Australia falling drastically behind the government’s massive new homes target is costing the states and territories massively in foregone taxes, fresh analysis shows.

The Australian Bureau of Statistics on Wednesday revealed the nation is now 94,980 dwellings behind the government’s 1.2 million homes goal just two years after the target was set.

It comes despite new dwelling commencements rising seven per cent and completions lifting almost 16 per cent in the June quarter.

The Housing Industry Association’s managing director Jocelyn Martin revealed the shortfall is also having a brutal economic impact.

“Not only does this equate to a significant shortfall in meeting the new homes target, but it also represents $45 billion in economic activity that the building shortfall would have generated had it occurred,” Ms Martin said.

“Access to housing plays a fundamental role in ensuring that families and individuals can lead a balanced life and make a positive contribution to society and the economy.

“The shortfall of homes could have housed potentially 242,160 Australians based on average household sizes.”

This shortfall equates to $8.2 billion in foregone GST and $2.82 billion in lost stamp duty, blowing an $11 billion hole for state and territory governments.

Ms Martin said this lost revenue would disadvantage the communities in desperate need of housing.

“What can’t be undersold is the economic activity that is generated by residential construction, creating jobs and benefits that flow throughout the economy,” she said.

“Governments generate significant revenue from taxation on housing. Where housing construction does not occur, the capacity of governments to generate revenue and deliver services to the community is diminished.”

The HIA expressed concern about how Labor’s budget night tax changes will weigh on housing construction numbers in the future.

Limiting negative gearing and scrapping the 50 per cent capital gains tax discount have already seen clearance rates drop and are forecasted to result in 35,000 fewer homes being constructed.

Ms Martin said the tax changes, along with the possibility of another cash rate rise in November, were cause for policy action to put Australia in a better position to meet its target.

“While the building activity results for the June 2026 quarter showed improvement, this is more an indication of approvals and sales from 2025 and does not reflect the Budget changes with respect to housing taxation or interest rate rises this year – the effects of which we expect to become evident on the ground in 2027,” she said.

“With headwinds of potentially further interest rate rises and uncertainty caused by international events, this reinforces the need for governments and other policymakers to reduce the costs of land and housing if Australia is to meet its long-term housing needs.”

Read related topics:Housing CrisisInterest Rates