough of ability, while lowering the threshold moderately so it aligns better with startup salary realities. Labour market testing, occupation lists and skills assessments should be abolished altogether for high-skill roles, shifting compliance to audits rather than upfront hurdles. Sponsorship fees and levies should be cut or waived, making it truly affordable to hire globally. All these costs should be cut dramatically, with the SAF levy waived for startups, so that bringing in a brilliant engineer from Bangalore is no more expensive than from Brisbane.

And instead of passively processing applications, Australia should actively court world-class researchers, entrepreneurs, and students through a dedicated Global Talent Attraction Office, offering relocation support, research chairs and co-investment in promising ventures. At the same time, visas like the National Innovation Visa should be simplified and expanded, with clear pathways to permanent residency for those who meet salary or startup success benchmarks.

The case for urgency is simple. Every study confirms that high-skilled migrants increase productivity, create jobs and accelerate innovation. Every month that Australia dithers, those people take their ideas elsewhere. Just as Silicon Valley’s dominance rests on a virtuous cycle of immigrant talent reinvesting in the ecosystem, so too could Australia harness this flywheel—if only it were willing to clear the bureaucratic hurdles and compete.

Conclusion

After more than a decade building Australian startups, I’ve seen the same pattern play out again and again. The builders here genuinely love this country. They want their companies, their IP, and their wins to push Australia forward. Yet I’ve also watched idealistic founders slowly lose faith that they can truly build it all here; the frictions add up, and before long they’re effectively building American companies — even when the founding story is unmistakably Australian.

It doesn’t have to be that way. Our biggest success stories, including companies like Canva, Atlassian, and Afterpay, were built here, and there are many more fledglings coming through. The system we’ve assembled for startups is, in many respects, enviable. With a handful of surgical changes, it could be the best in the world. The industry wants more of the value it creates to accrue to Australia; these simple recommendations would make that happen.

This essay sets out a practical modernisation program built around those flywheels. First, redesign the R&D Tax Incentive so it fits agile development instead of pretending every breakthrough comes from a lab notebook. Second, lift talent mobility where it matters most for young firms. Third, simplify and broaden ESOPs so more Australians own the upside they create. Fourth, unlock an angel investing boom by removing mismatched tests and liquidity traps. Finally, expand engineering pipelines with faster visas and work-ready training.

Brandon Sheppard is the COO of Instant. He has over a decade’s experience working in Australia’s tech sector.

The secret to Australian tech success is to treat it like an export industry.

Brandon Sheppard is the COO at Instant and has been in Australian tech since 2012—back when major VC funds didn’t exist here and Canva was just being founded. He’s lived the reality of building products in Brisbane while competing for talent against companies offering three times the salary in San Francisco.

Read the full article

Brandon is the COO of Instant. He has over a decade’s experience working in Australia’s tech sector.

By Jessy Wu

Australia leads the world in Unicorn creation per dollar invested.1 For every $1 billion invested into venture capital in Australia, we birth 1.22 Unicorns—that is, a technology company that achieves a valuation over $1 billion. The United Kingdom lags with 0.8 Unicorns created per $1 billion invested, while the US only manages to mint 0.69 Unicorns per $1 billion invested.

Our ability to efficiently create tech Unicorns is a bright spot in an otherwise grim economic picture. The OECD downgraded Australia’s 2025 growth forecast to 1.8% warning of the risk of the slowest annual growth (excluding the pandemic period) since 1992. Between 2010 and 2020, Australia endured its weakest productivity growth in 60 years. On the Economic Complexity Index (ECI), Australia has fallen dramatically—from 63rd in 2000, to 93rd in 2021, and further to 102nd in recent updates.

Is the solution to our economic malaise to lean into what we’ve shown ourselves to be successful at in the past; to increase the amount of venture capital in Australia, in the hope we’ll mint even more tech Unicorns?

I argue that simply increasing the quantum of venture capital isn’t the solution. A more complete solution would be to increase the variety of capital available to new businesses; to make the market for a new cohort of fund managers to launch smaller, differentiated funds that can invest in a diverse range of innovative companies—not just those aspiring to become software Unicorns. To be clear, I’m specifically referring to funding for new and emerging companies, not mature businesses that have access to private equity or traditional bank loans.

Of course, this begs the question—if there’s genuine opportunity to invest in these overlooked businesses, why isn’t anyone capitalising on it? If large funds are leaving money on the table, why haven’t nimble new players spun up to capture these returns? In an efficient market, this gap would have been filled.

But currently in Australia, emerging fund managers face such prohibitively high barriers to entry that raising a fund to pursue these alternative strategies is at worst unviable, at best unattractive. This is one of the dynamics bottlenecking the creation of an innovation ecosystem where different kinds of businesses can access appropriate capital; which could in turn unlock a more dynamic and risk-taking society.

