The popular HomeBuilder grants handed out during the pandemic contributed to overheating in the construction sector, a review's found.
The $25,000 grants for home builders and renovators did successfully stimulate the sector during the pandemic - as it was set up to do - but arguably too much, with the costs of construction hitting record highs.
The KPMG review of the HomeBuilder program done on behalf of Treasury found the grants were not the only factors piling pressure onto the sector, with external supply chain issues and state level construction grants also adding fuel to the fire.
The grants program was introduced in June 2020, offering grants of up to $25,000 towards new homes and large renovations.
In 2021, grants of $15,000 grants were introduced for eligible owner-occupiers.
During this period, the construction sector was plagued by acute labour, material and land shortages, with input prices in construction lifting 17.3 per cent between June 2021 and June 2022, according to Australian Bureau of Statistics data.
Treasury official Laura Berger-Thomson agreed the program contributed to cost pressures but noted the cost of not implementing such a program could have dragged on household budgets and caused demand for construction to plummet.
"The fact is that you actually had much more demand, then was expected at the time," she told a budget estimates committee on Wednesday.
"It's actually just a feature of the success of some of those programs," she said.
Treasury also confirmed that the program, which had an uncapped budget, was originally costed at $680 million and costs added up to $2.7 billion by its completion.
Labor senator Deborah O'Neil accused the scheme of funding lavish renovations - with projects needing to be costed at $150,000 to qualify - for people who were already well off.
"Could I spend it on you know, gold taps in the bathroom?" she asked.
Treasury officials said there was no data about the type of renovations funded by the grants but that granny flats and pools had been excluded.
Opposition's finance spokeswoman Jane Hume defended the program's success and said Labor would have preferred pandemic support for the construction industry in the form of "little boxes" of social housing.
"Little boxes. Little pieces of social housing would have been so much better," Senator Hume said.
Senator O'Neil asked the senator to withdraw the comment, noting that it was an inappropriate way to characterise social housing.
