The Urban Development Institute of Australia (Victoria) today backed the comments of the Federal Treasury's top forecaster, David Gruen, over the important role of the housing industry to keep the Australian economy ticking over as coal and iron ore contributions fall.

Mr Gruen made his comments yesterday addressing a Parliamentary Committee in Canberra.   

Tony De Domenico, Executive Director of the UDIA (VIC) said, "Whilst the Westpac Survey on Consumer Sentiment showed a surge of 17.9% in the past two months to the highest level since 2009, it is vital government at all levels took up the challenge of addressing the backlog and forward needs of infrastructure to keep up with the number of homes being built".

"This may mean governments will have to rethink their borrowing strategies and change focus on creating  a budget surplus, as not only is it a good time to buy a home with low interest rates, it is a perfect time for governments to borrow and lock in historically low rates to fund major infrastructure".

"With Australians turning to saving the time is right for the Federal and State Governments to implement the introduction of Government backed 'Infrastructure Bonds' linked directly to projects."

Mr De Domenico said that currently first home buyers and people building a new home are carrying major costs of infrastructure.  Up front figures by Charter Keck Cramer show in 2011, taxes and charges across the three levels of Government on an average block of land in Victoria costing $199,000, was $46,200. 

"With Australia's population forecast to double in 50 years, pressure for new affordable housing will continue to increase and the fact that we already have an under-supply of housing and are not building enough presently will increase price pressures on affordability."

The National Housing Supply Council projects that the national shortfall will increase to 370,000 dwellings by 2016, 492,000 by 2021 and 663,000 by 2031, assuming historic demographic and supply trends continue (the Council's "medium" growth scenarios for underlying demand and supply).

Mr De Domenico said, "The building of new homes on the fringe, the most affordable market for first home buyers, makes the greatest contribution to the economy stimulating employment".

"In Victoria the development industry directly employs around 310,000 full time employees, contributes around 12 per cent of the state's gross domestic product and contributes $4.6 billion in taxes to all tiers of government."