The solutions to this problem aren’t complex or necessarily expensive. Most of my recommendations urge governments to make tweaks to regulation and tax incentives, such as adjusting superannuation funds’ performance testing regime and making amendments to the Early Stage Venture Capital Limited Partnerships (ESVCLP) tax incentive program.

Emerging fund manager talent is there on the sidelines, but is being bottlenecked by high barriers to entry. Targeted support to overcome these initial barriers could go a long way; as would a privately-run VC fund-of-funds that could act as a market maker and on-ramp for emerging fund manager ambition.

Government attempts to deploy directly into venture capital have been vexed

Having the government directly invest in technology companies is a popular proposal. Melbourne University’s incoming vice chancellor Emma Johnston has called for the government to invest $1 billion into a venture capital fund deployed by universities, while Member for Wentworth Allegra Spender has petitioned the government to re-orient existing investment vehicles such as the $15 billion National Reconstruction Fund (NRF) to help catalyse Australian VC.

However, government-run venture capital funds are frequently vexed, because they’re trying to serve two masters: delivering financial returns while simultaneously fulfilling other policy objectives. Breakthrough Victoria, the Victorian government’s controversial $2 billion venture capital fund, illustrates this tension.

Since its establishment in 2021, Breakthrough Victoria has faced sustained criticism, which intensified after revelations that the fund spent $22 million on operating costs while deploying only $74 million in investments during 2023. As a point of comparison, privately run VC funds typically spend 2% of committed capital per annum on operations. Amid mounting pressure and the state’s rising debt burden, the Victorian government slashed the fund’s budget by $360 million over four years in the 2024 budget.

The fund’s 2024 investment in World View—a US start-up developing stratospheric balloons for sensing and communication services—exemplifies the problem with government-led venture capital funds. World View had recently terminated plans to merge with a SPAC in a deal that would have injected over $100 million, when Breakthrough Victoria stepped in with a $37 million investment, albeit with strings attached: World View was required to build “an advanced manufacturing facility that will ultimately employ up to 200 Victorians.”

But these kinds of funding conditions often lead to adversely selected investments. Companies with strong prospects can typically attract funding from sources that don’t impose operational constraints, meaning government funds may end up backing ventures that private capital has already passed over. By trying to achieve job creation and financial returns simultaneously, funds like Breakthrough Victoria risk achieving neither objective.

Rather than attempting to compete directly in venture capital markets, governments should focus on what they can uniquely do: creating the regulatory environment and enabling infrastructure that encourages private capital to invest in this asset class. Private fund managers, unencumbered by competing political objectives, can make investment decisions based purely on financial merit. This ultimately generates better outcomes for both entrepreneurs seeking funding and for the broader economy.

There is a growing amount of venture capital available, but it’s concentrating in a handful of large funds

2024 saw $4 billion of venture capital raised by Australian startups across 414 deals. While this falls short of the $10 billion raised in 2021, it’s twice as much as the $2 billion raised in 2018. According to The State of Startup Funding Report compiled by Cut Through Venture, there was general optimism about the amount of capital available for startups and scaleups in 2025.

However, a large portion of this capital is starting to concentrate in three megafunds. Thanks in part to the standout performance of Canva, which received early investment from Blackbird Ventures, Square Peg Capital, and Airtree Ventures, these three funds now boast impressive historical returns. This track record has unlocked access to substantial institutional capital from both Australian superannuation funds and international investors.

In August, Airtree announced a $650 million fifth fund, with the majority raised from international investors: the institutional asset management arm of one of the world’s largest insurance companies, the endowment fund of Harvard University and the University of Wisconsin, as well as AustralianSuper and the Australian Retirement Trust. Blackbird Ventures has announced a first close on a $700 million sixth fund, while Square Peg Capital has been fundraising for a $840 million sixth fund.

According to Pitchbook data compiled for The Australian Financial Review, seven local venture capital firms successfully closed new funds in 2024, raising a combined total of $3 billion AUD. In 2023, 11 funds closed, raising $670 million AUD.

The 2024 figures are skewed by Breakthrough Victoria, which accounted for $2 billion of the $3 billion total. Excluding the government-backed fund, Australian VC funds raised approximately $1 billion in 2024, bringing the two-year total for private fund closes to just under $1.7 billion. If the “Big Three” succeed in reaching their target fund sizes, their combined 2025 closes would roughly equal this entire two-year total.

Large funds are incentivized to deploy quickly into cash-hungry businesses

Fund strategies are dictated by fund sizes. Venture capital funds are under pressure to deploy their capital within 3 - 5 years, which means large funds must prioritize finding cash-hungry startups that can absorb significant investment over a short timeframe.

