Weak building approvals are an economic drag, emphasising the need for strong policy solutions to boost housing construction, according to the Urban Development Institute of Australia (UDIA).

Building approvals fell 1.2% in June in seasonally adjusted terms. The year-on-year decline was more than 25%, according to the Australia Bureau of Statistics (ABS).

“Weak building approvals will continue to act as a drag on economic growth for the short to medium term,” said UDIA National Executive Director Connie Kirk.

The weak approvals would magnify effects across housing construction markets and supply chains, employment, and broader economic growth that policymakers pursued, according to Kirk.

“We need to ensure every available policy lever is being pulled in favour of investment, jobs, wages and construction activity,” said Kirk.

The settled debate on the future of negative gearing could attract people back into the market, according to Kirk.

“These need to be matched with delivery on commitments to help close the deposit gap for homebuyers and designing the scheme in a way that broadens access and removes barriers to participation,” she said.

The state must also be involved in reducing excessive taxes and charges, red tape, and complex planning regimes suppressing investment and stall projects, Kirk said.

It would take the Commonwealth, state, and local governments working together to remove the impediments to housing supply and affordability by reforming the current planning system inefficiencies, reducing excessive taxes on houses, and reducing red and green tape, according to UDIA.