House prices remain concerning even with a bounceback in dwelling approvals in October. Government action is needed to remove supply-side impediments that will otherwise have dire consequences for housing affordability, according to Australia's peak body for the building and construction industry.

Master Builders Australia chief economist Peter Jones said "Given recent set backs in the form of the 'boost' scheme ending and pre-emptive rate rises by the Reserve Bank, a recovery in approvals is needed over the next few months to ensure the upswing in residential building activity regathers momentum."

His comments come as Building Approvals data from the Australian Bureau of Statistics today showed total number of dwellings approved jumped 9.3 per cent in October 2010, after falling for six consecutive months in seasonally adjusted terms.

Mr Jones said the latest interest rate rise will do nothing to assist a private sector revival in dwelling approvals, particularly in Queensland where there is no sign of the negative trend reversing.

He said, "With the credit squeeze still operative banks should do more to help investor-driven activity thereby ensuring a recovery in approvals of units and apartments."

"A long and strong residential building upturn is desperately needed given that we have been underbuilding in Australia over the past six or seven years."

"Even if approvals were to bounce back to an annualised rate of 170,000, the level of building would still be well below what is required to make inroads into the supply shortage."

He said "Government policy is constraining the ability of housing supply to meet demand and without reform, the problem of housing affordability will only get worse."

"Reputable commentators, including the Reserve Bank Governor have stated that unless there is urgent reform to address bottlenecks the strong supply response needed to meet demand will not eventuate."

"Master Builders supports many of the findings of the Henry Tax Review on housing affordability and will continue to push for the need to address inefficient developer charges, land release regulations and the approvals process as part of reforms to remove impediments affecting the supply of housing," said Mr Jones.