The optimal investment becomes a company that can consume a large amount of cashover five years. This creates a bias toward capital-burning business models, favoring companies that can spend cash quickly to win market share over those that might be more capital-efficient but require smaller check sizes. Moreover, when large funds write substantial checks into late-stage companies that have already expanded globally, less of this capital flows into the Australian economy. Take Airwallex, which recently received significant investments from Blackbird and Airtree as part of its $300m funding round—despite being an Australian-founded company, the majority of its operations and workforce now sit outside Australia.

Fund economics reinforce this bias. When a $1 million investment represents less than 0.15% of a $700 million fund, the due diligence, board participation, and portfolio management work becomes unwieldy relative to the fund’s total assets under management. The same amount of time invested in a $50 million deal has 50 times the impact on fund deployment.

In addition, larger funds are also incentivized to deploy capital quickly so they can raise subsequent funds and grow their management fee base. Funds typically charge a 2% annual management fee on assets under management, meaning a $700 million fund generates $14 million in annual fees before any investment returns. Since management fees scale with fund size regardless of performance, there’s a financial incentive to prioritize speed of capital deployment to raise more large funds.

Critically, this comes with the exclusion of smaller funds that are tailored to the sorts of emerging businesses that their traditional funds. Large funds would rather specialise in what they now know – the established tech businesses that they came in at the ground floor at. Creating a parallel fund would require re-building well established fundraising and diligence processes (which their super funds and LPs are already comfortable with), alongside hiring many new investors. Put short: the effort to create smaller funds for the big three is too high, especially when there is so much money to be made in mega funds.

Large funds’ narrow and homogenous mandates exclude good businesses

As a result, Australia’s well-capitalised venture capital funds operate fairly homogenously, pattern-matching for the same narrow range of opportunities. This creates intense competition for deals within their limited mandate while also leaving vast swathes of the innovation landscape underfunded.

As their fund sizes have grown, the ‘Big Three’ Australian VC funds have increasingly converged on the same investments. All three funds are now invested in graphic design company Canva, fintech Airwallex, and AI customer service platform Lorikeet. In 2024, Airtree led SafetyCulture’s $165 million Series D round—a 21-year-old company that has been heavily backed by Blackbird since 2013.

If you talk to investors at these funds, they’ll admit they’re all chasing a similar archetype: high-margin, software businesses targeting global markets, often leveraging frontier technologies like AI. VCs favor companies that create defensive moats as they scale, leading to a winner-take-most dynamic where being the market leader compounds into an insurmountable advantage. The ideal investment can rapidly burn capital to capture market share, then convert that dominance into pricing power.

Competition for companies that match this mould can create suboptimal outcomes for the investors backing these funds (who are, often, the same super funds). When multiple large venture capital funds chase the same deals, they bid against each other, driving up entry prices and depressing overall returns. Superannuation funds invested across several of these VC funds may find themselves inadvertently competing against their own capital.

The concentration of capital into large funds also disadvantages capital-efficient businesses. Businesses that could grow with modest investment are unable to attract funding not because they lack merit, but because they cannot absorb enough capital to justify a large fund’s attention.

One category of business that struggles to find suitable funding is those that can reasonably expect to reach $20 - 50 million in annual revenue but require upfront investment for R&D, product development, or scaling operations. These might include niche software companies, consumer brands, lending businesses, or hardware manufacturers. Their return profile and modest capital requirements make them unattractive to large venture capital funds, while their lack of immediate profitability disqualifies them from bank loans. However, they can offer strong risk-adjusted returns for the right investor: one deploying patient capital in smaller amounts. Moreover, these businesses deliver significant economic value: they create quality jobs, inject competition into complacent industries, and drive innovation in underserved markets.

Barriers to entry for first-time fund managers pioneering new approaches are insurmountably high

Of course, where there’s a gap there’s opportunity. In an efficient market, you would expect smaller funds pursuing different strategies to emerge, filling the gaps created by large funds.

A smaller fund can invest earlier and write smaller cheques into businesses with more modest return profiles. After all, a $1 million investment for a 10% stake in a seed-stage company can return a $20 million fund if the company exits for more than $250 million, factoring in dilution along the way.

However, in Australia, several significant barriers are preventing first-time fund managers from entering the market:

1. Prohibitive fund economics. The traditional venture capital model operates on a “2 and 20” structure: a 2% management fee plus 20% of carried interest on fund returns. A $20 million fund generates only $400,000 in annual management fees, which must cover licensing, insurance, legal compliance, and accounting. Only individuals who can afford minimal salaries—or work without compensation—can realistically launch new funds under these constraints. While fee structures that provide a greater portion of fixed fees exist (like sliding scale fees and capped carry), these are yet to be adopted widely in Australia, likely due to the inexperience of LPs investing in these fund types.

