The great Australian dream has turned into a housing affordability nightmare that could last another 40 years.

The damning outlook from the Committee for Economic Development of Australia forecasts the current squeeze could last decades unless governments at all levels make changes to housing policy.

Plummeting interest rates and the end of credit rationing has already sparked a surge in worldwide residential real estate prices, meaning the poorest will struggle to find homes, the committee’s new Housing Australia report outlined.

The CEDA report found government policy needs to reflect that for many people the great Australian dream of owning a home is over.

“The issue is far more complex and without changes now, could have longer-run consequences,” CEDA chairman Rodney Maddock wrote in the report released on Tuesday.

Growing numbers of Australians are retiring without owning their own home, while lower-economic groups are forced to the regions or outskirts of cities with fewer transport and job options.

“In the long term, this could have budget implications for governments as more people become reliant on government assistance,” Professor Maddock says.

One report author suggests Australia needs to produce 20,000 new dwellings every year that are affordable for people on low incomes.

The paper calls on councils to relax planning restrictions, and suggests changes to tenancy laws to provide certainty for long-term renters.

It also recommends a shake up of land tax and stamp duty.

Speaking at the report launch, Victorian Treasurer Tim Pallas said the state was taking action and moves by the federal government aren’t helping the matter.

“The state and commonwealth governments should play to their respective strengths,” he said.

“For the commonwealth government that means a focus on tax concessions together with the laws around foreign investment.

“For us, it means the ability to implement our own initiatives and direct much-needed funds to those most in need.”

Mr Pallas said the state government was taking steps to improve affordability, including cutting stamp duty for first homebuyers to “help level the playing field” and the opening of 17 new suburbs.

Federal Assistant Minister to the Treasurer Michael Sukkar noted the report.

“We are taking real steps to address challenges across the entire housing spectrum, from first home buyers, to renters, to those looking to downsize, to those in social and community housing, and those suffering homelessness,” he said in a statement.

The measures include a $1 billion fund to help finance local government works allowing development, releasing enough surplus Commonwealth land for 6000 dwellings, and working with state and territory governments to develop a united approach.

By Kaitlyn Offer