New home building has seen its third decline in four quarters, and could deteriorate further in the year ahead.

The Australian Bureau of Statistics has indicated that building commencements have fallen 4.7% over the quarter and 7% for the 2010/11 financial year. Housing Industry Association chief economist Harley Dale said the lagging home building industry is a result of high barriers to development.

"Renewed weakness in dwelling commencements began in mid-2010, and reflects a lack of policy reform progress in reducing the high cost base to new housing and a deterioration in household confidence and demand," Dale said.

Dale predicted the downturn in home building would continue, saying commencements appear set to fall "considerably further in 2011/12". He said the Federal Government's upcoming Tax Forum in October could provide an opportunity to stave off these falls through policy reforms.

"A kick-start to the policy reform process is vital to ensuring a sustainable recovery in new home building can emerge. In this regard the upcoming Tax Forum has the capacity to form the starting platform for driving the process of reform of Australia's Federalism model to remove inefficient taxes, reduce the total number of taxes and boost Australia's productivity," Dale said.