2. Difficulty accessing institutional capital. Institutional investors, including Australian superannuation funds, typically require a minimum five-year track record before considering an investment in a fund. In addition, they often impose a minimum check size of $25 - 50 million, which can represent a significant portion of an emerging manager’s target fund size. What’s more, many institutional investors have a rule that their investment can’t represent more than 30% of the total fund, stemming from reporting regimes that discourage them from underperforming their peers. This creates a catch-22 for new fund managers: emerging managers need institutional capital to achieve scale, but they cannot access such capital without an established track record and large fund size.

3. The cost of failure is severe. Unlike companies that can be wound up, fund managers must manage assets for the decade-plus life of the fund, and do their best to return capital to investors. Failing to raise a subsequent fund traps managers in “zombie mode”—locked into managing their existing portfolio without fresh capital to deploy or meaningful income from management fees. This prospect of professional limbo deters talented individuals from this path.

4. Australian LPs are reluctant to back ‘unproven’ fund managers. Despite data showing that first-time managers often outperform established ones, Australian Limited Partners (HNWs and Family Offices) generally lack the appetite to back unproven fund managers; most prefer to see a track record before committing capital. This may be due to the fact that Australian LPs are investing generational wealth, rather than cash generated through high-growth tech businesses.

Regulatory adjustments can unlock more private capital for venture overall

To incentivise more private investment into venture, the government could adjust its current superannuation performance testing regime, which would enable Australia’s $4.2 trillion superannuation sector to increase its allocation to venture capital and private equity.

The regime was introduced in 2021 with good intentions: to eliminate the “entrenched underperformance” that had plagued the industry and protect members from poor investment outcomes and excessive fees. Under this system, the Australian Prudential Regulation Authority (APRA) annually measures fund performance against regulatory benchmarks, with severe consequences for failure. Funds that underperform must notify members, and those that fail twice consecutively are banned from accepting new members.

However, the testing regime has created unintended consequences and discouraged investment in certain asset classes. The annual assessment cycle disincentivises funds from pursuing active strategies that might temporarily underperform benchmarks. This has led to what critics describe as a “homogenisation of investment strategies“ where funds avoid anything that could cause short-term underperformance relative to listed market benchmarks.

The regime particularly penalises investment in illiquid, long-duration assets like venture capital, that may underperform in early years but deliver superior long-term returns. VC operates on a different timeline and risk profile than listed equities, following the “J-curve” performance pattern. Failures typically emerge first—often within the first two years as companies exhaust their initial capital. Winners become apparent next, usually between years three to five as companies gain traction. However, the true extent of winners—the outsized returns that drive overall portfolio performance—only materialises last, often eight to ten years after the initial investment.

Consequently, super funds that allocate to VC may underperform benchmarks for several years while their investments mature, risking severe test failure consequences despite pursuing strategies that could ultimately deliver superior member outcomes. The rational response has been to decrease allocation to venture capital, despite its potential contribution to both members’ returns and national productivity.

It is important that reforms do not dilute accountability. Scrutiny of superannuation performance must be maintained to protect members and ensure capital is managed responsibly. The challenge is not whether to scrutinise, but how. A regime that conflates short-term underperformance with long-term risk ends up discouraging precisely the kinds of investments (e.g., venture, infrastructure) that align with members’ long-term horizons. By recalibrating benchmarks to match asset-class characteristics rather than imposing a one-size-fits-all test, regulators can preserve discipline in the system while enabling super funds to pursue genuinely diversified, long-term strategies.

One approach would be to anchor performance to a risk-adjusted metric, like the Sharpe Ratio, as was considered by Treasury in its 2024 Consultation Paper. The Super Members Council estimates that reforming the testing regime could double superannuation’s allocation to private equity and venture capital from 6% to 10% over five years, directing approximately $50 billion toward innovative private companies. Given that Australia’s superannuation sector represents one of the world’s largest pools of patient capital, changing this testing regime could have a significant impact on the amount of private capital flowing into VC funds.

Emerging fund managers need better on-ramps

Currently, individuals must crawl over broken glass to become fund managers.

While some of the challenges are unavoidable or require cultural change, governments can do their part to increase the amount of private capital available for venture capital, reduce barriers to entry, and create a more robust pipeline for emerging fund managers pursuing diverse mandates and strategies:

1. Reduce the minimum threshold for an ESVCLP

In Australia, the Early-Stage Venture Capital Limited Partnerships (ESVCLP) program provides significant tax incentives to fund managers and investors. Investors enjoy tax-free treatment on income and gains, plus a non-refundable carry-forward tax offset of up to 10% of their contributions. However, funds need $10 million in committed capital to qualify for ESVCLP status.

The $10 million threshold locks out brand new fund managers from accessing the same tax advantages available to established funds. Without ESVCLP status, these small funds cannot offer competitive tax treatment to prospective investors, who understandably gravitate toward funds with better tax benefits. Lowering the threshold to $3 million would level the playing field, enabling promising emerging managers to compete on merit rather than being disadvantaged by unfavorable tax status.

The significant administrative burden should also be streamlined for smaller funds. Current reporting requirements were designed for institutional-scale funds and create disproportionate compliance costs for smaller operators. Simplified reporting for funds under $10 million would remove operational barriers that smaller funds often cannot afford to meet.

2. Increase targeted support for emerging fund managers

New fund managers incur substantial upfront costs before they can even begin fundraising—legal, compliance, and preparing investment documentation can easily cost tens of thousands of dollars. Support programs that provide funding for these setup costs make a material difference for new fund managers.

Victoria’ startup agency LaunchVic has pioneered the VC Support Program, which provides up to $300,000 to individual funds establishing themselves in Victoria. The program supports both new funds and existing managers relocating to Victoria, covering establishment costs such as legal fees, staff salaries, and capital raising expenses for funds aiming to raise a minimum of $10 million.

The program has already demonstrated success in fostering innovative fund strategies. Three recently launched funds—FB Ventures (VC that’s accessible to retail investors), Advance VC (a fund of funds focused on fund secondaries), and Ecotone Partners (hybrid debt-equity for climate companies) all received support from LaunchVic’s emerging manager program. These funds all exemplify diverse strategies that enrich the ecosystem: FB Ventures is allowing retail investors to gain access to VC funds, Advance VC is creating much-needed liquidity for fund investors, and Ecotone Partners is addressing the climate funding gap through combined debt and equity structures.

LaunchVic’s $2.1 million investment across seven emerging VC funds is a positive example of what can be unlocked through targeted support that slightly reduces the barriers to entry for new fund managers. Just $300,000 can provide resourceful and ambitious fund managers with the boost needed to establish operations and begin building track records that can subsequently attract private capital.

3. Encourage a fund-of-funds to act as a market-maker for fund manager ambition

As the ecosystem matures and more institutional capital becomes interested in the asset class, there may eventually be sufficient demand to support a VC fund-of-funds that acts as a market maker for emerging fund managers. Such a vehicle could pool capital from institutional investors seeking diversified exposure to venture capital, while providing a structured pathway for promising new managers to establish themselves and access larger pools of capital.

The model could operate in two phases: initially seeding individual managers with $2-5 million funds plus $300,000 in operating expenses, providing a two-year runway to deploy capital and demonstrate coherent investment theses. For managers who prove their approach, the fund-of-funds could then cornerstone a subsequent $10 - 30 million fund, serving as a market signal that the manager has been professionally vetted and battle-tested.

Competition between emerging fund managers would drive innovation across the sector, leading to a more dynamic ecosystem where emerging managers compete to find excess returns and establish track records. Different investment strategies could be tested, giving entrepreneurs greater choice when seeking capital.

This fund-of-funds would create a structured pathway for talented individuals to become fund managers without requiring personal wealth, while providing institutional investors with professionally vetted access to emerging managers who might generate superior returns. Rather than superannuation funds inadvertently competing against themselves by backing multiple large funds chasing identical deals, they could diversify across broader investment strategies and manager profiles, potentially improving overall venture capital returns while supporting a more dynamic ecosystem.

Importantly, this fund-of-funds should be managed by private sector professionals experienced in fund manager selection, incentivized through carry (upside participation) in the performance of the portfolio. Fund manager selection is a distinct skill—top-quartile fund-of-funds managers consistently identify emerging talent before institutional investors, often achieving superior returns by backing first-time managers who later become market leaders.

Promising international models include Allocator One, a European fund-of-funds headquartered in Germany. Founded in 2024 to address the barriers that first-time and second-time venture capital managers face in raising their initial anchor commitments, Allocator One positions itself as both an anchor investor and an accelerator. For fund managers, it offers between €1 million and €7 million in early commitments alongside intensive operational and fundraising support. Its twice-yearly 12-week batches are designed to help a select cohort of emerging GPs establish their funds efficiently, with guidance on everything from fund structure to LP introductions. Allocator One has already established a reputation for rigour and selectivity, reviewing hundreds of applicants but backing only a small fraction.

A diversity of risk capital would fund a greater variety of businesses

A greater diversity of funds pursuing different strategies would likely result in a broader range of innovative companies being funded. Many promising companies require capital, but aren’t chasing the winner-take-most opportunities which return megafunds.

For example, companies that can grow steadily to $20 - 50 million in annual revenue—and potentially exit through an acquisition, management buyout, roll-ups, or small-cap ASX listings—represent an underserved market segment. Rather than forcing these businesses to contort themselves into venture-backable narratives, alternative funding structures could provide more honest alignment between capital providers and business owners. Other innovative forms of risk capital include:

1. combined debt and equity funds, which offer flexible capital structures particularly suited to capital-intensive businesses. Rather than forcing companies to choose between dilutive equity or restrictive debt, these funds provide blended financing suited for a company’s particular phase of growth. For companies that need substantial upfront capital for manufacturing but generate predictable cash flows once operational, this approach reduces dilution while providing patient capital. Ecotone Partners recently raised $20 million from family offices and HNWs to pioneer this model for climate companies.

2. scout funds, which are an investment model where investors back individuals before they’ve formed companies or even identified specific opportunities. These funds essentially place bets on people, providing capital for promising entrepreneurs to explore ideas, conduct market research, and develop a ‘minimum viable product’. While relatively uncommon in Australia, scout funds are prevalent throughout the US; established VCs often allocate portions of their funds to scout funds. Some pre-seed funds such as Co Ventures behave like scout funds, backing individuals with small cheques while they’re still in ‘ideation’ stage.

3. search funds, which focus on identifying and supporting individuals to acquire and operate existing profitable businesses. The search fund model typically provides an entrepreneur with capital to spend 18-24 months searching for acquisition targets, followed by additional investment to complete the purchase and support operations. This approach targets the universe of profitable small and medium enterprises whose owners are ready to exit. Search funds are also well-established in the US, with dedicated programs at business schools and institutional backing, but remain virtually non-existent in the Australian market, despite the abundance of potential acquisition targets among family-owned businesses approaching succession decisions. Enduring Investments is an example of an Australia search fund that’s been founded recently.

These examples are not exhaustive by any means; they merely illustrate that a greater variety of approaches would better serve the broad spectrum of business opportunity that falls outside the narrow mandate of large venture capital funds, and create a more comprehensive launchpad for Australian innovation.

While green shoots exist—with newly founded funds like Ecotone Partners, Co Ventures, and Enduring Investments pioneering alternative strategies—each has faced significant barriers to entry. Some initially operated as advisory businesses, others have foregone market salaries to operate funds at sub-scale, and others have been able to get started by reinvesting exits from previous ventures.

To build an antifragile ecosystem, we need more structured pathways for emerging fund managers, with clear routes to accessing institutional capital for subsequent and larger funds. Rather than relying on individual resourcefulness to overcome barriers, we need policy frameworks and enabling infrastructure that make it not only viable—but attractive—for talented individuals to launch innovative fund strategies, without requiring significant personal wealth or professional sacrifice.

Conclusion

Venture capital in Australia is still nascent, and we should be proud of what we’ve achieved. We owe a great deal to the VC funds that built our current ecosystem and backed some of Australia’s great tech companies, including Canva, Airwallex, Rokt, and Go1.

While they deserve their success, the concentration of venture capital into a small handful of megafunds pursuing similar strategies is not the formula for a substantially more entrepreneurial and dynamic economy. Megafunds succeed by investing large sums into cash-hungry businesses chasing global markets where winner takes most—they’re not suitable funders for the vast majority of Australian innovators who need smaller cheques and patient capital.

To diversify the kinds of risk capital available to Australian innovators, we must start to dismantle the
barriers that prevent talented individuals from launching smaller funds with diverse mandates. The prohibitive economics of sub-$20 million funds, the catch-22 of needing institutional capital to attract institutional capital, and the severe personal consequences of failure all conspire to keep promising fund managers on the sidelines.

The solutions are neither complex nor prohibitively expensive. Adjusting the superannuation performance testing regime could unlock up to $50 billion in patient capital for venture investment; lowering the ESVCLP threshold would level the playing field for emerging managers; expanding programs like LaunchVic’s successful VC Support Program nationally could provide the on-ramp that talented individuals need to establish credible fund operations. In time, a VC fund-of-funds could create a structured pathway for high-potential fund managers to become ‘institutional-grade’ and access larger amounts of capital as they scale.

The stakes extend beyond venture capital. In an economy struggling with productivity growth and falling complexity rankings, we need entrepreneurial dynamism across all sectors; we need fund managers willing to back the diverse businesses that drive broad-based economic growth.

The health of Australian entrepreneurship depends not just on minting more software unicorns, but on cultivating an ecosystem where different types of fledgling businesses can access appropriate risk capital.

Disclaimer: The author was formerly a partner at an early-stage venture capital fund and currently runs a communications agency focused on the technology sector. Her agency has provided services to several emerging fund managers, including Ecotone Partners and Advance VC, who are mentioned in this article.

Jessy Wu is the Founder and Managing Director of Encour. She was previously a partner at AfterWork Ventures.

And then she left. Not for another fund, not for a bigger partnership, but to build the kind of company that would never be in the mandate of a VC fund—a professional services company in the AI era. Because after years of evaluating whether founders were pursuing their life’s work, she realised she wasn’t pursuing hers.

What follows is a conversation about cognitive bias dressed up as intuition, about the $2 trillion professional services market that VCs typically ignore, about what it costs to speak truth in an industry built on relationships, and about why democratizing venture capital isn’t charity—it might just be the key to the next generation of Australian innovation.

Read the full article

Jessy is the Founder and Managing Director of Encour. She was previously a partner at AfterWork Ventures.

Read Issue 02

We’ve also released a new podcast episode, with Andrew Leigh, discussing the personal and political dimensions of productivity. You can listen to it now on all podcast platforms.

Listen to the Podcast

Issue 02 out now: technology & innovation

In this edition of Inflection Points, four fresh pieces unpack how innovation and technology can deliver a better future for Australia. The four feature essays are:

• How one Australian State Built a Digital Government by Victor Dominello

• Diversifying Australian Risk Capital by Jessy Wu

• Technology Can Address Care Worker Shortages by Jade Lin

• Industrial Policy for Tech Workers by Brandon Sheppard

How one Australian State Built a Digital Government

Victor Dominello reflects on his experience as NSW’s Minister for Digital to argue that citizens value seamless digital interactions with government just as much as they value physical infrastructure.

Very quickly, the Service NSW app became a trusted, widely-used platform because it was simple, reliable, and respectful, proving that digital convenience can rival physical concrete in building public trust.

But despite NSW’s success, other governments in Australia have not followed suit. To break through, Victor identifies four shifts that should be made to how government works:

• Agile data: data is used in real time, safely and across silos

• Agile decisions: decisions are made closer to delivery

• Agile funding: money moves with outcomes and lessons

• Agile thinking: curiosity, humility and iteration become the norm

Above all, he argues, a national Digital ID must be the backbone of reform, unlocking billions annually in economic benefits and enabling innovations like skills and health wallets for all.

Read Victor's Piece

Victor is CEO of the Future Government Institute. He was previously NSW’s Minister for Digital.

Diversifying Australian Risk Capital

Jessy Wu argues that Australia doesn’t need more venture capital; instead, it needs more diverse forms of risk capital. While Australia leads the world in Unicorns created per dollar invested, the concentration of capital in a few megafunds has biased VC investment towards large, cash-hungry software companies. This has left many promising but smaller-scale businesses unfunded.

Jessy contends that the government should remove barriers and create on-ramps for new managers, rather than try to run VC funds directly. To unlock more capital for diverse new businesses, she suggests:

• Adjusting superannuation performance tests

• Lowering the threshold for tax incentives

• Expanding support programs like LaunchVic

• Establishing a privately-run fund-of-funds

Read Jessy's Piece

Jessy is the Founder and MD of Encour. She was previously a partner at AfterWork Ventures.

Technology Can Address Care Worker Shortages

Jade Lin questions the dominant view that low productivity growth in the care sector is inevitable. She argues that real technology improvements that are already being adopted globally—like robotics, smart scheduling, and machine-learning risk models—could lay the foundations for improved quality at lower cost, for the benefit of both workers and those in their care.

But structural and regulatory challenges have to date prevented the care economy from adopting new technologies at scale and meeting the needs of workers. The fragmented sector has both limited capacity and few incentives to invest in new technologies, especially given substantial regulatory changes.

To address this, Lin proposes we overhaul the hours-based funding model for the care sector to give firms both the ability and the incentive to invest in new technologies. Combined with new incentives for employees, this could deliver better outcomes for both workers and those in their care.

Read Jade's Piece

Jade is a Fellow at the Patrick J. McGovern Foundation and a Masters student at Harvard University.

Industrial Policy for Tech Workers

Brandon Sheppard argues that Australia has the talent and capital to build world-class software companies, but too many of our rules were written for a different era.

Instead of supporting fast-moving startups, our rules reward incumbency, paperwork, and rigidity—pushing founders to incorporate here but scale overseas. Sheppard lays out five reforms to modernise industrial policy for tech workers:

1. Modernise the R&D Tax Incentive so it fits iterative software development rather than lab-style documentation, making it accessible and useful for early-stage firms.

2. Broaden employee ownership by simplifying and expanding ESOPs, so more Australians can share in the upside of the companies they help build.

3. Unlock an angel investing boom by fixing super tax rules on unrealised gains, easing wealth tests, streamlining ESIC eligibility, and endorsing a single SAFE template.

4. Boost talent mobility by extending small-business dismissal rules to startups, curbing non-competes, and giving early-stage firms the flexibility to pivot teams quickly.

5. Expand engineering pipelines by making visas faster and cheaper, lowering salary thresholds for startups, and actively attracting global talent through a dedicated office.

Together, these reforms would cut red tape, reward risk-taking, and keep more of Australia’s startup success at home.

Read Brandon's Piece

Brandon is the COO of Instant. He has over a decade’s experience working in Australia’s tech sector.

New podcast episode: Andrew Leigh on the personal and political of productivity

After a decade of sluggish growth—the slowest productivity gains in 60 years—Australia faces a fundamental question: how does our nation capture the dynamic potential of the 21st century? How do we build an economy that rewards innovation, enables competition, and creates opportunity for all?

In our second episode of the Inflection Points Podcast, we talk to Andrew Leigh about both personal and national productivity. In the first half of this episode, we dive into Andrew’s personal systems and productivity trade-offs, from four-hour sleep experiments to the art of the strategic “No”. Then, we zoom out to the national challenge: how do we translate individual excellence into collective prosperity?

Apple Podcasts – Spotify – Pocketcasts – RSS

Support Inflection Points

Since we’ve launched, many people have reached out to us asking: how can we help make Inflection Points a success? We held back from answering too quickly, because we wanted to be clear about the kinds of involvement that would strengthen, rather than complicate, our lean model.

In light of this, we’ve considered ways you can get involved with Inflection Points that’d best help us advance our theory of change. You can read more about how to support us here.

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Reform begins with ideas; and we hope you’ll help us share them. If you think someone you know would enjoy Inflection Points, please forward this email or direct them to our website.

– The Inflection Points Team

This is a conversation with Andrew Leigh about both personal and national productivity.

In the first half of this episode, we dive into Andrew’s personal systems and productivity trade-offs, from four-hour sleep experiments to the art of the strategic No. Then, we zoom out to the national challenge: how do we translate individual excellence into collective prosperity?

Andrew Leigh is the current Assistant Minister for Productivity, Competition, Charities and Treasury.

• Katie Roberts-Hull on the fight to mandate phonics in Victorian schools.

• Brendan Coates on reforming Australia’s skilled migration system.

• Michael Brennan on how Australia abolished non-compete clauses.

After these brief speeches, Myriam Robbin from the Australian Financial Review led a short panel discussion with the speakers, to understand how they think about influencing change in the Australian policy landscape.

You can listen to the Inflection Points Podcast below or on all podcast platforms (Apple Podcasts; Spotify; Pocketcasts; RSS).

A recording of the event is available on YouTube.

You can read an abridged version of these speeches on our website.

Read the full article

One of the most insightful perspectives from the event came from Katie Roberts-Hull, who suggested three lessons from her experience in driving the adoption of phonics in schools. See her words below.

The first lesson for policymakers is to be correct, not balanced. This isn't true in all cases: there are a lot of policy positions that are created through compromise that are good. But I think in some cases, policy really is zero-sum. And when there's evidence strongly on one side, the balanced approach, such as the balanced literacy approach, really doesn't lead to good outcomes and can be quite negative in terms of its impact, in this case, on children and student learning.

The second lesson is that research is not enough; it has to be activated. The research part is obviously really important… but it took decades to activate this research in schools. That activation process came a little bit from think tanks. It came a lot from bloggers and people starting to sort of share ideas, and then it became really activated through the creation of new groups.

The third lesson is to create new groups. It's really helpful to have many different types of groups that have different stakeholders, but that all share similar goals. So when the media is trying to pick up stories, having a parent group and a teacher group is really helpful. Or having researchers and academics… is really helpful as well. Creating those new groups and those new experts was a really important part of this.

Other updates from the Inflection Points team

Sydney get-together
We’re also hosting a small get-together for Inflection Points readers (Inflection Pints) in Sydney, to better understand our audience. The event will be held on Thursday 28 August from 6:30pm at the Dove & Olive in Surry Hills.

RVSP here

Give us feedback and pitch to us
As we’re in the early stages of Inflection Points, we’re especially keen to hear what you think. Please reach out to us if you are interested in pitching to write for us or helping us out in another way.

Pitch to us

What’s next for Inflection Points
We'll be following up our first issue in a few weeks’ time with new and engaging essays on productivity, innovation and the care economy. We’ll use this newsletter to let you know when the next edition of Inflection Points is released.

Reform begins with ideas; and we hope you’ll help us share them. If you think someone you know would enjoy Inflection Points, please forward this email or direct them to our website.

– The Inflection Points Team